Activities of Multinational Enterprises in Canada

Detailed information for 2017

Status:

Active

Frequency:

Annual

Record number:

5230

The Activities of Multinational Enterprises in Canada program describes the characteristics, activity, financial position and performance of multinational enterprises in Canada. The program is itself an extension of foreign direct investment data, and constitutes, along with the Activities of Canadian Multinational Enterprises Abroad (record number 1539), Statistics Canada's Activities of Multinational Enterprises program.

Data release - November 18, 2019

Description

The Activities of Multinational Enterprises in Canada program builds on the former Activities of Foreign Majority-Owned Affiliates in Canada program - also known as Inward Foreign Affiliate Trade Statistics.

Multinational enterprises (MNEs) are corporations with majority-owned operations in more than one country. This program describes the activities of foreign MNEs (firms in Canada controlled by a foreign parent) and Canadian MNEs (Canadian-controlled firms with a foreign affiliate).

The objective of this statistical program is to measure the economic and financial activity of foreign and Canadian MNEs in Canada. The data on foreign MNEs provide further insight on the effects of foreign direct investment in Canada and the impact of foreign MNEs on the Canadian economy, while data on Canadian MNEs provides information on the domestic activities of internationally-oriented Canadian firms and can be analyzed in conjunction with data on their global activities. Aggregate data on MNEs is useful for measuring the extent of globalization phenomenon within the Canadian economy.

The data is used by policy makers to negotiate and monitor trade and investment agreements. This information is also necessary to meet Canada's statistical obligations to international organizations, such as the Organization for Economic Co-operation and Development.

Foreign MNEs are identified based on a majority ownership concept under the foreign direct investment framework. The ownership of more than 50% of voting shares by enterprises outside the country is used to identify foreign MNEs. While the foreign direct investment concept of influence also includes ownership of 10% to 50% of the voting shares, this segment is excluded from statistics on MNEs.

Like foreign MNEs, Canadian MNEs are identified using a majority ownership concept, whereby Canadian MNEs are defined as enterprises based in Canada that own more than 50% of the voting shares of an enterprise abroad.

The analytical variables describing the activities of MNEs include assets, liabilities, shareholders' equity, operating revenues, operating expenses, operating profit or loss, number of jobs, trade in goods and commercial services, intramural (in-house) research and development expenditures, research and development personnel, international technological receipts and payments, and gross domestic product at basic prices (value added).

With respect to foreign MNEs, country of control is presented on two bases:
- Immediate investor - the first foreign country of inter-company claims;
- Ultimate investor - the economy from which investment ultimately originates and control resides through layers of inter-corporate ownership.

The development of both the immediate and ultimate investing country frames serve as the basis for producing foreign MNE data from a foreign investor perspective, as required by international standards.

In some cases, a Canadian enterprise whose immediate investor is foreign but the country of the ultimate investor is Canada. This is referred to as "round-tripping." For such cases, the Canadian enterprise is treated exclusively as a foreign MNE since control immediately resides in the foreign-owning country, even if the country of ultimate control is Canada. The ultimate Canadian parent is a Canadian MNE. This ensures mutual exclusivity between foreign and Canadian MNEs.

Analytical variables for foreign and Canadian MNEs, as well as for all other enterprises in Canada, are presented on an industry dimension. The industry dimension provides details at the 2-digit level (3-digit level for certain subsectors) using North American Industry Classification System (NAICS) 2017.

The primary statistical unit used for this program, whereby the industrial dimension is presented for most tables, is the enterprise. The enterprise is the top of the hierarchy with regards to ranking business classification at Statistics Canada, and represents the level of an organization where a complete (consolidated) set of financial statements is available. The enterprise is the statistical unit at which a corporation's multinational status is determined.

One table (36-10-0620-01), which presents activities by province and industry, is based on the establishment statistical unit. The establishment level is the lowest level at which accounting data required to measure production is available. Activities by province should be analyzed at the establishment level since large businesses often operate in multiple provinces. Due to the nature of the data, only four variables are linked at the establishment level: gross domestic product at basic prices (value added), number of jobs, and imports and exports of goods.

A cross-table of select ultimate investor countries by enterprise industry is available on table 36-10-0582-01.

The industry tables at the levels of enterprise (36-10-0604-01) and establishment (36-10-0620-01), as well as the total economy table (36-10-0356-01) include the concept of the corporate sector.

As an exercise undertaken for this program, the distribution of firms into corporate and non-corporate sectors is made using variables on Statistics Canada's Business Register that correspond to the Canadian Classification of Institutional Units and Sectors 2012. The corporate sector consists of establishments identified as non-financial or financial corporations, which includes government business enterprises (i.e. public corporations). The non-corporate sector consists of general government, households and non-profit institutions serving households.

Because there are cases wherein an enterprise has multiple establishments with some operating in the corporate sector and others not (e.g. a city government with a public transit system and other general government activities), the corporate sector flag for all tables is determined at the establishment level. This ensures consistency in the grand total "corporate sector" figures for all tables.

Non-MNEs in Canada are separated into two groups: corporations and non-corporate organizations. This serves to nuance analyses of MNEs, which reside entirely in the corporate sector and are best compared with other corporations only.

Also, due to consolidated financial reporting requirements, the MNE status of all establishments under an enterprise is the same - it is the MNE status of the enterprise itself. This is most relevant in cases of "round-tripping" where an establishment has an immediate foreign parent (foreign MNE) but its enterprise does not (Canadian MNE) - the "round-tripped" establishment is recoded as a Canadian MNE.

Together, Canadian MNEs, foreign MNEs and all other domestic corporations make up the corporate sector. The corporate sector and the residual non-corporate sector jointly comprise the full Canadian economy.

Reference period: Calendar year

Collection period: The information is collected as the data sources become available, generally in the year following the reference year.

Subjects

  • Balance of international payments
  • Business performance and ownership
  • Economic accounts

Data sources and methodology

Target population

The target population for tables 36-10-0356-01, 36-10-604-01 and 36-10-620-01 consist, for the given reference year, of all establishments and enterprises in the Business Register with valid North American Industry Classification System, province and postal code. These organizations are separated into their respective multinational status (foreign- or Canadian-owned multinational or neither) and corporate status (corporate or non-corporate).

Tables 36-10-0445-01 and 36-10-0582-01 focus only on foreign multinational enterprises.

Instrument design

This methodology does not apply.

Sampling

No sampling is done for this statistical program.

Data sources

Data are extracted from administrative files and derived from other Statistics Canada surveys and/or other sources.

The Business Register is a central repository of information on businesses operating in Canada. It is used as the principal frame for many of Statistics Canada's economic statistical programs. The Business Register provides consistent and standardized data at the enterprise and establishment levels for each year under consideration. It is used as the primary universe for the multinational enterprises (MNE) program, to which all other data is linked.

The enterprise-level tables derive the North American Industry Classification System (NAICS) code mostly from the Annual Financial and Taxation Statistics for Enterprises (AFTS) and is supplemented by the enterprise's Business Register NAICS code, while the establishment table (36-10-0620-01) uses the establishment's Business Register NAICS code.

Due to conceptual differences there are different totals by industry depending on the statistical unit of analysis (enterprise or establishment). For example, an enterprise has only one NAICS code, but it may be composed of establishments operating in multiple different industries. This only affects the distribution of the grand total; the grand total remains constant.

The primary data sources used to identify the foreign MNEs include Canada's International Investment Position statistical program (record number 1537, more specifically BP-FIC questionnaire), various tax schedules (T106 - Information Return of Non-Arm's Length Transactions with Non-Residents form, schedule 9 and 19 of T2 - Income Tax Return slip and the Corporations Returns Act [Inter-corporate Ownership database], record number 2503). Canadian MNEs are identified using Canada's International Investment Position statistics program (record number 1537, BP-CIA questionnaire) and several tax schedules (T106 form, schedule 9 of the T2 slip, and - T1134 Information Return Relating To Controlled and Not-Controlled Foreign Affiliates [2011 and later taxation years] form).

The compilation of descriptive variables is subject to the information available from the sources' programs.

The balance sheet and income statement variables as well as most enterprise level industry classifications are sourced from the AFTS (record number 2510). The universe used in the compilation of financial variables covers most enterprises, except partnerships, in the corporate sector. These variables are calculated using a business accounting basis. Compared to the AFTS program, whose target population excludes enterprises classified under the 2017 NAICS to Management of companies and enterprises (NAICS code 55), Religious organizations (NAICS code 8131), Political organizations (NAICS code 81394), Public administration (NAICS code 91), as well as Funds and other financial vehicles (NAICS code 526), this program, with respect to foreign MNEs, includes all business entities considered to be majority-owned by foreign investors based on a variety of data sources.

Employment microdata from the Survey of Employment, Payroll and Hours (record number 2612) is supplemented with employment (PD7 - Statement of account for current source deduct) and profiled employment figures from the Business Register.

To be consistent with totals achieved through national accounting methods, this microdata is then benchmarked to province and industry number of jobs totals from National Economic Accounts Division's (NEAD) table 36-10-0489-01, as well as to province and industry business sector number of jobs totals from NEAD table 36-10-0480-01 (see Labour Productivity Measures - Provinces and Territories [Annual], record number 5103), exclusive of business sector self-employed jobs. Jointly, these benchmarks add up to the totals from table 36-10-0489-01 for each province and industry grouping, with the exception of Canadian jobs outside of Canada, which are excluded in this program.

The "corporate sector" total published in this program is a subset of the "business sector" total published in table 36-10-0480-01. The difference between corporate and business sector is that the corporate sector excludes the self-employed jobs, the household sector, as well as certain limited liability partnerships.

The goods exports and imports numbers are from the Trade by Exporter Characteristics - Goods program (TEC, record number 5124) and the Trade by Importer Characteristics - Goods program (TIC, record number 5237). The totals from TEC and TIC are used as the total economy level. Enterprises identified by TEC and TIC accounted for 96% to 98% of the total domestic export and import value, respectively, from the Canadian International Merchandise Trade Database (customs basis).

Other data programs with which the program is linked include Canada's International Transaction in Services (record number 1536) and the Annual Survey of Research and Development in Canadian Industry (RDCI, record number 4201). Please refer to the following Statistics Canada tables for the total economy levels with respect to commercial services imports and exports (36-10-0006-01), intramural (in-house) research and development expenditures (27-10-0333-01) and research and development personnel (27-10-0337-01).

International technological receipts and payments covers activities related to patents and industrial design, trademarks, franchises, copyrights and related rights, research and development, and other technical services. The national economy totals can also be found in table 36-10-0006-01.

Gross domestic product (value added) is presented at basic prices on a national accounting basis. As compared to the business accounting, national accounting values depreciation and inventories using different methods. Depletion, bad debts, charitable donations, dividends, and capital gains/losses are not recognized as expenses or revenues for national accounting as they are for business accounting. All current expenses related to software, mineral exploration and research and development are capitalized for national accounting.

Gross domestic product at basic prices is calculated using an income-based approach, summing compensation of employees, gross operating surplus, and indirect taxes less subsidies on production. The corporate total for Canada can be found in table 36-10-0356-01.

For the gross domestic product (value added) variable, data is sourced, and methodology and concepts are available, from the NEAD (see National Gross Domestic Product by Income and by Expenditure Accounts [IEA], record number 1901).

The microdata populations for gross domestic product from NEAD, financial variables from AFTS, and Research and Development from RDCI exist for a corporate sector population only. As a result, some "Total Canadian economy" figures for these variables are left blank. This is a target of future analysis.

Error detection

Information on error detection methods applied to each of the individual data sources used in this statistical program can be found via links to the record numbers listed in the Integrated Metadatabase Data Sources section.

As multiple data sources are used, validation of firm identification and corporate structure is also carried out to ensure consistency across reference years. In case of discrepancies among the data sources, different techniques are applied to harmonize the information.

Imputation

This methodology does not apply.

Estimation

This methodology does not apply.

Quality evaluation

Data are analyzed for consistency against their own historical trend, with trends observed in relation to other Statistics Canada data series, and general trends in the economy. Analysis is also conducted to address potential discrepancies between the estimates based on administrative records and survey results.

For data confrontation purposes, when available, some foreign multinational enterprises variables are validated against official outward foreign affiliate statistics published by other foreign national statistics agencies and by the Organization of Economic Development.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Revisions and seasonal adjustment

In accordance with the revision policy in place in the Canadian System of Macroeconomic Accounts, revisions are carried out each year and generally only impact the time series for the last three reference years (years T-1, T-2 and T-3). However, due to different revision schedules in place for each of the individual data sources used in this statistical program, it is possible that for some variables, data might not be revised according to this general policy.

Data accuracy

This statistical program is derived from a record linkage exercise. Please refer to the Integrated Metadatabase entries of each individual data sources used in this program for more information on their data accuracy measures.

In addition, certain balance sheet variables associated to corporations in the Management of companies and enterprises sector (North American Industry Classification System code 55), such as assets, liabilities and equity can be overstated. This occurs for the corporations in this industry that are not in a consolidated corporate structure. In such cases, no adjustment has been made to correct for the potential double counting as it has been difficult to evaluate.

Documentation

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