The Quebec government is seeking almost $750-million and several prison terms in sales-tax fraud charges that have been laid against precious metals trader Kitco Metals Inc. and 11 other firms.
Revenue Quebec alleges that Montreal-based Kitco and its founder and president – Bart Kitner – as well as 11 companies including several jewellers and their respective owners participated in an elaborate strategy of fiscal fraud in the transformation of gold.
Mr. Kitner and Kitco and the other firms have been charged with having made false declarations and obtained tax credits under false pretenses between March 1, 2008 and Aug. 31, 2010.
The tax agency alleges that false billing was used by the companies to get tax credits to which they were not entitled.
Revenue Quebec is seeking a total of $227-million in fines from Kitco.
Kitco said in a news release Monday that it has never made false statements in a return nor attempted to obtain a rebate to which it is not entitled. The company said it continues to "vigorously contest all aspects of [Revenue Quebec's] actions."
Mr. Kitner said the agency has abused its authority and "has caused substantial harm to Kitco's ongoing operations and development."
Last year, Kitco filed a lawsuit in Quebec Superior Court seeking damages of $122-million following allegations Revenue Quebec first made in 2011 that Kitco and other companies had engaged in fraudulent activities.
On Monday, Kitco said the damages it is seeking will likely be higher as a result of more fallout arising from the charges disclosed Monday.
Kitco also alleged in the news release that evidence "in a July 26, 2011 court transcript indicates that [Revenue Quebec] directed at least one witness to provide false testimony about Kitco, or suffer consequences for refusing to give the false testimony."
The charges were disclosed by Revenue Quebec on Monday; they follow a similar operation in June, this time alleging that wholesaler Carmen International and other companies were part of a network running the same scam.
The agency alleges that artificial transactions were used in a cycle in which pure gold (which is not taxable) was converted into gold scrap (which is taxable), then shipped to a refiner to be once again transformed into pure gold.
According to the allegations, the transactions were then used to make phony claims for refunds on sales taxes on the gold that was rendered into scrap. None of the allegations have been proved in court.
In its defence, Kitco has previously stated that it buys precious-metals scrap and pays the suppliers sales taxes on these purchases, for which it receives a tax credit. Kitco said it is up to the suppliers to pay back the sales taxes to Revenue Quebec and that if some of those suppliers have not remitted the taxes paid to them, then the agency is unfairly holding Kitco responsible.