McKesson saga continues with new filing by taxpayer

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McKesson saga continues with new filing by taxpayer

McKesson has filed a supplementary memorandum of fact and law after the Court of Appeal deemed its initial memorandum too lengthy. The controversial transfer pricing case, involving a trial judge’s recusal, appears unlikely to come to a conclusion anytime soon.

On January 5, McKesson filed its Supplementary Memorandum of Fact and Law.

McKesson filed an initial Memorandum of Fact and Law on June 11 2014 which claimed that Justice Boyle, of the Tax Court of Canada, “erred” in his findings concerning a receivable sales agreement between McKesson Canada and its parent company (MIH) in Luxembourg.

In 2002, MIH bought receivables from McKesson for $460 million and purchased all eligible receivables daily, for the next five years, subject to a $900 million cap. McKesson used a discount rate of 2.206%.

Justice Boyle said an arm’s-length rate in the range of 0.959% to 1.17% would have been appropriate and dismissed the taxpayer’s appeal.

On September 4 2014, Justice Boyle filed his recusal. The 47 page recusal stated that McKesson’s appeal contained “clear untruths” and made “allegations of impartiality”.

Supplementary memorandum of fact and law

McKesson filed the supplementary memorandum at the request of the Court of Appeal who found their initial memorandum “unnecessarily lengthy”.

The supplementary memorandum states that the reasoning behind Boyle’s recusal endangered “the appearance of fairness on appeal”.

The memorandum goes on to say that the recusal reasons:

· Are an improper attempt to influence the Court of Appeal;

· Undermine the solicitor-client relationship;

· Retrospectively reveal the trial judge’s disposition against the Appellant;

· Fundamentally misconstrue the Appellant’s arguments on appeal; and

· Raise an inescapable inference of animus against the Appellant.

The Crown has yet to file a responding memorandum.

While an outcome in the McKesson Canada Corp. versus The Queen is unlikely to happen anytime soon, one thing is clear - this has to be one of the most controversial and drawn out transfer pricing cases to date.

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