In Budget 2019 the federal government has continued to bolster its tools and resources to detect and prosecute tax evasion. As such, several measures have been proposed, including a C$150.8 million investment over the next five years to fund new initiatives. More so than ever, tax professionals should be well acquainted with various definitions to ensure that their client services and advice cannot be construed as the commission or facilitation of a criminal offence.
The Canadian Broadcasting Corporation recently reported that the Canada Revenue Agency has transferred more than 1.6 million Canadian banking records to the US Internal Revenue Service since the intergovernmental agreement for the enhanced exchange of tax information under the Canada-US Tax Convention was entered into in 2014. The agreement provides lengthy and detailed rules with respect to the information that the Canadian government must transfer to the United States.
The minister of national revenue recently sought to compel 25 people to attend oral examinations as part of a transfer pricing audit. The minister applied to the Federal Court for a compliance order, arguing that the Income Tax Act provides the authority to compel such examinations. However, the court disagreed. Its analysis highlights the problematic nature of the minister's position.
The Canada Revenue Agency (CRA) recently announced that it would not seek leave to appeal the Federal Court of Appeal decision in BP Canada to the Supreme Court of Canada. The Federal Court of Appeal had previously imposed important restrictions on the use of Section 231.1(1) audit powers by the CRA. For some taxpayers, the risk that information gathering by the CRA might result in a criminal evasion investigation or prosecution has now increased.
The Federal Court of Appeal recently considered the authority to conduct the inspection of books and records given by Section 231.1(1) of the Income Tax Act and, on the basis of a contextual interpretation of this section, imposed significant restrictions on the limits of the minister of national revenue's authority.
In an ambitious, complicated, lengthy and controversial decision, a court recently held that advisory common interest privilege has "incorrectly [been] accepted in both the United States and Canada". The judgment, which is an upheaval of law, presents serious issues for lawyers who advise clients on commercial transactions and for clients that instruct and receive advice from lawyers on such transactions.
Two recent Supreme Court of Canada decisions illustrate that although tax law may be different for some purposes, its objectives do not justify the circumvention or restriction of the law of solicitor-client privilege as this has been consistently developed by the court over the past two decades.