Silver Wheaton Corp shares slump 12% on possible tax reassessment, payments of more than $200M – by Peter Koven (National Post – July 8, 2015)

The National Post is Canada’s second largest national paper.

The Canada Revenue Agency is seeking more than US$200 million in back taxes and penalties from Silver Wheaton Corp. in a probe that raises concerns about the company’s entire business model.

Shares of the Vancouver-based firm dropped 12 per cent on Tuesday after the CRA’s proposal became public, wiping out more than $1 billion of shareholder value. Investors were alarmed by the possibility the CRA’s back tax demands could grow much bigger in the months ahead, and that Silver Wheaton could have to pay higher taxes on all its future income.

Silver Wheaton, for its part, fiercely denied that it has ever avoided taxes. “We remain confident in our business structure, which we believe is consistent with that typically used by Canadian companies,” chief executive Randy Smallwood said on a conference call.

The CRA’s probe involves the complex issue of transfer pricing and deals conducted through Silver Wheaton’s foreign subsidiaries.

Silver Wheaton is the leading company in the precious metals streaming business. In essence, the firm provides up-front financing to mining companies looking to build mines. In return, it earns the right to buy silver and gold output from those mines at a heavily discounted price, which it sells for a profit.

When Silver Wheaton earns money from mines outside Canada, it reports the income through foreign subsidiaries and does not pay tax on it in Canada. The company has been doing this since it was founded in 2004.

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