The Federal Court of Appeal has upheld the Tax Court of Canada’s 2018 decision that found in favour of uranium major Cameco in its tax dispute with Canada Revenue Agency (CRA).
The dispute centres on reassessments that CRA issued for the 2003, 2005 and 2006 tax years.
“Four judges have now found that Cameco complied with both the letter and intent of the law. We followed the rules, yet this 12-year dispute has caused significant uncertainty for our company and our stakeholders at a time when we have been navigating through some of the most challenging global market and economic conditions we have ever faced,” said Cameco president and CEO Tim Gitzel.
The September 2018 ruling from the Tax Court found that Cameco’s marketing and trading structure involving foreign subsidiaries, as well as the related transfer pricing methodology used for certain intercompany uranium sales and purchasing agreements, are in full compliance with Canadian laws for the tax years in question.
CRA appealed this decision to the Court of Appeal on October 26, 2018.
On April 30, 2019, a subsequent decision by the Tax Court resulted in Cameco being awarded C$10.25-million in legal fees and up to C$17.9-million in disbursements for costs incurred as a result of its dispute with CRA.
CRA requested that this cost award be overturned if its appeal of the September 2018 decision was successful.
The Court of Appeal’s ruling upholds both the Tax Court’s original decision on reassessments for the 2003, 2005 and 2006 tax years and its corresponding decision on the cost award. Cameco will also be receiving an additional nominal cost award related to the Court of Appeal hearing.
CRA has until September 25 to seek leave to appeal the decision of the Court of Appeal to the Supreme Court of Canada. Proposed legislation related to Covid-19 pandemic measures is currently under consideration that would extend the deadline to November 12.
Cameco said that, if the Supreme Court agrees to hear the appeal, it could take a further two years to receive a decision.
If an appeal to the Supreme Court was not sought or granted, then the dispute over the 2003, 2005 and 2006 tax years was resolved and Cameco would expect to receive a refund of C$5.5-million plus interest for instalments the company paid on previous reassessments issued by CRA for the 2003, 2005 and 2006 tax years, as well as the costs awarded by the Tax Court and Court of Appeal.
The government of Canada hold C$303-million in cash and C$482-million in letters of credit that Cameco has been required to pay as instalments on the reassessments issued by CRA for all tax years in dispute (2003 through 2013), tying up a sizeable amount of the company’s financial capacity.
With both court decisions in its favour, Cameco said it would be asking the government to return these instalments to the company, even if leave to appeal was requested by CRA.
“If CRA feels the laws aren’t written the way they want, then it’s clear they need to approach the government to change the laws moving forward, not continue to pursue the same arguments over and over again before different courts and expect a different outcome.
“We therefore hope CRA accepts the Court of Appeal’s decision and applies it to subsequent tax years so that we can finally move on from this dispute and focus on managing our business for the benefit of all our stakeholders.”