Just as Chrysler tries to hammer out a cash deal with Ottawa and Ontario for at least a billion dollars, the automaker's Canadian branch has been hit with a half-billion dollar tax reassessment. The Canada Revenue Agency has been trying to collect tax payments from Chrysler for years, after the agency adjusted the amount Chrysler owes on parts and vehicles that were shipped across the border. Canada Revenue wants $500 million to pay off abuses from "transfer pricing," which is a bit of voodoo between subsidiaries and the parent divisions of corporations -- a shell game with profits, essentially.

One problem with this tax bill is the time at which it's coming. Chrysler has pledged that any monies received as part of bailout negotiations would go to keeping the operations going, not to pay back taxes. Also, there's a treaty between Canada and the United States that allows Chrysler to ask for a break in the US when Canada turns up the wick on fiduciary obligations. The treaty states that authorities must be made aware of reassessments within six years of the disputed year, and since this issue stretches all the way back to 1996, Chrysler argues that the last reassessment, in 2005, deprives the company of the option of asking for a tax break because it's outside of the six year window. For now, the dispute will have to wait, as there may not be a Chrysler for much longer if things don't get sorted -- meaning a big, fat goose egg of a tax payment.

[Source: The Globe and Mail]


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