Cameco celebrates tax court victory in CRA dispute over uranium income
Cameco Corp.’s share price jumped drastically in the hours after a federal judge ruled in the company’s favour in its long-running dispute with the Canada Revenue Agency over billions of dollars of uranium sales income.
In a decision handed down late Wednesday, Tax Court of Canada Judge John Owens said “none of the transactions, arrangements or events in issue in the appeals (for the tax years 2003, 2005 and 2006) was a sham.”
Owens’s order that the federal agency’s tax reassessments in question — on income totalling $483 million — be reversed dispersed a cloud that has been hanging over the Saskatoon-based company for a decade, Cameco CEO Tim Gitzel said.
“Obviously, the reaction was super positive. We were very excited to get the decision. It was a vindication of our position, our company,” Gitzel said in an interview hours after the 293-page decision was released. “Our employees have had to labour under this cloud and a lot of accusations, and the judge made it very, very clear — crystal clear — that Cameco has always followed the rules that the tax department has put out there.”
Owens’s decision is the latest development in Cameco’s decadelong dispute with the CRA over billions of dollars earned from uranium sales between 2003 and 2011 by its European subsidiary, Cameco Europe Limited.
The case hinges on a business practice known as transfer pricing — the sale of goods between two arms of a multinational corporation.
The CRA contended that Cameco used Cameco Europe Limited to report profits in low-tax Switzerland, while the uranium miner has maintained from the beginning that it did nothing wrong and followed a “sound business rationale.”
Since 2008, the CRA has moved approximately $4.1 billion earned in the tax years 2003 through 2012 back to Canada. Cameco has said it expects further reassessments through the 2017 tax year for a total of $8.4 billion in additional income.
That would have exposed the company to an estimated $2.5 billion in back taxes and penalties.
While Owens’s decision covers only three of the tax years in question, Gitzel said his decision was “meticulous.”
Cameco’s lawyers have said the CRA’s chances on an appeal would be “slim,” he added. “We’re hopeful that there won’t be an appeal, that the CRA will look at this and apply the ruling that the judge has laid down not only to the three years in question but also to the subsequent years.”
It is not clear if the federal agency will file an appeal, which Cameco expects would take two years.
It has 30 days to make that decision.
The CRA declined an interview request. In an emailed statement, CRA spokesperson Etienne Biram said the agency is committed to a fair tax system, and will “carefully review the decision and will respond in due course.”
Investors responded to the move with confidence. Cameco’s share price — which has been declining since the 2011 Fukushima Daiichi nuclear disaster devastated the uranium market — was up 15.7 per cent at the end of the day ’s trading.
The executive director of Canadians for Tax Fairness, which has previously urged Cameco to pay its back taxes, said the decision signals that tougher rules are needed to prevent “aggressive tax avoidance.”
“We need to have better laws in place so this isn’t possible,” Toby Sanger said.
While Cameco is still struggling amid low prices that have forced it to shutter mines and mills and make deep cuts to its corporate office, Gitzel suggested that the tax court victory is a positive sign in a difficult market.
“To be accused of different things, it was very tough. And to be vindicated yesterday by the Tax Court of Canada was important to us … Cameco doesn’t skate close to the line. We follow the laws of this country meticulously.”