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Tax Disputes | 23 "What the Supreme Court has done – more so in Copthorne Holdings Ltd. than in Canada Trustco Mortgage Co. – is to give some clarity as to how GAAR is to be applied," says Couzin. "If there's a commercial transaction going on, it's rare for GAAR to be applied. But if you're doing a tax shelter or a series of corporate reorganization transactions to achieve a purpose, you're much more exposed to GAAR." GAAR is certainly not the only reason why CRA's claws are sharper. The agency has, for several years, been engaged in riskbased auditing. The idea is to assess companies as having high, medium or low risk of non-compliance with the tax code and then focus most CRA audit resources on the high-risk group. The approach is much different than traditional CRA audits. There are more formal processes and many written questions. It's considered (by tax lawyers) much more intrusive than audits used to be, but there's no consensus yet on whether low-risk companies are under less scrutiny than they would have been anyway. "Taxpayers that 'have a history' with CRA or are engaged in a dispute at present with them are more likely to attract their attention," says Bruce Russell, a tax litigator and partner at McInnes Cooper LLP in Halifax. "In our experience, these are mostly medium-sized companies." The initial risk assessment weighs such factors as audit history, industry sector issues, major acquisitions or divestitures, unusual or complex transactions, international transactions and participation in aggressive tax planning. The 2010 federal budget first announced federal reporting requirements for so-called "aggressive tax planning" (ATP) measures. Bill C-48 requires advance reporting to the CRA by taxpayers, certain promoters and advisors, of "reportable transactions" (generally, avoidance transactions as defined by GAAR) — those where at least two of three "hallmarks" are present. The three hallmarks are as follows: "THERE IS MORE AND MORE INTERNATIONAL PRESSURE ON CRA TO ADDRESS ISSUES OF INTERNATIONAL AGGRESSIVE TAX PLANNING MORE STRICTLY THAN IN THE PAST." –Guy Du Pont, Davies Ward Phillips & Vineberg LLP • a "fee" based, or contingent upon, a tax benefit or numbers of participants • "confidential protection" (in favour of a promoter or advisor limiting disclosure of the transaction by the participant) • "contractual protection" (against failure of the transaction to achieve tax benefits) These transaction reporting requirements are intended not only to identify which aggressive tax planners might be audit-worthy but also to deter moves by LEXPERT®Ranked Lawyers Kryworuk, Peter W. Kwinter, Robert E. Lally, Michelle Lang, Adrian C. Laskin, John B. Lerners LLP Blake, Cassels & Graydon LLP Osler, Hoskin & Harcourt LLP Stikeman Elliott LLP Torys LLP (416) 863-3283 robert.kwinter@blakes.com (416) 862-5925 mlally@osler.com (416) 869-5653 alang@stikeman.com (416) 865-7317 jlaskin@torys.com Ms. Lang's practice concentrates on corporate commercial, class action and securities litigation. She sits on the Advisory Board of Class Action Defences Quarterly, the Advisory Board of Young Women in Law and is Chair of the Board of Canadian Stage. Senior trial and appellate counsel. Broad business litigation practice with emphasis on administrative and constitutional law, competition law, intellectual property and class actions. (519) 640-6317 pkryworuk@lerners.ca Mr. Kryworuk has trial and appellate experience in personal injury, insurance, medical and professional liability, health law and commercial litigation. He is a certified specialist in civil litigation and an ACTL Fellow. Mr. Kwinter has extensive experience in all areas of competition law. He is a leading counsel in international cartel matters and class actions, and has frequently appeared successfully before the Competition Tribunal & various trial & appellate courts. Ms. Lally's competition and foreign investment practice includes mergers and competitor collaborations. She represents parties facing civil and criminal investigations by the Competition Bureau and civil proceedings before the Competition Tribunal. Lax, QC, LSM, C. Clifford Lax O'Sullivan Scott Lisus LLP (416) 598-0988 clax@counsel-toronto.com Mr. Lax's litigation and arbitration practice emphasizes corporate, securities, real estate, environmental and defamation matters. He is an ACTL Fellow, and sits on the Commerical Panel of International Centre for Dispute Resolution.

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