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

Martin Mars waterbombers’ firefighting days are past: Coulson

The famed Martin Mars air tankers continue to draw interest from potential… Continue reading

Alberni RCMP officers honoured for taking drunk driver off the streets

Constables Brian Kenny, Rob Jackson named to Alexa’s Team

Port Alberni man dies in single-vehicle collision

Pickup truck with three occupants went off the road on first day of May long weekend

Alberni hosts Island track and field championship

Secondary schools compete at Bob Dailey Stadium

Is Steve Nash Vancouver Island’s best athlete of all-time?

As Captain Canada gets ready to enter basketball’s Hall of Fame it’s time to debate his legacy

VIDEO: After the floods, comes the cleanup as Grand Forks rebuilds

Business owners in downtown wonder how long it will take for things to go back to normal

Olympian sues USA Swimming, saying it failed to protect her

Ariana Kukors Smith alleges her former coach Sean Hutchison began grooming her for sexual abuse at the age of 13

Defence minister thanks troops for B.C. flood relief work

Harjit Sajjan says not only was military response quick, support from locals has been ‘tremendous’

Still no sign of missing father in Cowichan Valley

Search group for Ben Kilmer now stands 40 SAR volunteers and another 100 friends and concerned community members

Couple survives being buried in mudslide on B.C. highway

The couple, from Saskatchewan, were en route to Nelson when a tree fell in their path

‘So grateful:’ Injured Bronco hockey player glad he’s alive, works on recovery

Ryan Straschnitzki was badly hurt in the accident: a spinal injury, broken ribs, a broken collar bone, and punctured lung

UPDATE: Woman dies in ocean accident near Tofino hours before daughter’s wedding

“We are so thankful to everyone who helped our mom.”

PHOTOS: Floodwaters rise and fall in Grand Forks

The flood-ravaged Kootenay-Boundary region begins to heal

NHL playoffs weekly roundup

Vegas Golden Knights have done the impossible and have a chance at hoisting the Stanley Cup

Most Read