Plan to change Canada’s tax avoidance rule raises more questions – Bloomberg Tax

Pooja Mihailovich

May 1, 2023

Proposed changes addressed in the federal budget to overhaul the country’s general anti-avoidance rule (GAAR), which aims to prevent abusive tax dodging, raise questions and may create uncertainty for taxpayers, says Pooja Mihailovich in an article published in Bloomberg Tax.

Pooja says that, to date, the GAAR has operated effectively in striking a balance between achieving certainty in tax planning and countering tax abuse. While it is clear in light of the proposal that certain changes to the GAAR are inevitable, it is hoped that all of the proposed measures will not be introduced in their current form.

The proposed legislation introduces a new economic substance test in the misuse and abuse element of the GAAR analysis. As proposed, Pooja says the new test is problematic because it is situated at the wrong stage of the GAAR analysis – the question of whether a transaction is primarily tax motivated rather than primarily commercially motivated is relevant in determining the existence of an avoidance transaction, but it is now proposed to be at the misuse and abuse stage.

Read the full article published by Bloomberg Tax on May 1, 2023