Fairness And Economic Substance: Select Comments On The Proposed Changes To The General Anti-Avoidance Rule

Canada's 2023 federal budget was released on March 28, 2023 and contained proposals for changes to the general anti-avoidance rule ("GAAR"). We published a summary overview of the proposed changes to the GAAR on March 28. This article provides some additional comments on two aspects of the proposed changes to the GAAR; the addition of a preamble and an economic substance test. This article assumes the reader has at least a general understanding of the GAAR.

The proposed amendments to the GAAR, if enacted, could significantly erode some common tax-planning approaches. Tax planning which seeks to obtain tax benefits unintended by Parliament will be limited and perhaps eliminated by the proposed amendments to the GAAR. The proposed amendments also appear to further weaken and perhaps eliminate the principle articulated in the often cited case of the Duke of Westminster¹ and commonly referred to as the Duke of Westminster principle, which in summary terms states that a