When the Canada Revenue Agency demanded a lot more than US$200 million in back taxes from Silver Wheaton Corp. last July, almost no one thought it might hold on there.
The CRA’s claim only requested alleged unpaid taxes from 2005 to 2010. Investors figured the tax collector would ultimately create a similar claim covering more recent years since Silver Wheaton’s business design hasn’t changed.
That process has become underway. On Tuesday night, Silver Wheaton revealed the CRA will audit its international transactions for the 2011 to 2013 tax years. The dispute revolves around whether Silver Wheaton’s offshore transactions are taxable in Canada.
Andrew Kaip, an analyst at BMO Capital Markets, said this move by the CRA seems like a “poker raise.” He pointed out that it comes down under fourteen days after Silver Wheaton filed an appeal around the original claim to the Tax Court of Canada.
“We question the timing of the announcement as one that may be construed to exert pressure on (Silver Wheaton),” Kaip said inside a note.
Ironically, he said the CRA’s move could actually be considered a positive by investors, since they are in possession of a clearer feeling of its position and may assess the impact for themselves. Silver Wheaton said the company may demand about US$310 million in taxes covering the 2011 to 2013 tax years.
Kaip said the news has no impact on his valuation for Silver Wheaton, since he always assumed the CRA would pursue back taxes from 2011 onwards. He’s an industry perform rating around the stock and a price target of US$14.50.