TORONTO - Government lawyers say Loblaw Companies Ltd.'s Barbadian banking subsidiary was "playing with its own money" rather than an active business with outside customers and is obligated to pay tax back home.
Justice Department lawyer Elizabeth Chasson said in her closing arguments at the Tax Court of Canada that Barbados-based Glenhuron Bank Ltd. did not meet the requirements to be considered a foreign bank under Canadian law and be exempt from paying tax back home.
The dispute between Loblaw and the Canada Revenue Agency centres on the federal government's reassessments of Glenhuron for several tax years dating as far back as 2001. It could cost the company as much as $437 million according to its latest quarterly report.
Chasson argued that although Glenhuron had a banking license from the Barbados authorities, it did not take deposits or provide financial services to outside customers, but rather largely used its own funds in transactions such as buying short-term securities.
Loblaw lawyer Al Meghji has told the court that the majority of Glenhuron's activities involved arms-length entities, such as swap contracts with large banks, and its banking licence from Barbadian authorities is further evidence that it fits the profile of a bank.
Chasson argued that by entering into swap contracts and purchasing short-term securities Glenhuron is acting as a customer, rather than conducting business with arms-length parties and generating profits.
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