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Tax Disputes | 25 Also, in 1998, Ottawa introduced much more detailed rules on transfer pricing and tougher penalties if CRA requires adjustments to the pricing of nonarm's-length transactions. "For decades, there were transfer pricing disputes, and more and more of them, but there weren't any court cases," says Couzin. "The 'competent authority' procedure enshrined in tax treaties between Canada and other states settles most such disputes." However, recent CRA court cases involving GlaxoSmithKline and GE Capital showed "that not everything gets settled anymore," he says. "There are now lots of transfer pricing cases in the pipeline. We are going to see more court decisions" on transfer pricing. CRA has always paid special attention to high net worth individuals (HNWI), but since 2004 the tax agency has conducted the related party initiative (RPI), which concentrates on about 550 HNWIs. These are taxpayers who create intricate business structures including domestic and offshore limited partnerships, trusts, corporations and private charitable foundations. Meghji describes the process: "A person gets a 20-page questionnaire that says, 'tell me where all your investments are, what sources of income you receive, where are your bank accounts, do you have any shareholdings in other companies, etc.'" When those questionnaires are sent back to the CRA, the agency commences an audit; eventually it may (or may not) issue an assessment. "My expectation is that ultimately there will be significant numbers of assessments issued," says Meghji, "but are we seeing those assessments just yet? I haven't seen many, but the process is relatively new." Lately, taxpayers who feel burned by the way CRA has wielded its powers to audit and assess are fighting back against the tax authorities. A recent ruling by the Ontario Court of Appeal – McCreight v. Canada – upheld the right of an Ontario taxpayer to bring a civil suit for negligent investigation. "This is going to be the next big area of tax law," says Meghji. "Does the CRA get to do what it wants without being accountable to the courts and taxpayers? Does it have any sort of duty to taxpayers to carry out its work in a way that's fairminded and responsible? Taxpayers are saying, 'If you don't discharge your statutory powers in a way that is fair, then the courts should have the power to review the way you do your job.'" "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. 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 RE-ORGANIZATION TRANSACTIONS TO ACHIEVE A PURPOSE, YOU'RE MUCH MORE EXPOSED TO GAAR." – Robert Couzin, Couzin Taylor LLP Sheldon Gordon is a Toronto-based writer on legal and business affairs. LEXPERT®Ranked Lawyers Lichty, Mark G. Lisus, Jonathan C. Lowenstein, Larry P. Lussier, AdE, Sylvain MacGregor, Ian Blaney McMurtry LLP Lax O'Sullivan Scott Lisus LLP Osler, Hoskin & Harcourt LLP Osler, Hoskin & Harcourt LLP Osler, Hoskin & Harcourt LLP (416) 598-7873 jlisus@counsel-toronto.com (416) 862-6454 llowenstein@osler.com (514) 904-5377 slussier@osler.com (613) 787-1120 imacgregor@osler.com Mr. Lisus focuses on commercial disputes as trial and appellate counsel in courts across the country including the Supreme Court. He is a Fellow of the ACTL, IATL and a member of the Chief Justice of Ontario's Advisory Committee on Professionalism. Mr. Lowenstein focuses on complex litigation, including corporate governance issues, class actions, securities regulatory matters, employment and environmental liability. Frequent conference presenter and editor of Corporate Litigation. Mr. Lussier focuses on commercial, administrative, constitutional and class-action litigation, with an emphasis on Native law issues. He appears before courts, commissions and boards. He teaches administrative law and is a frequent author. Mr. MacGregor, a former Assistant Deputy Attorney General of Tax Law Services for Justice Canada, focuses on tax litigation and dispute resolution. He appears before all levels of court and teaches at the University of Ottawa Law School. (416) 593-3961 mlichty@blaney.com Mr. Lichty's practice is restricted to insurance and reinsurance matters, emphasizing coverage issues arising out of commercial property, commercial liability, directors and officers, homeowners and financial services policies. Macintosh, QC, George K. Farris, Vaughan, Wills & Murphy LLP (604) 661-9332 gmacintosh@farris.com Mr. Macintosh practises as general counsel before all levels of court and tribunals in Canada. His primary work is in corporate/commercial, administrative and constitutional law.

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