On September 26, 2013, the Canadian Tax Foundation Young
Practitioners Group (Toronto) convened a panel discussion titled "GAAR at 25: Lessons Learned & Current
Challenges" on the General Anti-Avoidance Rule
("GAAR") in section 245 of the Income Tax Act
The panelists included Justice Karen Sharlow (Federal Court of
Appeal), Justice Patrick Boyle (Tax Court of Canada), Phil Jolie
(formerly of the Canada Revenue Agency), Ed Kroft (Blake, Cassels
& Graydon LLP), Patricia Lee (Department of Justice) and Shawn
D. Porter (Deloitte LLP and formerly at Department of Finance).
The general view of the panelists was that the potential
application of GAAR in a specific case is very fact-dependent, and
that the jurisprudence on the legal analysis continues to evolve.
In the future, the focus will remain on how to interpret the
"misuse and abuse" test within section 245.
Impact of GAAR
The panel discussed whether the GAAR has had an impact in
deterring taxpayers from engaging in aggressive tax planning. Phil
Jolie was of the view that it has not, whereas Ed Kroft and Shawn
D. Porter noted that the GAAR has had somewhat of a
"chilling" effect in tax planning, particularly with
public companies concerned about reputational risk.
There was a general consensus among the panelists that there is
an element of a "smell test" in the GAAR. When
evaluating whether GAAR should apply, the Justice Sharlow and
Justice Boyle admitted there is an element of using one's
"nose", getting in touch with one's "spidey
sense", or simply determining if something "weird"
was happening before undertaking the legal analysis as to whether
the GAAR may apply.
The other panelists noted that this may raise difficulties for
tax practitioners who are asked to provide GAAR opinions to
clients. The panelists advised that prudent counsel should address
the evolving nature of GAAR jurisprudence in any opinion to a
client on an issue where the GAAR could be engaged.
Patricia Lee noted that the Department of Justice is currently
litigating 44 cases where GAAR is a "live" issue. The
cases include the following types of transactions:
Value shifting and capital loss creations;
Reverse attributes with trusts;
Base averaging of shares sold to a spouse;
Surplus stripping and, in particular, cross-border surplus
Manipulation of adjusted cost base of property;
Acquisition of tax credits and change in control; and
Leverage donation cases.
The panelists concluded that, even after 25 years, there
remains a degree of uncertainty in respect of the engagement and
application of the GAAR.
Dentons is a global firm driven to provide you with the
competitive edge in an increasingly complex and interconnected
marketplace. We were formed by the March 2013 combination of
international law firm Salans LLP, Canadian law firm Fraser Milner
Casgrain LLP (FMC) and international law firm SNR Denton.
Dentons is built on the solid foundations of three highly
regarded law firms. Each built its outstanding reputation and
valued clientele by responding to the local, regional and national
needs of a broad spectrum of clients of all sizes –
individuals; entrepreneurs; small businesses and start-ups; local,
regional and national governments and government agencies; and
mid-sized and larger private and public corporations, including
international and global entities.
Now clients benefit from more than 2,500 lawyers and
professionals in 79 locations in 52 countries across Africa, Asia
Pacific, Canada, Central Asia, Europe, the Middle East, Russia and
the CIS, the UK and the US who are committed to challenging the
status quo to offer creative, actionable business and legal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances. Specific Questions relating to
this article should be addressed directly to the author.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On Thursday, September 22, 2016, Dentons hosted a panel discussion about the management of liabilities and risks associated with environmental crises, including potential liabilities for directors and officers and provided insight into risk and liability techniques associated with environmental crisis management.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).