Companies controlled by B.C. property developer Terry Hui have asked Federal Court to halt Canada Revenue Agency collection efforts tied to nearly $330 million in tax debts.
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Companies controlled by B.C. property developer Terry Hui are alleging the Canada Revenue Agency has engaged in a “pattern of misconduct” as it seeks to collect on ballooning tax debts dating back to 2007.
In an application filed in Federal Court this month, five companies within Hui’s real estate development group say the government has moved to collect on tax debts totalling nearly $330 million, most of which is interest.
The companies targeted by the CRA audit include Adex Securities, One West Holdings, a B.C. numbered company, and two shell companies based in Luxembourg. The companies say the audit, which they describe as having been initiated in 2013, focused on transactions that relied on Canada’s tax treaty with Luxembourg.
The application says Adex owes $45 million, along with interest of more than $65 million. It also says the two Luxembourg-based companies owe together more than $92 million, with $127 million in interest.
The firms are asking the court to stop the government from collecting on the debts while a related case filed earlier this year is concluded. They are also objecting to the CRA’s request for a $115 million security payment from Adex, arguing that requiring the amount immediately—without the ability to defer—would cause the group to “lose significant capital that is currently being used to fund active development projects.”
The application says there have been no advance notice of the size of the debt, and that the companies “could not have reasonably planned” for a liability of that magnitude. It also argues being forced to pay would cause “irreparable harm.”
The companies’ application includes claims that CRA officers acted outside established policies and procedures “without regard to the impact of their actions on taxpayer businesses.”
In related Supreme Court litigation referenced in the filing, the court ruled 6-3 in favour of Alta Energy Luxembourg and held that Canadian tax authorities could not use anti-tax avoidance rules to “judicially amend or renegotiate a treaty,” describing Alta’s position as “well known as an international tax haven.” The dissenting justices in that case wrote that the federal government “did not deliberately set out to create the conditions for unlimited tax avoidance,” and said the court should not legitimize “blatantly abusive tax avoidance” on the basis that Canada should have negotiated different treaty terms.
The Canada Revenue Agency said it did not have a spokesperson available for an interview to comment on tax treaty abuse.
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