The Canadian Taxpayers Federation says a multi-million-dollar tax fight between Cameco and the Canada Revenue Agency is an example of why Canada’s corporate tax structure needs an overhaul.
The uranium giant is accused of avoiding up to $850 million in federal and provincial taxes by selling its uranium at a low price to its Swiss subsidiary, then reselling it at a higher price to buyers around the world.
Colin Craig with the Canadian Taxpayers Federation says if the company is found guilty of tax evasion it should be held accountable. But he also says, if it wins, there is a lesson for the government:
“I think what people need to keep in mind is what is at the heart of the Cameco situation — and that is really the need for governments to be competitive when it comes to taxes.”
Craig says when taxes are too high people change their spending habits, and reconsider their investments. He says when the business tax rate was 17% in Saskatchewan in 2005, the government collected about $260 million in revenue — but when the tax was lowered to 12% in 2010, revenue went up to $1.1 billion. Craig says lower taxes increase investment and generate more revenue:
“On the shopping side, you’re going to see people heading to Alberta to save a bit of money — perhaps going to the United States. And then on the tax side, it is important for not just Saskatchewan — but other provinces and the federal government — to be competitive on corporate income taxes or else businesses are going to look to other jurisdictions.”
The corporate tax rate in Canada is 27% — in Switzerland, it is 10%. Cameco maintains it has done nothing illegal, but it could take years before the courts decide whether this was a tax dodge or a prudent business decision.
Saskatchewan’s share of the revenue has been estimated to be about $350 million if Cameco loses.