TORONTO, Canada, Thursday April 26, 2018 – A Barbados-based banking subsidiary of Canada’s largest grocery retailer is at the centre of a case in which the Canada Revenue Agency has accused its parent company of using it to avoid paying taxes.
Glenhuron Bank Limited, a subsidiary of Loblaw Companies Ltd, had been operating as a bank in Barbados. It was incorporated in 1992 and liquidated in 2013, when Loblaw decided to use that capital domestically to buy Shoppers Drug Mart.
The lawyer for the Department of Justice, Elizabeth Chasson, alleges that Loblaw Financial Holdings took steps to have Glenhuron appear to be a foreign bank in order to avoid paying tax.
According to the Canadian Press, Chasson told Justice Campbell Miller in the Tax Court that the bank was more like a treasury centre — an in-house bank for a multinational corporation — rather than a foreign bank, which can qualify for a tax exemption.
“The appellant has tried to make its treasury centre, whose business is to invest surplus cash until needed by its parents or its affiliates, appear to have the attributes necessary to meet the (Foreign Accrual Property Income) exemption,” she said in her opening statement in court.
“It did so to keep hundreds of millions of dollars offshore from paying tax in Canada.”
According to news reports, Loblaw could have to shell out as much as CAD$406 million (US$316 million) if it loses the case.
But Loblaw’s lawyer, Al Meghji, argued that Glenhuron Bank was indeed a bank, according to the laws of Barbados, and viewed as such by the Caribbean country’s central bank.
He also pointed out to the court that Glenhuron had been audited by Canadian officials between 1992 and 2005, and its compliance had never been questioned.
And he insisted that the allegations being made against his client are “without merit”.