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 Federal Court has made a strong statement against an interpretation of the Canada Revenue Agency's (CRA's) powers that would allow almost unlimited invasions of taxpayer privacy. The force with which the court rejected the self-serving interpretation advanced by the CRA should be encouraging for taxpayers. The case serves as an important reminder that the CRA cannot act outside the bounds of law and that it is the courts, and not the CRA, that interpret the law.
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.
Taking questions under advisement is common practice in examinations for discovery in tax disputes; it indicates that counsel has not decided whether the question will be answered or refused and will advise at a later date. In a recent judgment, the Tax Court denounced the practice of taking questions under advisement during examinations for discovery and warned that there may be cost consequences to doing so.