A dark cloud now hangs over the operations of Glenhuron Bank Limited, a subsidiary of Loblaw Companies Ltd, which has been operating as a bank in Barbados.
In a case dating back three years ago, Loblaw Companies Ltd is facing court proceedings in Canada over allegations by the Canada Revenue Agency (CRA) that its Barbados-based banking subsidiary had been misused for the purpose of tax avoidance.
The Canadian press said the long-running dispute could cost the retailer more than CA$400 million (BDS$623 million).
It also quoted the department of justice’s lawyer Elizabeth Chasson as saying that Loblaw Financial Holdings took steps to have Glenhuron Bank Ltd appear to be a foreign bank in order to avoid paying taxes.
“The appellant has tried to make its treasury centre, whose business is to invest surplus cash until needed by its affiliates, appear to have the attributes necessary to meet the (Foreign Accrual Property Income) exemption,” Chasson said in her opening statement in tax court on Monday.
However, Loblaw lawyer Al Meghji argued that Glenhuron Bank met the requirements for a foreign bank under the regulations and that the allegations of financial impropriety were without merit.
When contacted today, Executive Director of the Barbados International Business Association (BIBA) Henderson Holmes acknowledged that Glenhuron Bank was registered to operate in Barbados.
However Holmes refused to comment on the ongoing court case.
“As far as we know they were operating a bank at the time of the definition of Canadian law and Barbados law, anything beyond that I would not be able to say. That is a technical matter,” he said while suggesting that there was a difference between tax avoidance and tax evasion.
“The question is if it is illegal or not,” Holmes said.
The dispute, which could cost Canada’s largest grocery retailer as much as $406 million (BDS$633 million) according to its latest quarterly report, began in 2015 after Loblaw Financial Holdings filed an appeal, according to the The Star.
It reported that 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 (BDS$737 million) worth of Glenhuron’s income.
Meghji argued Glenhuron was a bank according to laws of Barbados and viewed as such by the 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 in Canada to buy Shoppers Drug Mart, Meghji added.