The reorganization, by its leaders own reckoning, reduces Kinder Morgans taxes payable by more than $20 billion over 14 years.... Effectively KMI gets to work the intricacies of the accounting system. It will buy assets from its subsidiaries at a premium price and then depreciate these assets as if they were brand new. The deal creates a hefty $1.4 billion in tax savings each year for at least two decades. The markets reaction to the reshuffling of Kinder Morgans corporate structure is likely why Rich Kinder, KMIs largest shareholder, pocketed an extra $800 million the day after the announcement.... Though Canadas tax structure is different from the US one ...Kinder Morgan has shown it knows how to acquire a Canadian firm and absorb it into its U.S. operations, converting it, effectively, into a U.S. [one].... The company has, in Kinders own words, a convoluted complicated structure with more than 250 separate corporate entities. Upwards of 20 are registered in Canada...... Trans Mountain files accounting information with the National Energy Board on its regulated assets, which are a subset of its overall activity in Canada. These files reveal that although Trans Mountain earlier told the regulator it would pay $7 million in taxes in 2013, instead its regulated pipeline assets realized a tax refund of more than half a million dollars. I asked Kinder Morgan to explain the discrepancy between its filing with the NEB, what it tells the Canadian public about its contribution to fiscal revenues and what it tells U.S. investors and analysts. These questions were filed (see pages 30-44) in an information request as part of my right as a qualified intervener in the current hearing. Kinder Morgan refused to answer. I then asked the NEB to compel answers. Siding with Kinder Morgan, the board denied my request. I believe Canadians are owed an explanation why this U.S. multinational pays so little in Canadian corporate income taxes related to Trans Mountain. The NEB seems content to buy Kinder Morgans story that it will pay a tax rate of 25 per cent on its net income and that its expanded operation will lead to about $100 million a year in federal and provincial corporate income tax revenue. Indeed, in arguing for the Trans Mountain expansion Kinder Morgan presents itself to Canadians as a significant tax contributor. Yet Kinder Morgan now repatriates an average of $172 million per year from the Trans Mountain system for distribution to its U.S. based owners, but faces an average cash tax obligation of only $1.5 million in Canada.... If Kinder Morgans high return on equity in relation to its almost non-existent Canadian tax obligation does not concern the NEB, what remains, I would suggest, is for the federal government to step in and undertake a Canada Revenue Agency audit of all Kinder Morgan activities in Canada, particularly the transactions related to the purchase of Trans Mountain and the complex inter-company transactions that followed. The CRA would be well advised to include a full examination of the companys complex corporate structure, including its reliance on ULCs. It should include an examination of transfer pricing, particularly of debt and equity sourced by Kinder Morgans Canadian subsidiaries through their U.S. parent. Canadians deserve the bottom line facts about what benefits flow here, rather than south of the border, as Kinder Morgan proposes expanding its pipeline operations on our soil.
Posted on: Tue, 18 Nov 2014 22:26:18 +0000
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