The General Anti-Avoidance Rule: Are We Moving Away From Consistency, Certainty And Predictability

The General Anti-Avoidance Rule (the "GAAR"), contained in section 245 of the Income Tax Act (Canada) (the "Act"), is a provision which allows the Canada Revenue Agency ("CRA") to redetermine the tax consequences of a transaction(s) entered into by a taxpayer in an effort to deny the tax benefit(s) otherwise enjoyed by the taxpayer as a result of entering into the impugned transaction(s).

The GAAR, characterized as a provision of last resort, only applies where the taxpayer has complied with the Act and reported the impugned transaction(s) accordingly. As such, the GAAR lends itself to a measure of uncertainty for taxpayers, who will have fully complied with the law, yet find themselves on the receiving end of an unfavourable reassessment from CRA.