Quebecor must return to federal court to defend a tax avoidance operation that netted the company more than $30 million. Ottawa prosecutors are appealing a Tax Court of Canada decision that upheld a $96 million capital loss claimed in 2007 and eliminated a corresponding capital gain attributed to it by tax authorities.
As part of a trial that began in 2018, the telecommunications and media heavyweight recognized that a number of transactions were actually aimed at tax avoidance. Five of them took place on the same day, December 13, 2005. They consisted of a complex game of rolling and trading shares of Videotron and Abitibi-Consolidated, which belonged to Quebecor and its subsidiaries, and the subsequent liquidation of a related company.
On October 3, after an 11-year trial, a judge nevertheless concluded that the tax avoidance transaction was “not manifestly abusive,” a sine qua non for the application of the general anti-avoidance rule.
In an article by The press Commenting on the decision, two tax professors predicted that Ottawa would appeal the decision. It’s finished now.
“The Tax Court of Canada erred in concluding that the circumvention transactions did not result in an abuse of the provisions of the Act,” says the federal government’s application, filed Nov. 2.
Quebecor’s lawyers will have to make their arguments in the coming months.
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