Did Loblaws dodge taxes?

A tax court trial involving Loblaw Companies Ltd. and allegations by the Canada Revenue Agency that the retailer's Barbadian banking subsidiary was misused for tax avoidance started today.

Department of Justice lawyer Elizabeth Chasson said Loblaw Financial Holdings' took steps in order to have Barbados-based Glenhuron bank appear to be a foreign bank in order to avoid paying tax.

But, she told the court that the Barbados-based entity did not qualify because, among other things, it largely invested the grocery giants' own funds and did not conduct businesses with arms-length entities.

Loblaw lawyer Al Meghji argued in his opening statement that Glenhuron Bank met the requirements foreign bank under the regulations and the CRA's allegations are without merit.

The dispute, which could cost Loblaw as much as $406 million according to its latest quarterly report, began in 2015 after Loblaw Financial Holdings filed an appeal.

The federal government had reassessed Loblaw's subsidiary for several tax years as far back as 2001, and concluded it should pay taxes on $473 million worth of Glenhuron's income.

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