Report says B.C. mining company avoids hundreds of millions in taxes

A Vancouver-based company is being accused by a Dutch non-profit of avoiding taxes

A new report from a Dutch non-profit group alleges Vancouver-based Turquoise Hill Resources Ltd. has avoided paying hundreds of millions of dollars in Canadian taxes on its Mongolian mine. The corporate logo for Turquoise Hill Resources Ltd. is shown. (Ho/The Canadian Press)

Vancouver-based Turquoise Hill Resources Ltd. was accused Wednesday by a Dutch non-profit of avoiding hundreds of millions of dollars in Canadian taxes through the use of tax havens.

The report by the Centre for Research on Multinational Corporations, known as SOMO, alleges Turquoise Hill parent company Rio Tinto used so-called mailbox companies in the Netherlands and Luxembourg to channel financing of the massive Oyu Tolgoi mine — bypassing the higher taxes the company would have paid in Canada.

Had Turquoise Hill directly reaped the profits from its Mongolian operations, rather than have its Luxembourg subsidiary count them, it would have paid US$470 million more over seven years, the report said.

“This use of mailbox companies to gain illegitimate access to tax treaty benefits is considered by the OECD as treaty abuse,” wrote the authors.

Turquoise Hill challenged the report as having significant inaccurate or unsubstantiated facts, without specifying the apparent errors in the report.

“Turquoise Hill believes that our tax practices are not only compliant with local laws, international standards and voluntary commitments, but that Oyu Tolgoi’s operation is making substantial contributions to Mongolia’s economy and long-term development,” the company said in a statement.

Rio Tinto, which owns 51 per cent of Turquoise Hill, challenged the report’s findings and said the governments of Canada and Mongolia had approved the structure.

“The flawed SOMO report contains a number of unsubstantiated and incorrect allegations regarding tax,” Rio Tinto said in a statement.

The company said it is paying its fair share of tax in Mongolia, and is one of the country’s largest taxpayers with upward of US$1.8 billion in taxes and royalties paid between 2010 and 2017.

Mongolia terminated the tax treaties with the Netherlands and Luxembourg in 2013 that allowed Rio Tinto to access lower tax rates, but the company was able to continue to use the lower rates because of clauses in an investment agreement it signed in 2009.

The government tried to renegotiate tax issues, but after Rio Tinto agreed to some concessions, it left in the lower rate as part of an agreement reached in 2015, depriving it of an estimated US$230 million in taxes, the report said.

The agreements were ratified based on transparent, factual information and on terms comparable with other mining operations globally, Rio Tinto said.

But Mongolia does not appear to be satisfied, starting a new tax dispute last month when it sent a US$155 million tax bill to the owners of Oyu Tolgoi.

Canadians should also be dissatisfied with the current arrangement, said MiningWatch Canada outreach co-ordinator Jamie Kneen.

He said the Canada Revenue Agency has challenged Cameco Corp. and Wheaton Precious Metals for their use of tax havens to channel profits through, so it’s not clear why the CRA has apparently approved the Turquoise Hill arrangement.

“Here’s one that CRA has deemed to be legal, and it’s depriving Canada of millions in revenue and its not at all clear why they would do that.”

Citing confidentiality provisions, Minister of National Revenue spokesman John Power said the government couldn’t comment on the specifics of the case.

The government has, however, increased spending on investigating tax avoidance including annual assessments of all large multinational corporations who may be involved in aggressive tax avoidance schemes, said Power.

He said Canada is also committed to the OECD’s Base Erosion and Profit Shifting project that looks to identify aggressive tax avoidance strategies and ensure companies pay tax where the profits are generated, and has implemented a country by country reporting requirement for large multinational enterprises.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

OPINION: Urgent care room will cost lives

“Seniors, of any demographic, are the most vulnerable to the loss of emergency care.”

James Hayward coroner’s inquest rescheduled hours away from where RCMP shooting occured

The family is “a bit disappointed that it’s going to be held in Campbell River”

Deadline looming for North Island College scholarship applications

Students have until April 24 to apply for a record number of… Continue reading

BC Ferries to pilot selling beer and wine on select routes

Drinks from select B.C. breweries and VQA wineries to be sold on Swartz Bay to Tsawwassen route

Gil’s Girls win Harvey Walkus Memorial Ball Hockey Tournament in shootout

This year the tournament was held at the Don Cruickshank Memorial Arena on April 12-14.

VIDEO: Alberta man creates world’s biggest caricature

Dean Foster is trying to break the world record for a radio show contest

Chaos at the ferry terminal for people heading from Vancouver to the Island

Easter crowds create backlog at Tsawwassen ferry terminal

B.C. RCMP receive application for Police Cat Services

RCMP announced the launch of the Police Cat Services unit as an April fools joke

Kirkland Signature veggie burgers recalled due to possible metal fragments

Recalled products came in 1.7 kg packages with a best before date of Apr. 23, 2019

Parents of 13 who tortured children get life after hearing victims

One of their daughters fled their home and pleaded for help to a 911 operator

Flooding, climate change force Quebecers to rethink relationship with water

Compensation for victims of recurring floods limit to 50% of a home’s value, or a maximum of $100,000

Storms blast South, where tornadoes threaten several states

9.7 million people in the Carolinas and Virginia at a moderate risk of severe weather

Private cargo ship brings Easter feast to the space station

There are three Americans two Russians and one Canadian living on the space station

Notre Dame rector: “Computer glitch” possible fire culprit

The fire burned through the lattice of oak beams supporting the monument’s vaulted stone ceiling

Most Read