Transfer pricing at Cameco Corporation
Transfer pricing is a measure used by separate divisions of the same entity to transact with each
other. Each division is in charge of its profits, and whenever required to transact with another
division, it will set a price which becomes the cost of the transaction to the other division. Transfer
prices should be reasonably equal to market prices to avoid unethical business practices. However,
many multinational corporations have attracted public attention for engaging in unfair transfer
pricing practices as tax avoidance measures. This can be evidenced by the case of Cameco
Corporation that has taken transfer prices a bit too far and consequently been able to avoid paying
the correct amount of tax due to the authorities.
The company has recently faced litigation in the Court of Canada filed by the Minister of National
Revenue. The minister accused the company of wrongfully shifting its profits to Switzerland- an
action aimed at reducing tax liability in Canada. The minister went further to argue his case, saying
that Cameco Corporation had engaged in sham transactions and consequently violated paragraphs
247(2)(a) and(c); the sales were not at arm's length price, as dictated by Canada’s Income Tax Act.
As such the minister said that the company was for $11 m...