The James Hausman Tax Law and Policy Workshop Series
presents
Geoffrey Loomer
Dalhousie University Schulich School of Law
Tax Treaties, Investment Treaties, and the Castigation of Tax Havens
Tuesday, March 15, 2011
4:10 – 6:00 p.m.
Solarium (room FA2), Falconer Hall, 84 Queen’s Park
Policy statements issued in the wake of the global financial crisis of 2008, including the G20 London 2009 communiqué and OECD progress reports on its international tax standard, intimated that there was some connection between “tax havens” and the financial collapse. That connection was seen to arise from three distinct issues: tax evasion, tax avoidance, and financial regulation avoidance. Rising global pressure on tax havens in 2009 and 2010 resulted in an unprecedented level of capitulation, in the form of new Tax Information Exchange Agreements (TIEAs) and financial regulation standards. While these developments are laudable insofar as they counteract global tax evasion and improve financial market transparency, they also serve to legitimize most international tax avoidance activities. The post-2008 acquiescence in – if not tacit endorsement of – international tax avoidance is particularly evident in Canada. Three separate and related reasons for this can be identified. First, the Canadian legislation governing the exempt surplus/dividend exemption for foreign affiliates and the regime regarding foreign accrual property income, already lacking a clear policy basis, have been corrupted by the “non-qualifying country” rules adopted in 2007. Although these rules were introduced prior to the financial crisis, they accord with the G20 and OECD positions by inducing tax haven countries to conclude TIEAs with Canada in an effort to combat tax evasion; the beneficiaries of this development are multinational enterprises operating from Canada, who care little about the terms of a TIEA as long as one exists. Next, government heed of industry competitiveness concerns is resulting in expansion of the dividend exemption system, through negotiation of TIEAs with virtually all tax havens and through the repeal of proposed limitations on deductibility of financing costs related to foreign affiliates. Third, and more generally, Canada’s tax system with respect to outbound investment continues to be plagued by formalism and incrementalism, such that no coherent policy foundation can be discerned. Assessments and appeals that allege “abuse” or “unacceptable avoidance” of Canada’s international tax laws, which require identification of some tax policy or purpose that is being frustrated, will fail for the precise reason that no identifiable policy exists. Nonetheless, it can be expected that the CRA will continue to attack transnational structures on the basis that they are “abusive” or otherwise ineffective. It is questionable whether, with Canada’s legislative branch being complicit in international tax avoidance activities not expressly targeted by legislation, it is the role of the administrative branch to stand opposed. Fulfillment of a broader vision of which international tax avoidance transactions are “unacceptable” will require structural change in Canada’s international tax policy and legislative approach.
Geoffrey Loomer was appointed to the faculty of Dalhousie Law School in 2009. Geoff obtained his B.Sc. in Economics from the University of Victoria and his LL.B. from the University of British Columbia, spending two years in the interim with the Bank of Canada. He clerked with the British Columbia Supreme Court in 2000/01 and then practised in the tax group of McCarthy Tétrault until 2006. Geoff received a BCL from the University of Oxford in 2005 and later returned to Oxford to pursue a D.Phil. in international tax law. He is affiliated with the Oxford University Centre for Business Taxation. His research and teaching interests involve the intersection of tax law, corporate law and public law.
For more workshop information, please contact Nadia Gulezko at n.gulezko@utoronto.ca.
