Corporate Tax Planning: What Is a Tax Planner To Do After Deans Knight?

Abstract

The authors of this article review the current jurisprudential landscape surrounding tax-avoidance cases, in both the general anti-avoidance rule (GAAR) and non-GAAR contexts, for the purpose of assisting tax planners. The authors begin by addressing the challenges of achieving perfect certainty in the interpretation of tax provisions other than GAAR. They discuss how the background of judges can affect the decision-making process. They then review recent non-GAAR jurisprudence, highlighting instances where courts reject unacceptable tax plans and underscoring the courts’ generally unsympathetic stance toward aggressive tax plans that appear to defy common sense. The authors then analyze the Supreme Court of Canada’s decisions in Canada v. Alta Energy Luxembourg SARL and Deans Knight Income Corp. v. Canada. They compare the two decisions in detail and suggest how taxpayers might respond to these seemingly divergent judgments. Turning to the recently proposed amendments to GAAR, the authors question the necessity of these changes, in light of the Supreme Court’s recent guidance on the application of the provision in Deans Knight. The article concludes by offering practical suggestions for tax planners with the aim of equipping them to navigate GAAR in implementing tax plans.