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The U.S. Internal Revenue Service is demanding back taxes from Cameco Corp., adding to the miner’s ever-growing tax woes ahead of a crucial trial expected next year.
The IRS believes the revenue reported by Cameco’s Swiss subsidiary, Cameco Europe Ltd., is inadequate and that a portion should be taxed back in the U.S. at a much higher level. The claim is similar to the one made by the Canada Revenue Agency (CRA), which is trying to shift Cameco Europe’s revenue to Canada and apply a debilitating collection of back taxes and penalties.
Cameco insists it has done nothing wrong. But the Saskatoon-based miner said that if it loses the CRA dispute, the amount of back taxes and transfer-pricing penalties could amount to as much as $1.5-billion, with other penalties added on top. That would be a devastating blow to the company.
The IRS demand is much smaller, as it seeks to collect US$32-million from Cameco that it feels it was owed in 2009. It is also auditing tax returns from 2010 to 2012, and Cameco expects the U.S. agency to make similar claims for those years.
While the IRS demands are insignificant compared to those of the CRA, some experts think the IRS move against Cameco could bolster the CRA’s case. At the very least, it gives the company another sizable headache to deal with.
“Clearly there’s another party here that seems to disagree [with Cameco] on this issue,” said Pawel Rajszel, an analyst at Veritas Investment Research. He thinks the CRA has a “strong case.”
The tax dispute has its roots in 1999, when Cameco Europe was set up in Zug, Switzerland, a very low-tax jurisdiction. The European subsidiary signed a 17-year deal with Cameco in which it would buy uranium from the company’s North American operations at the prevailing price at the time (about US$10 a pound), and sell it on to customers at the world price.
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