Fresh from the pages of Reader Tips;

The Canada Revenue Agency (CRA) claims it is owed $11 billion in unpaid taxes by Canadian Corporations in 2014 alone. CRA estimates total unpaid taxes for 2014 were $26 billion. See, for example …



https://www.cbc.ca/radio/frontburner/canadian-corporations-owe-up-to-11b-in-taxes-1.5183181



In the above link 2 millennials try and unravel this dark secret about corporate tax avoidance. The female host talks about getting emails from CRA. They never email, but I diverge from the story.



The two biggest court cases regarding tax evasion (in Canada) are BMO and Cameco. CRA lost both decisions. In the case of Cameco, CRA claimed the company set up companies explicitly to avoid paying corporate tax in Canada (which is not a crime by the way). CRA called the scheme a “sham”. CRA claimed $2.2 billion in unpaid taxes.



What interested me about the Cameco case most was how it was reported in the media. If you Google “Cameco and CRA in court over taxes” most of the links are prior to the court decision and consist mainly of CRA claims and calls of unfairness by fair tax activists. Once the decision was made public there seems to be no follow up or discussion – until now where the CBC is regurgitating the CRA claims of widespread corporate tax avoidance in Canada. Here is the decision …



https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/344951/index.do



The most relevant part of the testimony is where a former Cameco executive explains why Cameco set up overseas operations in the first place.



Q. What were your conclusions regarding how Cameco could minimize its tax expense?



A. Well, we had a choice which — you know, I had had opportunities before, comparable. The company Cameco had a choice to make. With these new opportunities, such as HEU and offshore purchases and such, we could continue to run the company Saskatchewan focused. Everyone would remain in Saskatoon. All of this material would be brought back in to Cameco Corp., the Canadian parent. It would be sold through them and all that activity would be as it had always been. Everything ran through Cameco. Then nothing really would have changed. I would have the same tax bill. The same items would be included in the tax calculation as it always had been, so nothing would have changed.



But then I’d turn around and say, “Well, from a cost reduction perspective, I haven’t done anything. What can the company do? What can Cameco do to change that?” And the idea came up to say, well, in particularly the HEU material, it’s Russian. It’s equivalent over the life of it to about 80 million pounds for Cameco, which is a very substantial uranium mine. It had no connection to Canada. Why bring it here, subject that uranium to Canadian tax when it never was from Canada in the first place?



So that started me down the road of saying, “All right. If you move the HEU material — or if you don’t move it. If you put the HEU material offshore so that it never, in the first place, becomes part of the Canadian company, if you make your third-party purchases other than that offshore for material that’s never part of Canada, all of that material, then, is not part of the Canadian tax system. So that was the start of it.”



Cameco set up a company in Switzerland to buy uranium from Russia so that it did not have to bring the Russian uranium back to Canada and pay Canadian taxes – perfectly legal. This means that CRA was in error – the taxes they claimed were owed were not in fact owed. But no one challenges CRA in the media when it comes to corporate taxes. No one will challenge the bogus $11 billion in unpaid taxes from 2014 alone.