When the CRA’s bullying came back to bite it: Offshore tax audit results in $5 million in damages
Source: Financial Post
Author: Allan Lanthier
How do so many wealthy Canadians avoid tax on offshore income? And why isn’t the Canada Revenue Agency (CRA) more aggressive in its pursuit of offshore tax planning? A recent decision of the Quebec Superior Court offers some answers. The court ordered the CRA to pay damages of close to $5 million to a group of taxpayers following an overzealous offshore tax audit.
Irving Ludmer and the late Arnold Steinberg were friends and successful Montreal businessmen. In 1987, a company was incorporated in the British Virgin Islands to manage a global portfolio of investments. Ludmer and Steinberg were among the initial investors, and were directors of the company. In 2001, the company was reorganized under the name SLT. SLT had approximately 160 Canadian shareholders, and assets under management of about US$1 billion. Its structure was intended to defer Canadian tax for 15 years, and to result in capital gains rates for any accumulated income and gains at that future time.