Transfer pricing, of course, is a very complex issue. Just out of interest, I'll mention that here in the U.S. they had a similar transfer pricing case against Glaxo—a very similar structure with the Swiss affiliate and Zantac, and so on—and Glaxo settled this matter and paid the U.S. government $3.4 billion. This was roughly 10 years ago, to give you a sense of the dollars at stake.
Again, on a similar cross-border structure, we lost the case at the Supreme Court, as you just mentioned.
The case was based on section 69. That's now section 247 of the Income Tax Act, so that provision has actually changed. Unlike certain countries, Canada has chosen to go the very short version of the transfer pricing laws and so-called arm's-length pricing laws. The CRA produces an administrative bulletin, an information circular, that backs up these laws in great details and suggests how the law ought to be interpreted.
We can question whether that case is particularly relevant, because the law has changed since old section 69.
My recommendation elsewhere is that our Income Tax Act should more carefully prescribe what is meant by fair market value that is an arm's-length transaction to discern the appropriate transfer price between related entities based in different countries.
Glaxo is a very controversial case. Some folks say the government just didn't use the proper argument, and that's why the case was lost. In other words, the courts interpreted the section properly, but it wasn't argued that well before the initial Tax Court of Canada as well as the subsequent appeals.
Anyway, Glaxo is a real controversy. I think the transfer pricing laws could be tweaked to do a better job.