Cameco tax situation – not as complained

I have written about this topic twice in the past – on January 28th 2014 and April 30th 2014 – and now it’s back again.

Each time it was to add perspective to a then current news item – and here we go again.

First I will post my take on the situation, then I will post the recent news item.

Note regarding the Cameco royalty payment story:

  1. The program began in 1999 and was audited by the CRA every year. The CRA had no problem with it
  2. In the audit done in 2008, they flagged the 2007 year. Why did the CRA start then flagging it then, did the program/system magically become illegal? Was the system legal or not?
  3. Note though, the spot price of uranium spiked in 2007 up to $136/lb, prior to 2007 the Government was taking-in more money from Cameco under the program than it would have otherwise and that was ok, when the system reversed for a bit that was a problem.Uranium status 4
  4. Could this be a cash grab?
  5. Cameco would feel that the money they saved on the later years of the program went back into Saskatchewan anyway – i.e. Cigar Lake – and that it is better landing here than in Ottawa. As another series of examples, from 2010 to 2013, in Saskatchewan, Cameco spent; $8-billion on Capex and Opex, $2-billion on wages and benefits, $420-million on royalties, and $20-million on Community investment.

Eric
________________________

  • 16 Jun 2016
  • The StarPhoenix
  • ALEX MACPHERSON 

Activists urge Cameco to pay $2.1 billion in taxes

A locked front door and a burly security guard prevented Don Kossick from hand-delivering a petition signed by more than 36,000 people to Cameco Corp.’s top executives.

But it didn’t stop the veteran activist from urging the Saskatoon uranium mining company to drop its ongoing tax case and pay back the $2.1 billion his organization says it owes Canadian taxpayers.

“If they care, they should care about paying up,” Kossick, who represents Canadians for Tax Fairness, told reporters Wednesday morning after being denied admittance to Cameco’s 11th Street headquarters.

Members of Canadians for Tax Fairness and the international corporate watchdog SumOfUs delivered a similar petition to Prime Minister Justin Trudeau’s office in Ottawa on Wednesday, according to a news release.

Cameco is embroiled in a dispute with the Canada Revenue Agency (CRA). The case stems from the CRA’s contention that Cameco used its subsidiary, Cameco Europe Ltd., to report profits from uranium sales in low-tax Switzerland.

Since 2008, the tax agency has moved $3.4 billion earned by Cameco Europe Ltd. between 2003 and 2010 to Canada. Cameco says it expects to receive additional assessments for $3.6 billion for 2011 through 2015.

A trial for three tax years under dispute is scheduled to begin in October. If Cameco — which reported earning $65 million on $408 million in revenue last year — loses all of its cases, it could face a $2.1-billion tax bill, plus interest and penalties.

Cameco is aware that people are concerned about its tax case, and is itself concerned about the case, a spokesman for the company said. However, the uranium giant remains convinced that its position is the correct one.

“We believe we’ve paid all of the taxes we owe in Canada and other jurisdictions and we’re confident we’re going to be successful in court,” Gord Struthers said in an interview.

While Cameco expects to win its court case, the company has a strong balance sheet and has accounted for “all possible outcomes,” Struthers added.

Kossick contends that Cameco’s actions constitute “tax avoidance,” and that the company should abandon its court case and pay the CRA $2.1 billion.

“Why do we have to go through a court case with Cameco, and all of that in terms of what it costs, when Cameco just could pay up? There really is a simple solution here.”

Devan Mescall, a professor at the Edwards School of Business and corporate tax expert, said it’s unclear whether Cameco did anything wrong, and that Kossick delivered his organization’s petition to the wrong door.

“The issue isn’t with Cameco. The issue is with the tax laws that we have. Corporations are going to play by the rules that are set out, but the rules that we currently have, the way they’re set, there’s a lot of uncertainty,” Mescall said.

Few companies intend to break the rules, but the problem is that the rules are hazy, which can result in differences of opinion between tax agencies and companies over income earned and taxes owed from international deals, he said.

The issue is even more complicated because it involves not just the CRA, but tax agencies around the world. Mescall said that without global agreement on tax laws, international business can devolve into a “game of chicken.”

That game would likely involve corporations threatening to move their headquarters — and valuable jobs — to low-tax jurisdictions while tax agencies work to strike the right balance to keep them paying tax where they are, he said.

“I think that’s a great discourse to have as citizens, and things we have to think about in that discourse (are) not just what the tax rate should be, but where does that fit in globally as well? … There’s not an obvious answer.”

Cameco recently announced the closure of its Rabbit Lake mine in northern Saskatchewan due to extremely weak uranium prices. The closure will result in the loss of 500 jobs. The company is also planning a corporate staffing review.

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on June 16, 2016, in political, uranium and nuclear. Bookmark the permalink. 2 Comments.

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