Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Allegations of Tax Evasion by the Canadian Revenue Agency. During the annual audit in 2 0 0 8 , CRA identified issues with the transfer

Allegations of Tax Evasion by the Canadian Revenue Agency. During the annual audit in 2008, CRA identified issues with the transfer pricing approach employed by Cameco to set the price of uranium sold to its Swiss subsidiary. Based on this finding, CRA reassessed Cameco's earnings and the amount of tax payable for the years 2003 through 2007 The income for the years 2003 through 2007 was revised upwards respectively by $43 million, $ 108 million, and $ 197 million, $243 million, and $708 million. The company had to make a cash payment of $27 million to cover its increased tax liability for 2007(2012 Cameco consolidated financial statements, accessed from SEDAR on July 6,2014). Cameco is contesting CRA's decision; however, Cameco's management has made a provision of $63 million for the period of 2003 through 2012. Market analysts estimate that if CRA wins the case, the additional tax liability for the years 2008 through 2012 could be around $800 million. Exhibit 4 presents Cameco's consolidated income statements for the years 2003 through 2013. As Anderson studied the Cameco transfer pricing issue in more detail, it was not clear to her whether CRA's allegations were correct. If they were, it would be difficult to understand how the questionable practice could have gone on for so long, in spite of all the regulations and reporting requirements. Estimate the increased tax liability on Cameco if CRA wins the lawsuit against the company

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ray Garrison, Eric Noreen, Peter Brewer

16th edition

1259307417, 978-1260153132, 1260153134, 978-1259307416

More Books

Students also viewed these Accounting questions