Tax Treaty Case Law around the Globe 2015

S. 213Canada: McKesson Canada Corporation vs. The Queen – Judges are Human

Brian J. Arnold

I. S. 214Introduction

Everything about this case is extraordinary – the manner in which it arose, the issue and the reasons for the decision. The decision consists of the judge’s reasons for recusing himself from adjudicating two ancillary issues related to a transfer pricing case that he decided in 2013.

That case under the same namewas the subject of detailed commentary by Professor David Duff in the Tax Treaty Case Law Conference for 2013. It concerned a transfer pricing adjustment made by the Canada Revenue Agency (“CRA”) to the price of the non-arm’s length sale of receivables owing to McKesson Canada by its customers to related non-Canadian corporations at a substantial discount. McKesson Canada was part of the McKesson group (referred to by the judge as “the biggest company no one has ever heard of”), a US-based multinational engaged in the health care and pharmaceutical business. The discount represented an annual financing cost of approximately 27 percent and turned what had previously been substantial profits for McKesson Canada into losses. The CRA reduced the discount to an amount representing an...