Greg Peet, provincially-appointed member of the UBC Board of Governors and Chair of its Finance and Property committees, was found to have illegally reduced the taxes his company owed. That’s according to the federal government, which recently won a case against Mr. Peet in the BC Supreme Court. In a decision issued last December, The Honourable Mr. Justice George Macintosh found that Peet, through a company he controlled called Veracity Capital, participated in a scheme designed to avoid paying over $1M in BC provincial taxes. “This is a simple case of a tax not being paid anywhere which ought to have been paid somewhere,” Macintosh wrote.
The events of the case date back to 2002-2003, when Peet was the CEO of a company called A.L.I. Technologies (ALI). It was then that ALI was acquired by another company called McKesson for $530M. Peet and his family owned a substantial number of shares in ALI and were due to receive $23.5M as part of the sale. Peet approached KPMG for tax planning advice in light of the impending windfall.
KPMG suggested eight possible strategies for achieving tax savings. From those, the plan ultimately chosen by Mr. Peet was dubbed the Quebec Year-End Shuffle (“Q-Yes” for short). The details of Q-Yes are fairly intricate and required nine transactions to be executed in a specific order; if you’re interested, consult the court decision at paras 19-20 for the complete outline. In broad strokes, the plan involved the incorporation of a new company called Veracity Capital that would have a presence in both BC and Quebec. By setting different fiscal year end dates in the different provinces, funds could be shuffled around such that taxable gains were not being recorded in either province. “The direct result, under the Q-Yes Plan, of Veracity having a June 30 fiscal year end for federal and B.C. purposes, and an August 31 fiscal year end for Quebec purposes, was that Veracity avoided paying $1,175,249 in B.C. income tax. That tax was not paid anywhere. It was avoided entirely,” wrote Justice Macintosh (emphasis ours). In Quebec, Veracity was claiming that 100% of its gains were earned in BC, while simultaneously claiming in BC that 90% of its gains were earned in Quebec. “Veracity adopted contradictory positions about the allocation of the same income,” the judgment reads.
While none of the individual steps of Q-Yes contravened any laws, there is a “general anti-avoidance rule” (GAAR) built into BC’s Income Tax Act. The GAAR “is intended to draw a line between legitimate tax reduction and abusive tax avoidance” – essentially a blanket rule to protect against the egregious exploitation of loopholes in tax laws. Justice Macintosh found that the Q-Yes plan constituted abusive tax avoidance, offending the GAAR. The government’s assessment that Mr. Peet owes the province $1,175,249 was upheld.
On January 4, 2016, Peet appealed the case to the BC Court of Appeal. No court dates have yet been set. Despite it being impossible to find any public contact information for Mr. Peet, an attempt was made to contact him via another member of the Board. No response was received by the time of publication.
What does it say about Peet’s values that he would engage in a plan like Q-Yes, designed to deprive the government of tax revenue? Then, once the government caught on to the plan, continuing to avoid the taxes by taking them to court instead of simply paying his fair share? Then, in the wake of the BC Supreme Court findings, deferring payment again by filing an appeal of the decision? In short, rather than paying his provincial taxes, where the funds could be directed towards providing public services such as post-secondary education, he has chosen instead to pay his tax attorneys.
Peet is very influential member of the the Board, as pointed out by Aaron Bailey during his successful campaign for a seat on the Board:
- “There are specific Board of Governors members who may have a little more influence than other people, whom it’s important to get in touch with and make sure you’re able to work with to lobby them effectively. One such person is Greg Peet, the chair of the finance committee. Many of the finance committee decisions — revolving things like the strategic investment fund and the sustainable futures fund, which are both in my platform — go through that committee and he has a very strong voice, a lot of knowledge and frankly a lot of respect and influence over the board.”
Likely due to that influence, Peet has been a key player in the Board’s recent scandals and controversies. He was involved in the secret committees which culminated in the resignation of former president Arvind Gupta and also led the committees that recommended against divestment based on reasoning that has been called both hypocritical and perplexing.
Despite all that, he appears to have even bigger things planned for this year. During the divestment discussions, it was strongly hinted that the Board is planning to look at restructuring the entire system of UBC endowments. As Chair of the Finance Committee, Greg Peet would be the one leading that project. The clear finding that he (through his company) entered into a tax avoidance scheme should cause the Board to carefully consider whether it might be in the best interests of the university to have someone else lead this process.