Claims have been made by companies under the control of billionaire property developer Terry Hui in British Columbia that the Canada Revenue Agency (CRA) has been involved in what they describe as a “pattern of misconduct” in their efforts to recover mounting tax debts dating back to 2007.
The CRA audit is targeting five companies within Hui’s real estate development group, including Adex Securities, One West Holdings, a B.C. numbered company, and two shell companies based in Luxembourg.
In a recent application to the Federal Court, the companies allege that the government has improperly taken steps to recover tax debts amounting to nearly $330 million, the majority of which is in accumulated interest.
The group, engaged in large real estate projects in Toronto, Vancouver, and Calgary, states that the audit, which began in 2013, focused on transactions leveraging Canada’s tax treaty with Luxembourg.
According to the court application, the CRA audit of the companies commenced in 2013. (Robert Short/CBC)
The companies reveal in their application that they have recently received tax debt assessments, with Adex owing $45 million and over $65 million in interest, while the two Luxembourg-based companies collectively owe more than $92 million and $127 million in interest.
They are seeking a court order to halt the government’s debt collection efforts until the resolution of a related case initiated earlier this year. Additionally, they oppose the CRA’s request for a $115 million security payment from Adex.
The demand for such a substantial payment without the ability to defer it is anticipated to deplete significant capital that is currently funding active development projects for the real estate group.
This application is one of several filed in Federal Court this year concerning the dispute, where the companies argue that being compelled to pay will lead to “irreparable harm” and that the lack of prior notice from the CRA means they “could not have reasonably prepared for a debt of this magnitude.”
The companies accuse the revenue agency of demonstrating a “pattern of misconduct,” alleging that its officers have disregarded established policies and procedures and have acted without considering the impact on taxpayer businesses.
Terry Hui is recognized in British Columbia for his leadership at Concord Pacific Developments. (Ethan Cairns/CBC)
Although lawyers for the companies were not available for immediate comment, Justin Kutyan from KPMG Law in Toronto previously stated to The Canadian Press that the transactions in question are akin to a tax structure upheld by the Supreme Court of Canada in 2021.
In a 6-3 decision favouring Alta Energy Luxembourg, the court upheld a tax exemption claim on a capital gain exceeding $380 million under Canada’s treaty with Luxembourg, noted in the ruling as a well-known international tax haven.
The court ruled in favour of Alta, asserting that Canadian tax authorities cannot apply anti-tax avoidance rules to “judicially amend or renegotiate a treaty.”
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