Dear CRA: Don't let Cameco get away with its $2.2-billion tax evasion
[ http://rabble.ca/columnists/2016/10/dea ... ax-evasion ]
By Murray Dobbin | October 28, 2016
Cameco, the Saskatchewan-based uranium mining colossus, is currently in Federal Court facing charges by the Canada Revenue Agency (CRA) that it illegally avoided a stunning $2.2 billion in Canadian income taxes. It is not only the largest such case in Canadian history but one of the most shameless tax dodges ever hatched by a Canadian corporation. The court case has been delayed for years and just the fact that it has finally made it before a judge is good news. But the news could quickly turn bad if, facing defeat, Cameco makes a pitch to settle for less than the full amount. That would be a miscarriage of justice.
It is absolutely critical that the government not make a deal with Cameco for a smaller sum -- as often happens in these cases. Because this is no ordinary case. Cameco is a rogue corporation, contemptuous of the country it operates in, and so arrogant in its tax avoidance scheme that it can't even bother to try to justify it. Confronted by the facts, Cameco just repeats its executive mantra: "We believe that it was established in accordance with sound business principles and in accordance with relevant laws and regulations."
At a time when more and more attention is being paid to off-shore tax havens and the billions we lose to them, Canada needs to make an example of this irresponsible corporate "citizen."
How Cameco avoids taxes
Here's the bare bones of the scheme. In 1999 Cameco decided to dramatically reduce its income tax bill by setting up a subsidiary in Zug, Switzerland, where the tax rate is 10 per cent -- compared to the (then) Canadian rate of about 27 per cent. At the time the price was at rock bottom -- $10 a pound. That's the price the Saskatchewan head office charged its Swiss "subsidiary." Then came the windfall manoeuvre: Cameco drafted a 17-year uranium supply agreement at a fixed price of $10 a pound. It was simplicity itself: Cameco would sell literally all of its uranium through the Swiss subsidiary and it would sell it for whatever the world price was. That world price went to almost $140 a pound in 2007 and is now around $35. All the revenue earned above $10 a pound was taxed in Switzerland at the low rate. (An insignificant amount is actually sold in Europe and, of course, not an ounce of the stuff ever finds its way to Zug.)
This scheme is known as "transfer pricing" and sometimes it is perfectly legitimate -- companies that sell their products in multiple countries "sell" them to subsidiaries which then sell them in their jurisdiction and get taxed on the profits. But more and more multinationals have been abusing the law that allows this -- including Apple, "based" in Ireland, which is now facing a US$15-billion tax bill from the European Commission for its abuse of transfer pricing. [ http://www.forbes.com/sites/francescopp ... 35138e9d97 ]
But Apple actually sold its products in European countries and has 5,500 employees in Ireland. Cameco? Not so much. According to a 2014 Globe and Mail story: [ http://www.theglobeandmail.com/globe-in ... e18989010/ ]
"While Cameco says Cameco Europe has its own board of directors and a full-time CEO, documents in the case reveal the European company had no other full-time employees, and no stand-alone office, instead renting space from the law firm performing its legal work."
Virtually all the substantive work was performed in Canada.
All of the uranium is mined in Canada, all of Cameco's sales are negotiated and completed in Canada, and literally all of its profits are generated in Canada. The company's scheme is pure scam which is why fair-tax activists in Saskatchewan call the company Scameco. A citizens' group, Saskatchewan Citizens for Tax Fairness, has been on Cameco's case for several years -- paying for a billboard demanding Cameco pay up and collecting 36,000 names on a petition which it presented to the federal government.
Growing suspicion
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