The Joint Committee comments on the draft GAAR amendments

Comments of the Joint Committee on the draft GAAR rules released with the March 2023 Budget include:

• The GAAR proposals should apply prospectively so that they would not apply to a series of transactions that commenced before the effective date.
• The test in s. 245(4.1)(b) - of comparing expected tax benefits and expected non-tax economic return - will be difficult to apply where the latter are difficult to quantify.
• Taxpayers who are assessed under s. 245 after the time has passed for reporting a transaction or series under proposed s. 237.3(12.1) - but there were intervening developments, such as cases or new published CRA positions, that changed the GAAR profile of the transaction or series - should be allowed to file a late disclosure or have the penalty under draft s. 245(5.1) waived as part of the s. 245 rules in appropriate circumstances.
• Calculations of the penalty amount (referencing the amount of the tax benefit resulting directly or indirectly from the transaction or series) could be uncertain or harsh where multiple taxpayers are involved with different benefit amounts or where the series produced tax deferrals rather than absolute tax savings.
• There should be a s. 245 rule stating that a disclosure filed under proposed s. 237.3(12.1) cannot be used as a factor in any way when determining whether GAAR applies.

Neal Armstrong. Summaries of Joint Committee, Summary of Comments and Recommendations Provided to the Department of Finance on the General Anti-Avoidance Rule Proposals Released on March 28, 2023, 7 June 2023 under s. 245(4.1). s. 245(5.1) and s. 237.3(12.1).