Finance outlines GAAR amendments that have been thought about

Comments of Brian Ernewein on the GAAR Committee and the future of GAAR included:

  • Finance participates on the Committee for a window on what is happening and to offer insights on the policy underlying the Act.
  • However, Finance does not bring “inside information” to this policy question as GAAR should be applied to the scheme of the law, as evidenced in the public record.
  • Although perhaps five years ago (i.e., before a spate of more favourable decisions), this same conclusion might not have been reached, it now appears on balance that the introduction of GAAR has been an improvement: it has put a brake on some overly aggressive planning, without unduly impeding legitimate activity; and it has effectively engaged the Courts and CRA to give more than lip-service to something resembling a textual, contextual, and purposive analysis of legislation.
  • Finance has considered:
  1. Whether a GAAR penalty should be introduced (the potential downside is that this might have a deleterious effect on the jurisprudence, i.e., fewer Crown wins)
  2. Explicitly incorporating economic substance into GAAR.
  3. Overruling Wild (which found that surplus-stripping transactions were not subject to GAAR before the surplus was actually stripped – and “seems inconsistent with the expressed intention of Parliament.”)
  4. Perhaps also requiring more reporting of aggressive transactions.
  • That being said, any GAAR changes should be made with extreme caution.
  • If, at the time of introducing new rules to shut down transactions, CRA is pursuing those transactions under GAAR, Finance will add a statement to the Explanatory Notes that GAAR can apply to those transactions.

Neal Armstrong. Summaries of 7 March 2019 CTF Seminar on GAAR: Brian Ernewein on GAAR – Past and Future under s. 245(4).