TORONTO – Loblaw Companies Ltd. will record a $368-million tax charge related to its former Barbadian banking subsidiary Glenhuron Bank Ltd.
The charge of 98 cents per share will be recorded in the company’s third quarter but Loblaw says it plans to appeal a tax court ruling that was issued last week.
The tax court decision centres on the Canada Revenue Agency’s reassessments of Glenhuron for several tax years dating as far back as 2001.
The federal government had alleged Glenhuron did not meet the requirements to be considered a foreign bank under Canadian law and therefore exempt from paying tax back home.
Loblaw says the court found the retailer did not take steps to avoid Canadian tax and reduced the amount of taxes assessed against the company.
However, Loblaw says it was disappointed with the court’s interpretation of a technical provision in the legislation and will appeal.
After deducting amounts already paid, Loblaw expects to make an a cash payment of approximately $242 million from cash on hand, without any impact on its capital investment plans, dividend growth or its share buyback program.
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