Chrysler Canada gets hit with a $500 million tax bill

The federal government has slapped a $500-million charge against Chrysler Canada Inc. as part of a high-stakes tax battle that is complicating government bailout negotiations for the troubled auto maker.

According to Federal Court documents obtained by The Globe and Mail, the Canada Revenue Agency began notifying Chrysler Canada in 2002 that it had been reassessed and owed “substantial increases" in taxes for three years starting in 1996. The reassessment, one of three issued against the company between 2002 and 2005, targeted the pricing of automobiles and parts that crossed the border between Chrysler Canada and its Detroit parent.

The court documents do not reveal the amount of back taxes that Canada Revenue is seeking. But according to documents filed with Ontario's Land Registrar, the tax agency filed a $500-million charge or lien in September against Chrysler's operations in Brampton, Ont. Tax experts said the lien is believed to be one of the largest ever served against a company in Canada and typically such claims do not reflect the full amount of taxes owed.

A spokesperson for Canada Revenue declined to comment.