Tax & Trade Blog

One of the emerging areas in criminal law in the 21^st century are the rules that surround the search and seizure of electronic devices like computers, notebooks and smartphones – particularly where those devices contain information covered by Solicitor-Client Privilege.

When the CRA executes a Search Warrant in the tax consequence, and seizes electronic storage devices like a notebook or an iPhone, the party subject to the Warrant may still rely on a claim of Solicitor-Client Privilege. This results in a unique court process which deals with how to isolate privileged documents that are otherwise stored in the device alongside non-privileged ones.

A recent case before British Columbia Supreme Court dealt with this issue, and is a good read for persons finding themselves subject to such a seizure.

One of the messier areas in tax law tends to be the case where “civil” tax default meets potential “criminal” tax fraud – with the consequences to the taxpayer moving beyond tax assessments and interest, to fines and potential time sentenced in the ‘Crow Bar Hotel’.

As a result of the COVID-19 pandemic, the Tax Court of Canada (the "TCC") has been closed with all hearings cancelled since March 16, 2020.

A recent Notice to the Public and Profession (the "Notice") issued by the TCC has indicated this cancellation of hearings will extend to July 17, 2020 (which would have been the last day of hearings before the TCC's previously scheduled 4-week summer recess).

The Notice also reveals that the TCC has been preparing to re-open.

Section 231.1 of the Income Tax Act (“ITA”) provides the Canada Revenue Agency (“CRA”) with broad powers to examine records of taxpayers that may be relevant for audit and for the administration or enforcement of the legislation.   If a taxpayer fails to provide the required information, the CRA may seek a compliance order from the Federal Court (“FC”) pursuant to section 231.7(1).  (Parallel provisions in the Excise Tax Act are sections 288 and 289.1.) 

As section 231.1(a) says “any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer”, what is the legal test for relevance?  In The Minister of National Revenue v. Atlas Canada ULC (2018 FC 1086), the FC confirmed that the Minister is only required to meet the very low threshold for relevance in respect of production of documents.

As we blogged about here and here, the CRA has an often forgotten power to issue ‘Requirements for Information’ (“RFIs”) on third parties which can be used to compel them to hand over evidence in their possession to the CRA to be used to determine if another taxpayer has unremitted tax or undeclared income. The recent case in Minister (National Revenue) v Roofmart Ontario Inc (2019 FC 506) dealt with those RFI powers, in particular the CRA’s ability to issue an RFI when it did not know the identity of the taxpayer it ultimately wanted to investigate (the so-called ‘unnamed person requirement’).

That case was appealed to the Federal Court of Appeal (“FCA”), and the decision in favour of the CRA was released earlier this month.