September 10, 2018
Loblaw cleared of tax-avoidance allegation, and will appeal technical ruling
BRAMPTON, ON, Sept. 10, 2018 /CNW/ - On September 7, 2018, the Tax Court of Canada issued a ruling for Loblaw Companies Limited (TSX: L) in its decision relating to Glenhuron Bank Limited, a wholly-owned subsidiary of Loblaw that was wound up in 2013. The Company is providing the following statement in response to the decision.
"We are pleased with the court's finding that Loblaw did not take any steps to avoid Canadian tax," said Sarah Davis, President, Loblaw Companies Limited. "This confirms what we have said all along: Glenhuron was established for legitimate business purposes. We are also pleased that the court's decision will result in a reduction of the amount of taxes assessed. We are, however, disappointed with the court's interpretation of a technical provision in the legislation. We strongly disagree and will appeal."
Loblaw estimates that if it is unsuccessful in its appeal of the decision, it would be required to pay tax and interest of approximately $368 million. After deducting amounts already paid, the incremental cash payment would be approximately $242 million. Loblaw expects that it would be able to fund the required payment from cash on hand and without any impact on its capital investment plans, dividend growth or its share buyback program.
Although Loblaw believes strongly in the merits of its position, it will record a charge of approximately $368 million ($0.98 per share) in the third quarter of 2018.
About Loblaw Companies Limited
Loblaw Companies Limited is Canada's food and pharmacy leader, the nation's largest retailer, and the majority unit holder of Choice Properties Real Estate Investment Trust. It provides Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, financial services, and wireless mobile products and services. With a network of nearly 2,500 stores, the company, its franchisees, and Associate-owners employ approximately 200,000 full- and part-time employees, making it one of Canada's largest private sector employers. The company's purpose – Live Life Well® – puts first the needs and well-being of Canadians who make one billion transactions annually in the companies' stores.
Forward Looking Statements
This News Release contains forward-looking statements. These statements include the statement that the Company intends to appeal the decision, the amount of tax and interest that the Company would be required to pay if it is unsuccessful in an appeal, the impact any such amount would have on its earnings, how it would fund any such payment and the impact any such the payment would have on its capital plans, dividend growth and its share buyback program. These forward-looking statements reflect the Company's estimates, beliefs and assumptions, which are based on management's perception of current conditions and expected future developments, as well as other factors they believe are appropriate in the circumstances. The Company cannot predict with any certainty the timing or outcome of the matter discussed in this News Release and can give no assurance that such estimates, beliefs and assumptions will prove to be correct. The Company's estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and, as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions will prove to be correct. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this News Release. Except as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Loblaw Companies Limited