Toronto: Canadian Tax Foundation, 2022, 9:1-35

Justice Wilson of the Supreme Court of Canada (SCC) noted that the Income Tax Act (the Act or the ITA) was based on the principle of self-reporting and self-assessment. And, in order to supervise the tax system, the Minister of National Revenue (the Minister) must be given broad powers to audit taxpayers’ returns and inspect related books and records. In order to do so, the Minister must be capable of exercising these powers whether or not they have reasonable grounds for believing that a particular taxpayer has breached the Act. Justice Wilson went on to state that:

“…A spot check or a system of random monitoring may be the only way in which the integrity of the tax system can be maintained.” 

This paper will review the CRA Audit and Assessment practices for requests and requirements. Under the power granted to the Minister in section 231.1 of the Act, the requests for information are referred to as Requirements for Information (RFI). The requirementto provide documents or information of third parties is issued by following the process outlined in 231.2, and where the Minister submits an Unknown Persons Requirement (UPR) application to a judge of the Federal Court seeking judicial authorization.

This paper is organized to convey a story to the reader. The paper will first analyze case law – case law found in favour of the Canada Revenue Agency’s (CRA) UPR applications and case law found in favour of the taxpayer in the CRA’s enforcement of an RFI issued to taxpayers.

During the week of the 2022 Atlantic Tax Conference, the Federal Court of Appeal (FCA) released the Miller v Canada (National Revenue), 2022 FCA 183, decision and the authors felt the case warranted inclusion in this paper. This case was analyzed, and its potential impact is discussed. During the analyses, the question of whether the CRA uses section 231.4 inquiries provision arose and in order to assist the reader, the authors canvassed section 231.4.

The paper then continues to get back on track to review the responses from the CRA and the Minister of Finance in response to the two cases that were found in favour of the taxpayer. These responses were in the form of CRA policy statement AD-19-02R, Obtaining Information for Audit Purpose and changes proposed to CRA’s Audit Authority under subsection 231.1(1) of the Act as indicated in Budget 2021.

The solicitor-client privilege is reviewed with a focus on the accountants’ work to assist the taxpayer. Our paper reviews the instances for which solicitor-client privilege can incorporate the accountant based on jurisprudence.

The paper will end with a discussion of current CRA projects and initiatives

The full publication is accessible here:

 https://taxfind.ca/#/document/2022_APC_paper_9