When is a bank not a bank? Loblaw, CRA take $404M dispute to court
TORONTO — Loblaw Companies Ltd. and the Canada Revenue Agency faced off in a Toronto court Wednesday in a $404-million dispute involving allegations the grocery giant’s Barbadian banking subsidiary was misused for tax avoidance.
The Tax Court of Canada hearing focused on Barbados-based Glenhuron Bank Ltd. was largely procedural ahead of a trial due to start on April 23.
The dispute — which began in 2015 after subsidiary Loblaw Financial Holdings filed an appeal — could cost the grocery giant as much as $404 million, including interest and penalties, according to its latest quarterly report.
The CRA alleges in court filings that Loblaw Financial Holdings took a series of steps to have Glenhuron “appear to be a foreign bank in Barbados in order to circumvent” the rules.
It notes that Glenhuron was not allowed to accept deposits from or provide international financial services to Barbados residents.
The CRA’s stance is that certain investment income earned by Glenhuron should be treated and taxed as income in Canada, and not as a foreign bank which can qualify for an exemption.
Loblaw spokesperson Kevin Groh says the supermarket conglomerate has “paid its taxes as it should in the jurisdictions it should,” and Glenhuron’s income earned outside of Canada should not be taxable.