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

Castlegar bridge designed by architect of collapsed Italian bridge

Riccardo Morandi designed the Kinnaird Bridge, which is part of Highway 3.

Interior Health evacuates Kimberley facilities

Residents at Kimberley Special Care Home and Garden View Village evacuted

Latest report from BC Wildfire Service

BC Wildfire Service says Meachen Creek fire settled down again Thursday evening, after high winds kicked it up

UPDATE: Fire forces closures and delays on Highway 3 at Kootenay Pass

Motorists should detour using Kootenay Lake ferry

Kimberley under evacuation alert; be prepared

Information on what to do; expect

PHOTOS: B.C. city wakes up to darkness under wildfire smoke

The rest of the province also dealing with thick haze as smoky skies continue

Safeway union urges prejection of mediator recommendations

Says mediator asks for too many concessions

Fire chases B.C. crews out of their own camp

Crews in Burns Lake had to leave after a wildfire reportedly overtook their sleeping quarters

To address peacock problem, B.C. city moves ahead on trapping plan

Surrey’s new bylaw focuses on ensuring people no longer feed the birds, ahead of relocation

Hospitals to see ‘delays’ in care after losing Saudi students, health group says

About 1,000 Saudi residents called back to kingdom after suspending diplomatic relations with Canada

Bernier diatribe against ‘extreme multiculturalism’ boosts Liberal coffers

Party spokesperson Braeden Caley says online donations doubled, social media engagement quadrupled

‘Disjointed’ system hinders British Columbia First Nations in wildfire fight

More than 550 wildfires were burning in B.C. and crews were bracing for wind and dry lightning

Federal government announces over $115 million to Royal Canadian Navy

Defence Minister Harjit S. Sajjan was at Victoria’s CFB Esquimalt to announce missile system upgrades

RCMP nab prolific car thief after month-long, B.C.-wide search

A province-wide warrant was issued for Brian Robert Stephan in June for a litany of offences

Most Read