Minister’s position would require taxpayers to consult with their experts and provide opinions

Income Tax – Administration and enforcement

In taxpayers’ appeals from assessments relating to transfer pricing, Minister’s motion for order to compel taxpayer B Co. to answer questions was granted, while parties reached agreement on questions that should be answered by taxpayer C Co. in light of motion order. Minister took position that some of taxpayers’ answers were still not responsive and brought motion for order to require responsive answers and production of relevant documents over which taxpayers had claimed privilege. Motion granted in part. For first category of questions, about applicable range of arm’s length prices for guarantee, taxpayers provided clear answer that arm’s length party would have charged 50 basis points or more for guarantee. Taxpayers’ answers on first category were responsive, as Minister’s position would require taxpayers to consult with their experts and provide those opinions on that range. Expert opinion would be provided when expert reports were filed. Minister’s question about legal entity’s credit rating and about effect of guarantee on interest rate with respect to C Co. had been responsively answered by taxpayers as any further answer would require expert evidence. B Co. admitted at hearing that answers given to questions about comparator transactions were unclear so new answers would be provided, but follow-up question about other economically relevant characteristics did not have to be answered as it was question for expert opinion. Taxpayers had not indicated grounds for their privilege claims but Minister was entitled to know why relevant documents were not produced. Taxpayers had provided contested documents to court for review, which led to conclusion that privilege claims could stand, but they would otherwise have been required to provide brief description of each document, indicate type of privilege claimed, and ground for claiming it.

Burlington Resources Finance Company v. The Queen (2019), 2019 CarswellNat 3388, 2019 TCC 143, Johanne D'Auray J. (T.C.C. [General Procedure]).

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