Real History and the Canadian Gangster World

Posted Saturday, December 22, 2001

Alphabetical index (text) Index to the Traditional Enemies of Free Speech

[A] controversial tax ruling in 1991 allowed the Bronfmans to move more than $2 billion worth of Seagram Co. stock to the United States without paying capital gains tax. The decision allowed the family to avoid as much as $700 million in taxes.

Monday, March 6, 2000

Angry taxpayer takes on the Bronfmans Revenue Canada says $2-billion tax loophole is none of his business

by Janice Tibbetts

ONE of Canada's richest families will be the focus of a Federal Court battle this week when a private citizen challenges hundreds of millions of dollars in favourable tax treatment given to the Bronfmans. Revenue Canada will face off in the Federal Court of Appeal against George Harris, a Winnipeg office worker and social activist, who is contesting a loophole that allowed $2 billion in Bronfman family assets to escape the country tax-free.

"This case is about public confidence in the Canadian income tax system," Mr. Harris, a program officer for Canadian University Services Overseas (CUSO), asserts in his class-action lawsuit.

"Without general public acceptance of the integrity and fairness of our income tax regime, no amount of assessment and enforcement action by government will be able to protect the tax base and ensure the collection of essential public revenues."

The challenge, to be heard Thursday, comes amid persistent rumours that Edgar Bronfman Jr. is looking to sell Seagram Co. Ltd., the Montreal-based liquor and entertainment giant.

Mr. Harris's three-year-old legal fight was prompted by a controversial tax ruling by Revenue Canada in 1991 that allowed the Bronfmans to move more than $2 billion worth of Seagram Co. stock, held in two family trusts, to the United States without paying capital gains tax. The decision allowed the family to avoid as much as $700 million in taxes.

Revenue Canada is appealing a January 1999 ruling by Federal Court Judge Francis Muldoon, who allowed the lawsuit to go ahead in the public interest, concluding that allowing the Bronfman billions to escape untaxed smacks of "favouritism" and "grave maladministration."

Government lawyers will challenge Judge Muldoon's decision by arguing that Canada's tax system is based on "strict confidentiality" and Mr. Harris has no direct interest in the case.

"The law in any event does not permit one taxpayer or citizen to challenge the income tax treatment of the transactions or affairs of another taxpayer," says Revenue Canada's written court submission. "To allow such a challenge is ... inconsistent with our system of tax administration."

Revenue Canada lawyers say the public interest is already being addressed in a "normal and lawful manner," since legislation is being considered.

After a severe rebuke from Auditor General Denis Desautels, the government announced in October 1996 that it would introduce new rules to ensure taxes are paid on assets moving out of the country that have increased in value during their time in Canada.

The much-debated departure tax has encountered stiff opposition in Liberal strongholds like Vancouver and Toronto, where immigrant communities balk at the prospect of investors and entrepreneurs coming into Canada being forced to list their assets and pay capital gains on profits accrued during their time in the country.

The business community also has been opposed, saying it would create an unwanted barrier for investors in, and operators of private companies.

In his earlier ruling, Judge Muldoon admonished government officials for treating Mr. Harris like a "nobody" by arguing that he had no right to challenge Revenue Canada's practice.

"Mr. Harris brings this action on behalf of his fellow taxpayers, except the favoured few, for the few will never be heard of to complain of the official favouritism," Judge Muldoon wrote.
"The fair-minded, objective observer must surely smell at least of grave maladministration here ... One can only imagine the benefit to the country and to national programs such sums could have contributed."

Mr. Harris, a member of a social advocacy group called CHOICES, argues he has as much right to challenge tax treatment as he does other government expenditures.

"The plaintiff submits that matters of tax assessment and collection raise the very same public interest concern as matters of direct financial expenditure. There is no substantive difference between a dollar of tax revenue forgone and a dollar of public money expended by government."