The Canada Revenue Agency (CRA) is alleging that Loblaw Companies set up a phoney bank in Barbados to avoid taxes on hundreds of millions in investment income.
A CBC investigative report says that in preparation for a full trial in April, government lawyers are requesting that a judge force Loblaw CEO Galen Weston to provide more information about the company’s offshore operations.
The CRA is claiming Loblaw owes $404 million, including interest, penalties and provincial income tax.
The bank was incorporated in 1992, and Loblaw used it to make investments in financial derivatives that earned it hundreds of millions of dollars. Canadian tax law provides an exemption for the investment income of Canadian-owned foreign banks.
CRA auditors reassessed the 2001-2010 tax filings of a Loblaws subsidiary that was the bank’s Canadian parent, and determined that the bank doesn’t qualify for the exemption as its activities “did not constitute banking or a banking business.”
Loblaw says it has already given the government the information it requested, that attempts to compel it to divulge more information are "without merit," and that the Barbadian bank is a legitimate foreign bank under Canadian and Barbadian law.