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Loblaw to appeal Canadian tax court ruling on former banking unit

Loblaw Cos. Ltd. will appeal a ruling by the Tax Court of Canada in relation to allegations that the company made its former banking subsidiary, Barbados-based Glenhuron Bank Ltd., appear to be a foreign bank to avoid paying taxes.

According to the Toronto Star, the tax court's decision focuses on a re-evaluation made by the Canada Revenue Agency into Glenhuron's taxes since 2001. Lawyers from Canada's justice department argued during the trial, which began in April, that Loblaw made Glenhuron appear to be a foreign bank in order to evade taxes.

The bank reportedly did not qualify because it mostly invested Loblaw's own funds and was "playing with its own money."

Tax Court Justice Campbell Miller on Sept. 7 released his judgment on the matter, saying that the transactions entered into by Loblaw regarding Glenhuron resulted in a tax benefit but "were entered primarily for purposes other than to obtain the tax benefit and consequently were not avoidance transactions," according to the report.

In a statement released Sept. 10, Loblaw President Sarah Davis said: "We are pleased with the court's finding that Loblaw did not take any steps to avoid Canadian tax. This confirms what we have said all along: Glenhuron was established for legitimate business purposes."

However, Davis said they are "disappointed" with the court's interpretation of a technical provision in the legislation and that they plan to contest the ruling.

Loblaw said that if the appeal is unsuccessful, it expects to pay tax and interest of approximately C$368 million.

Loblaw spokesman Kevin Groh told Toronto Star in an email that although Justice Miller was supportive of Loblaw's position on most points, "his decision on a technical tax-law interpretation means that Loblaw's tax obligation for Glenhuron has been reduced but not eliminated."

The newspaper reported in April that Glenhuron, which was incorporated in 1992, was liquidated in 2013 when Loblaw decided to use the bank's capital to buy Shoppers Drug Mart Corp.