Big banks vs CRA: The $2.8-billion tax battle that’s been decades in the making
Tucked into the recent financial statements of Canada’s biggest banks — past their mountains of assets and impressive profits — is a hint of tax trouble.
Though the banks stress they are in the right, their statements disclose a series of disagreements with the Canada Revenue Agency. At least some of those disputes could trace back to a seemingly simple pledge made nearly 30 years ago in the House of Commons.
Among the policies proposed in the April 1989 budget speech by Michael Wilson, then federal finance minister and now chairman of Barclays Capital Canada Inc., was “stopping abuse” of an obscure class of financial transactions known as dividend rental arrangements.
“These arrangements represent an abuse of the tax system; the return to all parties to the arrangement is subsidized by the forgone tax revenues that would have been collected if the investor had received interest or other income rather than a tax-free dividend on the rented share,” the 1989 federal budget papers declared.