From: AlanBaggett@volcanomail.com   
      
   Canadian Government lent $1 billion to a mining company that allegedly avoided   
   nearly $700 million in Canadian taxes :CRA SOTW   
      
   By Marco Chown Oved Investigative Reporter   Mon., Feb. 5, 2018   
      
   The Canadian government provided more than $1 billion in loans to a mining   
   company that used a complex offshore business structure to allegedly avoid   
   nearly $700 million in Canadian tax.   
      
   Turquoise Hill Resources, a Canadian company headquartered in Vancouver and   
   listed on the Toronto and New York stock exchanges, received a loan of $750   
   million (U.S.) in 2015 from Export Development Canada, a Crown corporation   
   that supports Canadian    
   businesses abroad.    
      
   The loan is worth more than $1 billion Canadian, according to EDC’s   
   disclosure database.   
      
   Between 2010 and 2016, Turquoise Hill ran the finances for its massive Oyu   
   Tolgoi mine in Mongolia through shell companies in Netherlands and Luxembourg,   
   The arrangement allowed it to avoid paying $559 million (U.S.) in Canadian   
   corporate income tax,    
   worth $694 million Canadian at current exchange rates, according to a report   
   put out by the Dutch NGO SOMO this week.   
      
   “There does seem to be a contradiction there,” said Karyn Keenan, director   
   of Above Ground, an Ottawa-based NGO that advocates for corporate   
   accountability.   
      
   “Should EDC be providing over a billion dollars of financing to a company   
   that’s engaging in tax avoidance?” she asked. “EDC is a public   
   institution. It’s an arm of the state. It should operate in a way that’s   
   coherent with the policies and    
   the stated aims of the government.”   
      
   “If the government of Canada is trying to impose a progressive tax regime to   
   sustain the social contract with Canadians, then it’s surprising this kind   
   of deal could happen,” Keenan said.   
      
   The loan was Canada’s portion of a $4.4-billion (U.S.) finance deal to   
   expand the Oyu Tolgoi’s open pit with a second underground mine. The other   
   sources of funds are EDC’s U.S. and Australian counterparts and 15   
   commercial banks, including CIBC    
   and HSBC.   
      
    A EDC spokesperson, Phil Taylor, said due diligence is performed on all deals   
   to make sure they comply with Canadian laws.   
      
   “We believe that the CRA is the ultimate authority on the appropriateness of   
   Canadian corporate tax structures, and their specific approval in this case   
   constitutes the final word on the matter from EDC’s perspective,” Taylor   
   said.   
      
   Turquoise Hill disputed the SOMO report, saying the company had received   
   approval from the Canada Revenue Agency for its tax structure.   
      
   “Turquoise Hill and Oyu Tolgoi are committed to tax transparency and   
   Turquoise Hill believes that our tax practices are . . . compliant with local   
   laws, international standards and voluntary commitments,” a company   
   spokesperson, Tony Shaffer, wrote    
   in an email.   
      
   “We believe a significant number of the statements presented as alleged   
   facts in the SOMO report are inaccurate or unsubstantiated,” he said.   
      
   According to the report, which was based on public financial declarations,   
   Turquoise Hill declared $2.1 billion in profit in Luxembourg, where it employs   
   only one part-time staff member. The company paid $89 million in tax in   
   Luxembourg — a tax rate of    
   4.2 per cent.    
      
   It paid no corporate income tax in Canada, the report states.    
      
   Export Development Canada is a self-financing Crown corporation that supports   
   Canadian businesses operating abroad with insurance and loans.   
      
   “Our job is to support and develop Canada’s export trade,” states   
   EDC’s website. “We are committed to the principles of corporate social   
   responsibility. Our rigorous due diligence requirements ensure that all   
   projects and transactions we    
   support are financially, environmentally and socially responsible.”   
      
   EDC has signed on to multiple international guidelines and standards for   
   ethical business conduct, including the OECD’s Guidelines for Multinational   
   Enterprises, which states that companies should “refrain from seeking or   
   accepting exemptions . . .    
   related to . . . taxation.”   
      
   “Enterprises should comply with both the letter and the spirit of the tax   
   laws and regulations in all countries in which they operate,” the guidelines   
   state.   
      
   The SOMO report also alleged Turquoise Hill deprived the Mongolian government   
   of $230 million, mostly the result of a contract that gave it favourable tax   
   treatment, even when the tax treaty it was based upon was repealed.   
      
   In December, the Mongolian government handed Turquoise Hill a $155-million tax   
   bill that the company is disputing.   
      
   “Turquoise Hill is of the firm view that Oyu Tolgoi LLC has paid all taxes   
   and charges required under the Investment agreement . . . and Mongolian   
   law,” the company said in a statement at the time.   
      
   Above Ground’s Keenan said it’s common for multinational companies to   
   stockpile their profits in a tax haven.    
      
   “It’s a race to the bottom” made worse by the fact that “Canada is   
   using this public institution to support a company that is undermining the   
   fiscal basis for both Mongolia and Canada,” she said.   
      
   Parliament reviews EDC’s mandate every 10 years, and will be asked to do so   
   again in 2018. Keenan would like to see the government add stricter criteria   
   to lending to make sure EDC doesn’t fund operations that evade tax,   
   participate in environmental    
   degradation or human rights abuses.   
      
   “There are reasonable questions whether EDC is getting it right,” she   
   said. “The government should be actively involved in overseeing EDC’s   
   deals.”   
      
   Oyo Tolgoi, which is expected to become the third-largest copper mine in the   
   world when it reaches peak production in 2025, was discovered by Ivanhoe Mines   
   in 2001.    
      
   The Canadian company was founded by Robert Friedland, a U.S.-born Canadian   
   citizen now living in Singapore, who spent years developing the stake before   
   partnering with British-Australian mining giant Rio Tinto in 2006.   
      
   Rio Tinto took control of the company in 2012, and Friedland left, taking his   
   corporate name with him. The company was rebranded Turquoise Hill, the English   
   translation of Oyo Tolgoi.    
      
   In 2015, Friedland sold his shares of Turquoise Hill for approximately $200   
   million, according to Bloomberg data. He is no longer associated with   
   Turquoise Hill.   
      
      
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