Ottawa accuses Cameco of multi-million dollar tax dodge

One of the largest companies in Saskatchewan is in the midst of a multi-million dollar tax court battle with Canada Revenue Agency.

Saskatchewan may have missed out on $300M in corporate tax

One of the largest companies in Saskatchewan is in the midst of a multi-million dollar tax court battle with Canada Revenue Agency (CRA).

Cameco has publicly estimated that it could end up owing $800-850 million in Canadian corporate taxes for the years 2008 to 2012, if it loses the case.

CRA contends that the uranium giant set up a subsidiary in Zug, Switzerland for the purpose of avoiding taxes in Canada. 

However Cameco's CFO, Grant Isaac, disputes that claim.

He says there's a compelling business case for having a marketing arm in Europe, close to customers there.

"We believe that it was established in accordance with sound business principles and in accordance with relevant laws and regulations," Isaac told investors at the corporation's first quarter update in May 2013. 

Cameco Switzerland

The Swiss subsidiary was created in 1999 in the low tax jurisdiction of Zug, Switzerland, a well-known tax haven.

Pawel Rajszel, an analyst with Veritas Investment Research in Toronto, estimates Cameco's corporate tax rate in Switzerland at about 10 per cent compared to a Canadian rate of at least 27 per cent. 

Rajszel questions Cameco's need for the Swiss operation.

"It's strange that the company would have created this Swiss subsidiary without having any real operations in Switzerland," Rajszel said.

He says from his research, virtually all of the mining, marketing, and management functions of the company are in Canada, while the operation in Switzerland merely does some paperwork. 

"So effectively the company is outsourcing the profits to Switzerland to pay the lower Swiss tax and avoiding the higher Canadian corporate tax rate," Rajszel said.

Pricing agreement

In 1999, Cameco Canada signed a 17-year agreement with its Swiss arm to sell uranium at the fixed price of about $10 US per pound. 

Since that time, the price of uranium has soared reaching a high of almost $140 US per pound in 2007.

In recent days, it's been hovering around $35 US per pound. 

This means Cameco Switzerland buys uranium from Cameco Canada at the low price of $10 US per pound and then sells on the world market at $35 US per pound. 

"So in effect they are booking profits in the Swiss subsidiary and not realizing those profits here at home," Rajszel concludes.

However, Cameco argues that the agreement signed with its Swiss operation was based on market prices at the time and is therefore legitimate.

"In other words, they are prices that an independent third party would agree to," Grant Isaac said.

However, Rajszel doubts that claim. 

He says in this arrangement Cameco Canada, the parent company, guarantees the performance of Cameco's Swiss subsidiary. 

"In other words, all the upside has been transferred to the subsidiary," Rajszel explained. "Meanwhile all the risk has stayed with Cameco Canada."

Saskatchewan's stake

The $800-850 million potentially owed by Cameco includes both federal and provincial corporate tax dollars.

The CRA collects taxes for both levels of government. 

Rajszel says based on his calculations Saskatchewan's take of the total tax bill would be between $300-350 million.

But this case is far from settled. CRA is still in the midst of auditing Cameco and it's likely this matter will be fought in tax court for many years.


Geoff Leo

Senior Investigative Journalist

Geoff Leo is a Michener Award nominated investigative journalist and a Canadian Screen Award winning documentary producer and director. He has been covering Saskatchewan stories since 2001. Email Geoff at