Cross Border Transactions: Avoiding Tax Fraud

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Friday, March 1, 2002
Claude Auger & Thomas Copeland
In the face of the restrictive approach to tax avoidance adopted by the Supreme Court of Canada, Tax authorities may seek recourse to the GAAR. When it was proposed, GAAR was described as rule intended to prevent abusive tax avoidance transactions but not to upset legitimate commercial or family transactions undertaken for tax-planning purposes. The GAAR attempts to ensure that a taxpayer does not engage in tax minimization transactions unless: the transaction is carried out primarily for Bona fide non-tax purposes; or it does not result in a misuse of the provisions of the Act or in an abuse of the Act having regard to the provisions of the Act read as a whole if the transaction is carried out primarily for tax purposes. Tax avoidance is a much murkier concept as these are few provisions of the Act that deal with this concept. Determining whether a taxpayer has committed tax avoidance will generally depend upon how the Act is to be interpreted.