Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. The Canadian Revenue Agency found that transactions between Cameco Corp and the Swiss subsidiary constituted a sham arrangement resulting in improper profit shifting. Hence, a tax assessment was issued for FY 2003, 2005, and 2006. Cameco disagreed with the Agency and brought the case to the Canadian Tax Court. In 2018 the Tax Court ruled in favor of Cameco and dismissed the assessment. This decision was appealed by the tax authorities to the Federal Court of Appeal. The Federal Court of Appeal in 2020 dismissed the appeal and also ruled in favor of Cameco A application for leave to appeal from the judgment of the Federal Court of Appeal was then brought to the Canadian Supreme Court by the tax authorities. The application for leave to appeal was dismissed by the Supreme Court ...

Cameco, together with its subsidiaries, is a large uranium producer and supplier of the services that convert one form of uranium into another form. Cameco had uranium mines in Saskatchewan and uranium refining and processing (conversion) facilities in Ontario. Cameco also had subsidiaries in the United States that owned uranium mines in the United States. In 1993, the United States and Russian governments executed an agreement that provided the means by which Russia could sell uranium formerly used in its nuclear arsenal. The net result of this agreement was that a certain quantity of uranium would be offered for sale in the market. Cameco initially attempted to secure this source of uranium on its own but later took the lead in negotiating an agreement for the purchase of this uranium by a consortium of companies. When the final agreement was signed in 1999, Cameco designated its Luxembourg subsidiary, Cameco Europe S.A. (CESA), to be the signatory to this agreement. The agreement related to the purchase of the Russian uranium was executed in 1999 among CESA, Compagnie Générale des Matières Nucléaires (COGEMA) (a French state-owned uranium producer), Nukem, Inc. (a privately owned United States trader in uranium), Nukem Nuklear GMBH and AO “Techsnabexport” (Tenex) (a Russian state-owned company). This agreement, which is also referred to as the HEU Feed Agreement, initially provided for the granting of options to purchase the uranium that Tenex would make available for sale. In the years following 1999, there were a number of amendments to this agreement. In particular, the fourth amendment in 2001, in part, obligated the western consortium (CESA, COGEMA and Nukem) to purchase a certain amount of uranium (paragraph 82 of the reasons). On September 9, 1999, CESA entered into an agreement with Urenco Limited (Urenco) (a uranium enricher) and three of its subsidiaries to purchase uranium that Urenco would be receiving from Tenex. Also in 1999, Cameco formed a subsidiary in Switzerland. This company, in 2001, changed its name to Cameco Europe AG (SA, Ltd) (CEL). In 2002, CESA transferred its business (which was described in the transfer agreement as “trading with raw materials, particularly uranium in various forms”) to CEL under the Asset Purchase and Transfer of Liabilities Agreement dated as of October 1, 2002, but executed on October 30, 2002. Therefore, CESA transferred to CEL the rights that CESA had to purchase uranium from Tenex and Urenco. CEL also purchased Cameco’s expected uranium production and its uranium inventory. It would appear that this arrangement did not include any uranium that was sold by Cameco to any customers in Canada (paragraph 40 of the Crown’s memorandum). At certain times, Cameco also purchased uranium from CEL. The profits in issue in this appeal arose as a result of the sale of uranium by CEL that it purchased from three different sources: Tenex, Urenco, and Cameco. When the arrangements with Tenex and Urenco were put in place in 1999, the price of uranium was low. In subsequent years, the price of uranium increased substantially. As a result, the profits realized by CEL from buying and selling uranium were substantial. The Canadian Revenue Agency found that the transactions between Cameco Corp and the Swiss subsidiary constituted a sham arrangement resulting in improper profit shifting.  According to the Canadian Revenue Agency, Cameco would not have entered into any of the transactions that it did with CESA and CEL with any arm’s length person, cf. paragraph 247(2) of the Act. All of the profit earned by CEL should therefore be reallocated to Cameco Corp. Hence, a tax assessment was issued for FY 2003, 2005, and 2006 where $43,468,281, $196,887,068, and $243,075,364 was added to the taxable income of Cameco Canada. Cameco disagreed with the Agency and brought the case to the Canadian Tax Court. In 2018 the Tax Court ruled in favor of Cameco and dismissed the assessment. This decision was then appealed by the tax authorities to the Federal Court of Appeal. The Federal Court of Appeal dismissed the appeal and also ruled in favor of Cameco. “In this appeal, the Crown does not challenge any of the factual findings made by the Tax Court Judge. Rather, the Crown adopts a broader view of paragraphs 247(2)(b) and (d) of the Act and submits that Cameco would not have entered into any of the transactions that it did with CESA and CEL with any arm’s length person. As a result, according to the Crown, all of the profit earned by CEL should be reallocated to Cameco. The Crown, in its memorandum, also indicated that it was raising an alternative argument related to the interpretation of paragraph 247(2)(a) of the Act. … However, subparagraph 247(2)(b)(i) of the Act does not refer to whether the particular taxpayer would not have entered into the particular transaction with the non-resident if that taxpayer had been dealing with the non-resident at arm’s length or what other options may have been available to that particular taxpayer. Rather, this subparagraph raises the issue of whether the transaction or series of transactions would have been entered into between persons dealing with each other at arm’s length (an objective test based on hypothetical persons) — not whether the particular taxpayer would have entered into the transaction or series of transactions in issue with an arm’s length party (a subjective test). A test based on what a hypothetical person (or persons) would have done is not foreign to the law as the standard of care in a negligence case is a “hypothetical ‘reasonable person’” (Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at page 121, 1993 CanLII 146). … The Crown’s position with respect to this hypothetical transaction is also contradicted by its position in this case. Essentially, in this case, Cameco became aware of an opportunity to purchase Russian sourced uranium from Tenex and Urenco and chose to complete those arrangements through a foreign subsidiary rather than purchasing this uranium itself and selling it to third-party customers in other countries. This was a foreign-based business opportunity to ...

Several mining companies are beeing audited by the Canadian Revenue Agency for aggressive tax planning and tax evasion schemes. Among the high-profile companies that have filed pleadings with the Canadian Tax Court are Cameco, Silver Wheaton, Burlington Resources, Conoco Funding Company and Suncor Energy. The CRA says, the companies inappropriately ran international transactions through subsidiary companies in low-tax foreign jurisdictions. In the Cameco case the Revenue Agency has audited years 2003 to 2015 and challenged Cameco Canada’s arrangements with a Swiss subsidiary. Cameco sells uranium to its marketing subsidiary in Switzerland, which re-sells it to buyers, incurring less tax than the company would through its Canadian office. The CRA position is that Cameco Canada was in fact carrying the uranium business – not Swiss Cameco subsidiary. The total tax bill for the 13 years: $2.1-billion, plus interest and penalties. Three tax years are currently being tried in the tax court, where a final decision is expected in late 2018 or early 2019 ...

In relation to ongoing audits regarding transfer payments, the tax authorities asked the Court to order approximately 25 personnel from Cameco Corporation and its wholly owned subsidiaries to be made available for interview regarding Cameco’s 2010, 2011, and 2012 income tax years. It was confirmed in Court that Cameco has complied with all audit requests related to the relevant years except the refused request for oral interviews. Cameco has agreed to written questioning by the Minister, but not oral interviews. The Court dismissed the application. “A compliance order…can only be issued if the Minister proves that Cameco did not comply with section 231.1 of the ITA. Cameco has provided the Minister with every opportunity to inspect, audit and examine their books, records and documents and to inspect their property. The Minister confirmed that Cameco has allowed such access, save the requested oral interviews. Cameco has not allowed the oral interviews that they had done in previous years given the numbers requested and the fact that the subject matter of the audit is similar, if not identical as the ongoing litigation before the Tax Court of Canada.” “Chief Justice Noël, writing for the Federal Court of Appeal in BP Canada Energy Company v Canada (National Revenue), 2017 FCA 61 [BP], agreed that the Minister is not vested with unlimited audit powers. The issue in BP was a request by the Minister for production of tax accruing working papers. Chief Justice Noël found at paragraph 80 that when subsection 231.1(1) of the ITA is interpreted, it does not make the TAWPs compellable without restriction as it was “…clear that Parliament intended that the broad power set out in subsection 231.1 (1) be used with restraint when dealing with TAWPs…” He went on to explain that the context of subsection 231.1(1) “is the notion of self-assessment which is at the root of the compliance system put in place under the Act. The system is one of self-assessment because the person who generates income is best positioned to identify compute and report the amounts that are subject to tax under the Act.” However, he then concluded that this self-assessment does not “require taxpayers to tax themselves on amounts which they believe not to be taxable” (BP at paras 81 and 82). He held that in conducting audits the Minister is to be provided with “all reasonable assistance” in performing their audits (paragraph 231.1(1)(d) of the ITA), and that they cannot compel taxpayers to reveal their “soft spots” (BP at para 82). In the context of obligations on publically traded corporations under provincial securities legislation that “Parliament could not have intended to vest the Minister with a power so sweeping that it would undermine those obligations” (BP at para 86). Chief Justice Noël found that the Minister cannot use subsection “231.1(1) for the purpose of obtaining general and unrestricted access to those parts of BP Canada’s tax reserve papers which reveal its uncertain tax positions” (BP at para 99).” “I acknowledge the difference between access to TAWPs and a right to orally interview a large number of employees. However, the Minister puts forward here a wide interpretation of an already powerful tool similar to that suggested in BP. Chief Justice Noël did not find in BP that the section was so wide as to compel a taxpayer to show its “soft spots” when being audited. In this case I find that that subsection 231.1(1) of the ITA is not so wide as to compel an indeterminate number of people for oral interviews.” “paragraph 231.1(1)(d) of the ITA does not provide the Minister with an unlimited right to conduct oral interviews of Cameco employees. To do so would ignore the mid-amble of the section which expressly restricts assistance for the purposes of allowing the Minister to “inspect, audit or examine” the books, records, documents and property of Cameco.” “In order to avoid redundancy, the Court must attribute a meaning and function to the words “and for those purposes” over and above what is expressed in the balance of the provision. Those purposes are the inspection, audit or examination of books, records, documents or property. The Minister’s argument that “inspect, audit and examine” in paragraph 231.1(1)(a) necessarily includes the authority to ask questions of a taxpayer would render paragraph 231.1(1)(d) redundant. If the Minister were correct, there would be no need for a provision like paragraph 231.1(1)(d). The presumption against tautology militates against this interpretation (Placer Dome Canada Ltd v Ontario (Minister of Finance), 2006 SCC 20 at paras 45 and 46).” “Parliament could not have intended for there to be no restraint on how the Minister questions employees of a corporation. The unique and compelling facts of this case include: a) the same issue (transfer pricing) spanning numerous years; b) Cameco coming to court with clean hands having complied with all requests including a number of oral interviews in previous years; c) the number of interviews proposed and the compromise position that Cameco presented; d) the Tax Court of Canada currently hearing the transfer pricing case for other years” “The order the Minister seeks does not meet the principle of proportionality. The related litigation before the Tax Court of Canada will likely resolve most of the issues that would form the basis of the requested interviews. The time and cost involved in allowing the Minister to interview more than 25 Cameco personnel scattered across the world is not proportional to the information being sought since the Tax Court of Canada will determine the issues that are the focus of the requested interviews.” The decision of the Federal Court has been appealed by the tax authorities to the Federal Court of Appeal ...

Canadian mining company, Cameco Corp, has settled a tax dispute and will pay the IRS $122,000 for income years 2009-2012. Cameco’s dispute with tax authorities relates to its offshore marketing structure and transfer pricing. Cameco sells uranium to its marketing subsidiary in Switzerland, which re-sells it to buyers, incurring less tax than the company would through its Canadian office. Cameco says it has a marketing subsidiary in Switzerland because most customers are located outside Canada ...