Canada To Sue Tobacco Firms For Unpaid Taxes

by Mike Godfrey, for LawandTax-News.com, Washington

15 August 2003

In what promises to be the largest corporate fraud case in Canada's history, the federal government is planning to sue major tobacco firms for $1.5 billion, accusing them of conspiring to evade taxes.

According to the suit filed in the Ontario Superior Court, around twelve tobacco firms are said to have accumulated huge profits from underground cigarette sales which were never declared to the authorities.

"We allege that a scheme the companies devised and implemented resulted in them gaining illicit profits from smuggling tobacco," stated Justice Department lawyer Gordon Bourgard, adding: "(The amount sought) is measured by lost taxes, duties, and disengorgement of profits and other general damages."

One of the tobacco firms, JTI Macdonald sought to dismiss the government's action in press reports this week, pointing to a $1 billion lawsuit in 2000 that was thrown out when the New York court ruled that it didn't have jurisdiction in a Canadian tax case. The firm also blamed the anti-smoking lobby for influencing the government's decision.

"These unfounded claims have been dismissed before and we are confident they will be dismissed again," the company was quoted as saying by the Canadian Press.

It has been estimated by some that the government has foregone $13 billion in tax revenue from tobacco firms.

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