Cinar Tax Settlements

files/pictures/picture-35.jpgCinar Corp. announced that it has finally come to settlements with Canadian federal and provincial tax officials over the repayment of improperly obtained tax credits. Scandal hit the Montreal-based company in the fall of 1999 when fraud allegations were made in the House of Commons claiming that Cinar was placing false Canadian names on scripts written by U.S. writers to gain tax credits. Subsequently, the firm's co-founders Micheline Charest and Ronald Weinberg and CFO Hasanan Panju were fired. To the Canadian Customs and Revenue Agency, the TV producer will pay C$5.095 million (US$3.34 million), plus penalties for fund improperly obtained with $2 million ($1.31 million) of it being due immediately. Moreover, Cinar will give up claims on an additional $6.072 million ($3.99 million) in credits that were filed but never received. Cinar also recognizes a tax liability of approximately $3.71 million ($2.43 million), plus applicable interest for certain corporate tax matters arising mainly from the early deduction of some expenses. The liability will be dispersed over the next five years. To the Ministry of Quebec Revenue, Cinar will repay $7.93 million ($5.2 million), including interest and penalties, again with $2 million ($1.31 million) due immediately. The company will relinquish claims on another $3.6 million ($2.36 million) and recognize a tax liability of $1.068 million ($700,971), plus interest. "I am satisfied that these agreements provide a reasonable basis for Cinar Corporation and both the Federal taxation authorities and the Quebec taxation authorities to move forward on this question," said Barrie Usher, Cinar president and CEO. "It is a significant step in the clarification of the company's financial position, which will reflect the agreements' financial and accounting impact on the company. It will also enable federal and Quebec taxation authorities to again deal with Cinar Corporation with trust and confidence. With this agreement reached, we expect that Cinar will now be able to approach its different partners to see how it can restart its activities with them and continue to play an important role in the Canadian entertainment industry." The settlement now allows Cinar to obtain tax credits, which were halted in light of the controversy. However, the production house is still facing lawsuits from investors and subsidiaries in addition to police investigations. Cinar is still working on filing its financial statements for the year ending November 30, 1999.