Canada: Further thoughts on McKesson — the devil is in the details

Tax Controversy & Dispute Resolution ()

Our Tax Insight issued January 11, 2014 provided a summary of the Tax Court of Canada’s (TCC) decision in McKesson Canada Corporation v. Her Majesty the Queen. In that publication, we also observed that the Court (i.e., Justice Boyle) made several transfer pricing related comments that, while relevant to the issues before it, were not relied on to support the judgment. Specifically, the Court questioned the relevance of the series of transactions that relate to the transaction, and whether the scope of transfer pricing adjustments under subparagraphs 247(2)(a) and (c) of the Income Tax Act (the Act) is limited to quantum versus terms. The Court also questioned whether it was required to consider the following in making its decision:

  •      Factors that exist only because of a non-arm’s length relationship.
  •      Alternative options available to the taxpayers.
  •      The purpose of the transaction and issues related to the “fair share of tax” debate.