Turquoise Hill Resources routed its investment in one of the world’s largest copper deposits through Luxembourg, avoiding $559 million (U.S.) in Canadian corporate tax between 2010 and 2016, according to a new report.
A Canadian mining company operating in one of the world’s biggest copper deposits has avoided more than half a billion dollars in Canadian tax over the last seven years, according to a report released Wednesday.
By using a complex network of tax haven subsidiaries and lending money to itself at high interest rates, Turquoise Hill Resources has also deprived the government of Mongolia — where the mine is located — of an additional $230 million (U.S.), states the report produced by the Dutch nonprofit SOMO.
“It’s shameless tax avoidance,” said Vincent Kiezebrink, one of the report’s authors. “It doesn’t just affect the world poorest, but also regular people in Western countries as well.”
“The more multinationals keep avoiding taxes, the more regular folks will have to pay for public services that are important not only for people, but also for the multinationals,” said Kiezebrink, who is a researcher at the Centre for Research on Multinational Corporations, known by the Dutch acronym SOMO.
Turquoise Hill, a mining company headquartered in Vancouver and listed on the Toronto Stock Exchange, used letterbox companies in Luxembourg and the Netherlands to make almost $7 billion in loans to its Oyo Tolgoi mine in Mongolia between 2010 and 2016, the report states.
The interest charged on these loans allowed the company to reduce its taxes in Mongolia and transfer much of its profits to low-tax Luxembourg instead of Canada.
This structure allowed the company to avoid paying $559 million in Canadian corporate income taxes ($690 million Canadian at current exchange rates), while only paying $89 million (U.S.) in tax in Luxembourg, according the report.
Turquoise Hill’s Luxembourg subsidiary, which has only one part-time employee, has declared $2.1 billion in profit and paid 4.2 per cent in tax, the report stated.
British-Australian mining group Rio Tinto, which owns 51 per cent of Turquoise Hill contests SOMO’s findings.
“The flawed SOMO report contains a number of unsubstantiated and incorrect allegations regarding tax,” wrote spokesperson Illtud Harri. “Oyo Tolgoi is one of Mongolia’s largest taxpayers and is paying its fair share of tax.”