The Canada Revenue Agency (CRA) is going after Cameco, a Saskatchewan-based uranium producer.
The CRA alleges Cameco sold tons of uranium at a low price to a subsidiary in Europe. That European subsidiary then sold the uranium for a higher price to customers around the world. As a result, huge profits were made by the European subsidiary and it paid much lower taxes to the Swiss government than what Cameco’s Canadian operation would have paid to Canadian governments. The allegation of course is that Cameco chose Switzerland to avoid high Canadian taxes, and did so illegally.
If Cameco is found guilty of tax evasion, the Canada Revenue Agency should do what it does with any other company or taxpayer - try to recoup any taxes owing to the Saskatchewan and federal governments.
To be sure, taxes can be a pain in the butt, but people and businesses should abide by tax laws enacted by governments. If individuals and businesses don’t pay their obligations, then everyone else has to pick up the slack to pay for policing, road repair, education and other government services.
That much should be obvious to all.
While everyone awaits the courts to rule on the Cameco situation, the provincial and federal governments should figure out what they will do if Cameco wins its tax battle. If this practice is completely above board and legal, Cameco won’t be the only company looking for a better tax deal in a different jurisdiction.
Any changes proposed by the government should ensure top dollars are paid to the government for Canadian resources while maintaining a competitive rate/tax structure; one that continues to see large investments in Saskatchewan.
Second, advocates for high taxes and big government should learn from the situation. After all, at the heart of this matter is the incentive to go to where lower taxes exist. Just as people shop around for lower prices so do businesses.
When the Manitoba government raised its sales tax from 7 per cent to 8 per cent, the Canadian Taxpayers Federation was interviewed on a talk radio station in Brandon, Manitoba; not far from the Saskatchewan border. A gentleman called in and noted that people from Manitoba were already getting in their cars and shopping in nearby Yorkton, Saskatchewan due to Saskatchewan’s lower tax rate of 5 per cent.
The gentleman suggested that an even higher tax rate in Manitoba would drive (pun intended) even more people to shop in Saskatchewan.
Similarly, businesses in the western Saskatchewan border town of Lloydminster don’t have to charge the provincial sales tax on goods and services. This is done to support Sask businesses in the town, as there would be no way for them to compete with the Alberta side of the town that doesn’t have a sales tax.
The point is that taxes matter. They matter to Cameco and they impact the decisions of everyday shoppers. But cutting taxes doesn’t automatically mean governments will collect less revenue.
For instance, back in 2005 the general business tax rate in Saskatchewan was 17 per cent and the government collected revenues of $257 million. However, by 2010 the province had lowered the tax rate to 12 per cent and revenues were $1.1 billion. Yes, despite a lower tax rate the government saw revenues skyrocket. Why? Well, a big part of that increase was due to the fact investment poured into Saskatchewan as it became more competitive.
Clearly, whether we’re talking a bit of savings on your grocery bill by shopping somewhere with a lower tax or a multi-million dollar investment, the government needs to be competitive with tax rates.
Again, it’s important for businesses to pay what their tax obligations, and Cameco should pay every penny they owe if they’re found guilty. However, it’s equally important for high tax advocates to realize the Cameco situation is symbolic of the need for governments to be competitive in the first place.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation