B.C. must reconsider rebate for TD
Denying extension on $2.8M claim was ‘unreasonable,’ court rules
The B.C. Court of Appeal has directed the provincial government to reconsider TD Bank’s claim for a $2.8-million tax rebate under a little-known program designed to attract international financial companies to B.C.
The rebate that TD is claiming is under the International Business Activity Act, a program thrust into B.C.’s election spotlight this week with a New York Times report that questions the 29-yearold program’s job creation results, transparency and benefit to B.C. residents. The Times reported the program has cost $140 million in tax refunds and created up to 300 jobs.
Liberal Leader Christy Clark has defended the program — which also existed under an NDP government — saying it is a way to attract head offices from around the world to B.C.
An April 21 ruling from the B.C. Court of Appeal says B.C.’s commissioner of income tax was “unreasonable” to deny TD an extension for its tax return under the program, filed in 2014.
B.C.’s government had judged that TD’s claim arrived one day late, and therefore the rebate would be nil.
B.C.’s government has been directed to reconsider an extension for TD’s claim, the ruling says. TD’s lawyer in the case, Thomas Gelbman, told Postmedia he could not comment.
The ruling does not specify the financial services TD was claiming rebates on, but it sheds light on the size of annual tax breaks that can be claimed by companies enrolled in the program.
The appeal court ruling states “the program is designed to expand economic activity in British Columbia, create jobs and increase provincial revenues.”
Critics of the program, such as Dermod Travis of IntegrityBC, question whether expansions to the program since 2010 have unleashed a flood of offshore finance that may have pumped up Metro Vancouver’s real estate market.
Since 2010, the program has offered a personal tax benefit aimed at executives of Asian banks considering locating in Vancouver, according to strategic documents from AdvantageBC, the non-profit to which program members belong, and whose CEO is Colin Hansen, a former B.C. finance minister.
“This is a temporary foreign workers program that benefits rich foreigners,” Travis said.
“And it is the guy that is working 9 to 5 at Canadian Tire who is paying an income tax break for a foreign executive that could be working for the Bank of China.”
The program focuses on businesses in China, Hansen told Postmedia this week, because Chinese companies want to expand globally.
AdvantageBC’s website advertises that rebates for companies registered in the program “can result in an effective corporate income tax rate of 15 per cent — lower than Hong Kong ’s 16.5 per cent tax rate.” AdvantageBC documents say financial services such as loans, asset management, letters of credit and loan guarantees can only be eligible for tax breaks if “one side of the transaction (is with) a nonresident.”
The Times’ report said Poly Culture Group is one of the Chinese companies enrolled with AdvantageBC.
Poly Culture’s parent company is China Poly Group, a sprawling Chinese state-owned corporation involved in many sectors, including real estate, defence technology and mining. Postmedia reported in April that Poly Culture, which runs an international auction house, opened an art gallery in Vancouver in 2016 after Premier Christy Clark met with China Poly Group chairman Xu Niansha in 2015, according to HQ Vancouver, another provincial program aimed at attracting Asian companies to B.C.
When Poly Culture Group went public in 2014, it disclosed that it could not assure investors that “our internal control system in relation to anti-money laundering and anti-corruption will be effective in preventing our auction operation from being exploited for money laundering or other illegal purposes.”
And an October 2016 briefing note prepared by Western Economic Diversification Canada said Poly Culture’s presence in B.C. could pave the way for “possible real estate and other functions,” Postmedia reported.
China Poly Group’s military roots and links to China’s Communist elite have made it the focus of repeated reports from Bloomberg, the New York Times and the Wall Street Journal.
In April, the Journal reported that Xiao Jianhua, a Hong Kong billionaire and Canadian citizen, was involved in transactions for “firms linked to Beijing’s formidable arms-trading conglomerate, China Poly Group Corp.”
This is a temporary foreign workers program that benefits rich foreigners.