The case involves some $300 million of dividends that Husky, a Canadian company, paid out to a foreign shareholder, who routed the payment through a series of offshore corporations for the purpose of reducing their Canadian tax by about $30 million. At trial, the Tax Court of Canada effectively said the taxpayers were not entitled to reduce their tax the way they did, so the government won the case. The taxpayers are appealing in hopes the Federal Court of Appeal will disagree with the Tax Court judge’s view.

The Tax Court judgment raises questions about so-called “treaty shopping,” where taxpayers move payments around to companies formed in different jurisdictions in order to shop for the lowest tax rate. In the Husky case, the shareholders temporarily moved their shares from Barbados to Luxembourg to drop their rate on the dividends from 15% to 5%.

We sought the court’s permission to intervene in this case on a public interest basis. A motion to intervene is a procedure that exists to allow a person who is not a party to a case to participate, in this case to assist the court because we think the case has a strong public policy dimension.

To our knowledge this is the first time in Canada that a non-profit, non-partisan group headed by a law professor has ever sought to intervene in a tax case at the Federal Court of Appeal; further, our memorandum was produced with collaboration and input of a group of tax law professors from across Canada and around the world, and that is a first in Canada as well.

Unfortunately, despite there being no official deadline for moving to intervene, the FCA determined that our motion arose “too late” in the proceedings, and the Court also stated that the CCTP did not satisfy it that the submission would advance the determination of the issues.