Canadian Lawyer

46 A P R I L 2 0 1 9 w w w . c a n a d i a n l a w y e r m a g . c o m W hether it is with house flippers in the overheated real estate market, international tax evasion, GST/HST or the federal government's new tax reforms, tax lawyers say the Canada Rev- enue Agency is sharpening its fangs with new capabilities and growing more aggressive in the hunt for tax revenue. According to Vitaly Timokhov, a partner at TaxChambers LLP in Toronto, whose practice focuses on cross-border and corporate taxation, the mix of increased auditing and tax reforms from the federal Liberal government has shifted his tax practice to one dominated by litigation and audit defence from one in which most of his business came from tax planning. Typically, tax plan- ning is more profitable, but right now, more is to be made from tax litigation, he says. In the auditor general's 2018 fall report, it states that the 2016 and 2017 bud- gets gave the CRA nearly $1 billion in extra resources, which "provided the tools and capacity to leverage new global collaboration and data sharing to combat tax cheating," says Dany Morin, a spokesman for the CRA. Tax avoidance is legal and the Inland Rev- enue Commissioners v. Duke of Westminster decision in 1936 set the basis for tax planning, providing that a person is entitled to arrange their affairs to pay the least amount of tax legally owed, says Marie-France Dompierre, a tax litigator and partner at Lavery de Billy LLP in Montreal. But the tax authorities can still use s. 245 of the Income Tax Act — the general anti-avoidance rule — to invalidate tax savings if the benefit came from a series of transactions done with no commercial purpose other than avoiding tax. Dompierre says that, in Quebec, there's a new penalty of 100 per cent of what the lawyer billed if the arrangement is deemed "aggressive tax planning." "Which is very subjective. It's not quite clear what it is," she says. Also adding to the fight against tax avoid- ance is the Guindon v. Canada decision from 2015, says Dompierre, which has led to more penalties being levied against tax preparers for devising tax-avoidance plans. In June 2017, Canada signed on to the Mul- tilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, a convention in which Canada The Canada Revenue Agency has increased its enforcement on many fronts By Aidan Macnab CRA STEPS UP THE FIGHT T A X L A W L E G A L R E P O R T WAYNE MILLS

• Cover