Barbados the Offshore Domicile Implicated in Loblaw Tax Avoidance Case

The case playing out in Canada which involves Canada’s most visible retailer Loblaw and the reported attempt to avoid paying taxes by channelling transactions through the Barbados registered Glenhuron Bank Ltd is likely to do the Barbados offshore sector no favour. Barbados is established as a mature offshore centre, however, in recent years there is clearly an attempt to more rigidly regulate offshore domiciles as the OECD countries seek to retain capital and profits onshore.

The blogmaster is aware that there is a large Canadian membership in the forum and looks forward to the discussion that is sure to be stoked by this case given the ramifications. The following article is reproduced from the Canadian newspaper The Star in the public’s interest.

 

TORONTO—Loblaw Companies Ltd. and the Canada Revenue Agency faced off in Tax Court on Monday over allegations that the retailer’s Barbadian banking subsidiary had been misused for tax avoidance — a long-running dispute that could cost the retailer more than $400 million.

Department of Justice lawyer Elizabeth Chasson said Loblaw Financial Holdings took steps to have Barbados-based Glenhuron Bank Ltd. appear to be a foreign bank in order to avoid paying tax.

“The appellant has tried to make its treasury centre, whose business is to invest surplus cash until needed by its parents or its affiliates, appear to have the attributes necessary to meet the (Foreign Accrual Property Income) exemption,” she said in her opening statements on Monday.

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“It did so to keep hundreds of millions of dollars offshore from paying tax in Canada.”

Loblaw lawyer Al Meghji argued Glenhuron Bank met the requirements for a foreign bank under the regulations and the CRA’s allegations are without merit.

The dispute, which could cost Canada’s largest grocery retailer as much as $406 million according to its latest quarterly report, began in 2015 after Loblaw Financial Holdings filed an appeal.

The federal government had reassessed Loblaw’s subsidiary for several tax years as far back as 2001, and concluded it should pay taxes on $473 million worth of Glenhuron’s income.

Chasson told Justice Campbell Miller that the bank was more akin to a treasury centre — an in-house bank for a multinational corporation — rather than a foreign bank, which can qualify for a tax exemption. Among other things, Glenhuron did not conduct business or provide services with arms-length entities.

Meghji argued Glenhuron was a bank according to the laws of Barbados and viewed as such by the Caribbean country’s central bank.

He added that Glenhuron had been audited by Canadian officials between 1992 and 2005, and its compliance had never been questioned.

Glenhuron was incorporated in 1992 and liquidated in 2013, when Loblaw decided to use that capital domestically to buy Shoppers Drug Mart, Meghji added.

“Loblaw anticipates that the evidence will show that the minister’s theory is without foundation,” Meghji told the court. “That the epic description of what happened is without merit.”

51 comments

  • Tax avoidance is not illegal. Individuals do it, companies do it. Barbados is not a tax haven, its a low tax jurisdiction. Simple.

    Liked by 1 person

  • @Kevin

    It s not about how you label the business, it is how the developed world paint our domicile and the challenges they impose.

    Like

  • Well Well & Cut N' Paste At Your Service

    Not bad, open a bank in Barbados, save money for 21 years, liquidate, buy the Shoppers Mart chain install them in Loblaws expensive supermarkets selling overpriced crap…a win win.

    Like

  • Canada think the company owes over 400M in taxes.
    How much did the government of Barbados get from this company? Millions? Or a mere registration fee?

    Like

  • After the economic meltdown of 2007/2008, the developed world began to fight hard to keep capital from leaving its borders. So they’ll try to paint us and other smaller jurisdictions as some lawless place stealing profits and taxes. They will not stop coming after us in the short, medium nor long-term and will seek to change and impose new rules, and regulations willy-nilly so as to keep us always non-compliant with something. I’ve worked in international business since graduating, and we all know what to expect from those entities like the OECD, blocs such as the EU etc. Saying that, the authorities must always try to be on top on these new rules & regulations that keep changing almost every year.

    Like

  • @ David,

    Does anyone believe that Canadian businessmen use Barbados as a low tax jurisdiction for any reason other than to enrich

    themselves by avoiding higher taxes in Canada.

    Barbados needs to wean itself away from this ” risky business”.

    Sooner or later this Canada / Barbados Low Tax will become a political football with dire consequences.

    Like

  • @ David,

    “Loblaw’s attempt to make amends for its part in a bread price-fixing scandal with $25 gift cards appears to be paying off — at least for some customers.”

    http://www.cbc.ca/news/business/loblaw-25-gift-card-bread-price-fixing-1.4549723

    Like

  • Well, one thing bout Bahbadus, Cog bleanuh, anybody coming home to set up uh offshore bank or trust or IBC the *uckers at the CBoB know how to let you know dem things aint fuh you. Cog bleanuh

    Like

  • @Hants

    They are those who want to believe that Barbados as an offshore domicile is perceived as different.

    Like

  • NorthernObserver

    @Kevin
    “Barbados is not a tax haven, its a low tax jurisdiction. Simple.”
    I ask ‘what is a tax haven?”
    Wikipedia states…”A tax haven is a jurisdiction that has a low rate of tax or does not levy a tax[1] as well as offers some degree of secrecy”
    Collins states…”A tax haven is a country or place which has a low rate of tax so that people choose to live there or register companies there in order to avoid paying higher tax in their own countries.”
    Investopedia states …”A tax haven is a country that offers foreign individuals and businesses a minimal tax liability in a politically and economically stable environment, with little or no financial information shared with foreign tax authorities.

    So I would suggest you write to their editorial boards, and request them to change their definitions. For they do not draw any distinction between no-tax and low-tax, when it comes to describing tax havens.

    Like

  • @ NorthernObserver,

    Barbados is a tax avoidance jurisdiction used by some wealthy Canadians.

    Like

  • NorthernObserver

    @WW&C
    the model is actually install grocery stores within the Shoppers Drug Marts. Many of the Loblaw grocery stores already had pharmacies, just results in increased buying power.

    Like

  • NorthernObserver

    @Hants
    yes…and so are 65 other countries. Canada now has official tax treaties with I believe 26 separate nations.

    Like

  • NorthernObserver

    “The state-run Queen Elizabeth Hospital (QEH) said today it will only be performing critical and emergency surgeries at this time.
    However, in a statement the hospital’s board said the move was a temporary one, prompted by concerns about the non-availability of critical drugs needed by patients after surgery.
    The QEH sought to explain that amid worldwide demand, drugs used before and after surgery were out of stock. However, it said the hospital was working with the Barbados Drug Service and pharmaceutical suppliers to source the needed drugs by early next week.”

    What Worldwide Demand? They mean they haven’t been paying suppliers who have them on C.O.D and suppliers are not importing certain products UNTIL the money is available for payment.

    Like

  • @ NorthernObserver,

    Spin doctors working overtime in Barbados.

    Like

  • Yes they have run out of stock of the anesthetic…the hardware store is out of hammers.

    Like

  • Lawson April 25, 2018 3:37 AM

    This is an award-winning hospital.

    Like

  • @Hants

    It is about cash flow. The suppliers need to submit orders for drugs with adequate lead times.

    Like

  • Well Well & Cut N' Paste At Your Service

    Northern…yep, like Bay Mall in North York…same compound as Loblaws.

    http://www.nationnews.com/nationnews/news/151233/bar-court-action

    “Bar’s court action
    HEATHER-LYNN EVANSON, heatherlynevanson@nationnews.com

    Added 24 April 2018

    The Supreme Court complex could be a virtual ghost town Wednesday as the Barbados Bar Association has joined the National Union of Public Workers (NUPW) in advising its members not to enter the Whitepark Road building.

    This came as civil attorneys spent a frustrating morning Tuesday trying to find where their matters were being heard, and as computer-aided transcription (CAT) reporters pulled their services from one of two criminal courts, forcing the adjournment of a number of sentencing matters.”

    I am wondering how the Chief Justice, the Registrar and all involved could get this so wrong and succeeded in grinding everything at the Supreme Court to a complete halt…how do they get everything so wrong afteŕ making it look easy on paper.

    Just one week ago they published all these plans to move the supreme court to various areas of the island for continuity, this week it’s total chaos, no one knows where anything is happening, why are they all so disorganized in that Court…it is a disgrace.

    Adriel Nitwit is such an idiot, all he will do is make things worse, all of them lack organizational skills.

    Like

  • all of them lack organizational skills.,/em.

    But not the PM, at least not when it comes to organizing parties and extravaganzas at Ilaro Court.

    Like

  • Chief executive officer of the Queen Elizabeth Hospital, Dr Dexter James remarked that “we were assessed during the week of February 19-23 by a team of surveyors from Accreditation Canada and just 20 days after the survey visit, we received correspondence from the credentialing body stating, ‘Accreditation Canada has reviewed the results from your on-site survey and is pleased to inform you that the decision awarded to your organisation is Accreditation with Condition – Gold’.”

    http://www.nationnews.com/nationnews/news/143073/qeh-accredited-internationally

    Like

  • lol…that is because Fruendolittle loves a fete and a wukkup, he needs to start throwing parties out of his own pocket for a change, leave the taxpayer’s money alone..

    The one thing the Chief Justice should have had is organizational kills, not surprised any of the others immersed in incompetence for decades have no such skills, but there is no excuse for him spending decades in the US, particularly in NYC, particularly in the court system and still lack these skill.

    Like

  • NorthernObserver

    Reading between the lines…..it would seem the legal argument is i) Canada has a tax treaty with Barbados ii) Glenhuron was legally established and fell within the confines of a “Bank” within Barbados iii) Loblaw did nothing wrong.
    Probably another monumental waste of time by the CRA who has limited resources.
    The Government of Canada has embarked on investigating a “National Drug Plan”, and hired the former Minister of Health in Ontario, Dr Hoskins, to spearhead the movement. Loblaw, between their own grocery stores and the acquired Shoppers Drug Mart chain, control a significant portion of the prescribed drug dispensing landscape, and will be key to any deal. “IF” there is any hint of guilt in Glenhuron, one can bet a “deal” between that case and a National Drug Plan can be reached.

    Like

  • fortyacresandamule

    Government in the developed world, not to mention poor countries in Africa, are denied billions in legitimate tax revenue each year by various kind of accounting GIMMICK practiced by multinational corporation.

    With rising social cost to take care of their aging population, Government in developed countries will have to protect their tax revenue stream from PROFIT SHIFTING by transnational corporation . Barbados, like a lot of other islands, who have benefit from this financial gimmick…will eventually come to an end.

    Like

  • fortyacresandamule

    Uganda, one of the poorest country in the world, was almost denied (afters years of court proceedings and international tribunal ) over US$400 million in capital tax gain over its oil resource. The oil company in Uganda booked the transaction in two shell companies incorporated in The Bahamas and the US Virgin Island. I cannot for the life of me support this kind of extreme greedy capitalistic behavior, even if, by technicality, such practice is legal.

    Like

  • Galen Weston does not need any more money. He and his wife live in Florida. All that foregone tax is depriving me and mine of necessary social services and the like. I say, bring it back home and add a fine to the $400 million. Having said that, I shop at Loblaws, which is just across the highway from me, or at their discount store No Frills. I buy dry goods there. i buy fruit and vegetables from Farm Boy and I have a butcher.

    By the way, I also got my $25 card which I spent and I also joined the class action suit.

    Like

  • @NO

    Surely you are not suggesting that the CRA read Gov’t is pursuing Loblaws out of spite. I mean Loblaws was able to escape Gov’t wrath after overcharging customers for bread for years and the excuse was that they “came forward” to the Competition Bureau. Who owns Loblaws again? The CRA must be trying to make up for the time they ruled in favour of a billionaire family that avoided taxes in the amount of $700 million when they transferred $2 billion Trust fund to the USA or the fact that a Canadian bank booked a substantial profit in Barbados in the 90’s off an asset sale and avoided (gotta avoid lingo that would get me in trouble) taxes.

    Perhaps the NDP had the info and was waiting to spring it on the Gov’t so it decided to act, meanwhile I owe the Gov’t taxes so I’ve diarized April 30 for payment wouldn’t want the CRA to slap a “Requirement to Pay” on my Bank as they once threatened someone close to me because they owed the princely sum of $2000.00 bucks.

    NB They didn’t actually threaten to use a RTP, they said they knew the individual had RSPs and they would take the money from it.

    Like

  • NorthernObserver

    Not suggesting spite Sarge.
    Rather, “IF” Loblaw is found guilty (and verdict and penalty are two separate issues), they have “negotiating” room. No spite. Just business.

    Like

  • @ Sargeant wrote “after overcharging customers for bread for years ”

    The $25 “rebate” created more profit for Loblaws because it could only be spent at Loblaws stores.

    I will not say what I think about Loblaws owners.

    Like

  • NorthernObserver

    The “focus” on the bread price fixing is all on Loblaw…..but why? Loblaw via Weston Foods and Canada Bread (now owned by the Mexican giant Grupo Bimboa, formerly owned by Maple Leaf Foods) were the suppliers, the retailers fingered are all the Loblaw branded grocery stores, Walmart, Giant Tiger, with Sobeys and Metro owned/brand grocery retailers.
    Loblaw was the squealer, for which it gets prosecution immunity, the others are now “co-operating”, though Metro and Giant Tiger have claimed no involvement, unsurprising as they are HQ’d in Quebec, where market manipulation is normalized.

    The question is….what have customers got from Canada Bread, Walmart, Sobeys, or Metro for their involvement? Or what have been the penalties levied by the Competition Bureau?

    Like

  • NorthernObserver

    @Blogmaster
    back to your initial post……any promotion maybe good promotion. I see FB in light of recent revelations is reporting soaring ad revenue, as small business people learned via the exposé, how easy targeting was with FB advertising. Whether Loblaw wins or loses, Barbados is getting free exposure.

    Like

  • @NO

    ‘Free exposure’ , who is the target of the exposure?

    Like

  • NorthernObserver

    target = anybody who reads a headline or news story.

    Like

  • It should have been a cheque good for spending at any store, preferably a Loblaws competitor.

    Like

  • @Well, Well April 25, 2018 9:54 AM “he needs to start throwing parties out of his own pocket for a change, leave the taxpayer’s money alone.”

    Will never happen. Does he look like a generous big hearted man to you? A man who entertains friends just for the sheer joy of doing so?

    Yes?

    No?

    Like

  • Well Well & Cut N' Paste At Your Service

    Fruendolittle is just as selfish as all his retarded, greedy, self absorbed ministers.

    they all, including him, took back their badminded 10% pay cut did they not, after creating hardships for the people…and then made it retroactive, which means they never sacrificed anything, only the citizens sacrificed everything, so the electorate cant put such selfish, uncaring politicians back in parliament.

    Like

  • Can Loblaw’s P&L recover from this affair?

    Like

  • David
    April 25, 2018 5:28 AM

    @Hants
    It is about cash flow.
    ++++++++++++++++++++++++++

    No cash … no flow!!

    Like

  • Referring to a previous announcement that the neighbouring CLICO building would be used as a temporary relocation facility, Cooke-Alleyne said as the time drew near for that move, her department would have to be closed for about four days to facilitate packing up for the transition.
    Three days ago, Cooke-Alleyne had announced plans to retrofit the CLICO building at White Park to accommodate the courts within the next two weeks.

    ++++++++++++++++++++++++++++++

    Out of the frying pan into the fire!!

    Like

  • NorthernObserver

    “Can Loblaw’s P&L recover from this affair?”

    Have you read their financials? This is a drop in the bucket issue financially.

    Like

  • If Loblaw is found guilty you do not anticipate it will erode customer loyalty?

    Like

  • NorthernObserver

    If you read this thread, you will appreciate the price fixing bread incident, is far more relevant to the Public than any offshore financial dealings. The average Canadian pays minimal attention to business news of this nature.
    The same Loblaw just exited the gas station business, I bet few know, or care. http://www.cbc.ca/news/business/loblaw-gas-station-brookfield-1.4075290

    Like

  • Have no idea the make-up of the Canadian consumer mindset. Thanks for pointing out the indifference or ignorance of Canadians as it relates to these matters. Find it interesting we have a company that based on reports engaged in price fixing in a country often reputed to be consumerist/consumerism.

    Like

  • NorthernObserver

    Price fixing is not uncommon. After a long investigation into the candy bar industry, the Bureau got Hershey to plead guilty, the other 3 accused settled without an admission of guilt. http://www.cbc.ca/news/business/chocolate-price-fixing-costs-candy-makers-23m-1.1857642
    Gasoline prices are now predicted, with accuracy in advance; but since the government via taxes is the main beneficiary, they turn a blind eye. Price fixing in construction is perennial, but very hard to prove. It is done by “cover”, which means the over bidders are rewarded by the successful bidder for not driving the price down. The material supplier segment is similar, only they decide among themselves who will deal with each major contractor, that way they can’t be shopped for price. Bank rates are matched, rarely any difference between the big 6.
    Another racket is the sale of tickets to large events. Recently it has become public, but has been ongoing for years, how owners/venues participate in the reseller/scalper markets. This has become so widespread, several teams/promoters now offer resellers season or entire tour tickets at slightly inflated prices, knowing the product will end up in the resale market. It also relates to “bots” which buy large quantities within seconds.

    Like

  • As a keen follower of these issues you observed Walmart dumped Asda?

    Like

  • ” Sainsbury’s has agreed to buy Walmart’s Asda for about £7.3 billion ($10 billion) to create Britain’s biggest supermarket

    group by market share, overtaking long-standing leader Tesco.”

    Like

  • @ David did you read my last post in the Diaspora corner ?

    Like

  • @Hants

    It would be funny if it was untrue. Profiling or racism what is your view based on your on the ground experience? Kudos to the victim for following through, it is the only way change can take root read exposing and seeking redress every time it shows.

    Like

  • @ David,

    I have observed racism and have relatives and friends who have experienced it.

    I am light skinned and that has saved me from overt racism.

    Of note is that a lot of young black men in Canada are educated and articulate.

    There are also some really good human rights lawyers who will take on cases of discrimination.

    Like

  • NorthernObserver

    “dumped” is an interesting term. They (wal-mart) always kept it quite separate, which is odd for Wal-Mart. It was never able to penetrate the non-food markets, which is the historical Wal-Mart base model. And Amazon is quite strong and growing in the UK. Good time to exit.

    Like

  • Hello!

    As ICIJ’s director I am incredibly proud to share with you news from the United Kingdom today that shows how our work makes a difference.

    More than two years after we released the Panama Papers, the UK government announced it will force its overseas territories, such as the British Virgin Islands (BVI) and the Cayman Islands, to have public ownership registers. This means, the owners of companies in these territories will be revealed. As you may remember from our reporting at the time, the BVI was one of the most frequently used tax havens by Mossack Fonseca, the firm at the heart of the Panama Papers.

    Help us have more impact like this

    Conservative MP Andrew Mitchell said that the justification for this disclosure was made “eloquently but passively” by the leaking of the Panama and Paradise Papers. “It is only by openness and scrutiny, by allowing charities, NGOs and the media to join up the dots, that we can expose this dirty money and those people standing behind it. Closed registers do not begin to allow us to do that.”

    This is the kind of real and lasting impact that can happen when ICIJ’s global team of reporters work together. Our job as reporters is to reveal hidden truths so that communities around the world can be inspired to take action.

    We value our role and take this responsibility seriously. But let’s be clear – we could not achieve this level of impact without the support of readers like you. As we pursue our next major investigation, can we count on your support?

    Support investigative journalism

    You can help ensure that ICIJ continues to hold the powerful accountable and expose broken systems around the world. You can help us make these kinds of changes. Consider a gift to ICIJ today.

    With gratitude,

    Gerard Ryle, ICIJ Director

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