On November 29, 2016, Chief Justice Crampton of the Federal Court of Canada (Trial Division) upheld the Order of Justice Noel of the Tax Court of Canada compelling KMPG LLP to disclose confidential information relating to certain of its unnamed clients, including their identities and documentation relating to their participation in a tax structure known as the “Offshore Company Structure”. Click here to review the Court’s decision.
The “Isle of Man” tax structure has been criticized in the media recently as permitting wealthy Canadian families to avoid paying significant tax and has been criticized by the CRA as a “sham” transaction. Click here for the CBC News report on the plan alleged to be implemented by KPMG.
This decision is another example of where solicitor and client privilege might have been utilized in order to protect a taxpayers confidential tax planning from falling into the hands of the Canada Revenue Agency.
Whether or not the Isle of Man tax structure implemented is in accordance with Canadian tax law remains to be seen. However, it is almost certain that each and every client of KPMG LLP will be identified by the Canada Revenue Agency and, if necessary, reassessed for the tax they avoided along with the possibility of significant interest and penalties.