Rémi D. Gagnon presents Economic Substance: The New GAAR, Dissociation and Risk today at Toronto as part of its James Hausman Tax Law and Policy Workshop Series hosted by Ben Alarie:
The new economic substance test introduced in the GAAR retains the accessory principle and does not require an enquiry into the economic substance of a transaction to potentially recharacterize it for tax purposes. However, the outcome of transactions such as those undertaken in Canada Trustco remains unclear even under the new economic substance test. The U.S. experience shows that a flexible interpretation of economic substance through the dissociation of tax concepts from their private law meaning is effective as a guard against tax avoidance. This is because dissociation targets the one thing that taxpayers control: form. The U.S. dissociative approach gives courts more flexibility to grapple with the underlying tax policy intent in determining whether a tax arrangement is abusive. In fact, under the U.S. dissociation principle, Canada Trustco might very well have been decided in the government’s favor. The U.S. dissociation principle can thus be rationalized as another form of statutory interpretation. Viewed this way, one is left to wonder whether a similar dissociative approach might not be conceivable in Canada irrespective of the new GAAR limitations. Indeed, the Federal Court of Appeal’s nuanced approach to the accessory principle in Barejo can be understood as one step in that direction. Could this be the way forward for Canadian tax law?
Rémi is a senior advisor to the Honourable François-Philippe Champagne, Minister of Finance and National Revenue. Rémi advises Minister Champagne on all matters relating to the development and implementation of Canadian federal tax policy. Prior to his current position, Rémi practised Canadian and U.S. tax law at major corporate law firms in Montreal and New York City, where he focused on complex cross-border investments and transactions, mergers and acquisitions, and capital market transactions.
