Tax & Trade Blog

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.

The recent decision in Canada v. Colitto (2020 FCA 70) has seen the FCA weigh in on a huge issue for so called “derivative assessment” of directors and other person potentially at risk for a corporate taxpayer’s tax liability. With the financial pressures of COVID 19, this may come as bad news for corporate directors!

An oft-forgotten power of the CRA is its ability to issue a Requirement for Information (“RFI”) which compels a third party to turn over evidence which the CRA can use to determine if another taxpayer has met its obligations under the Canada’s tax laws. This power also extends to “unnamed” persons, where the CRA does not know the exact identity of who may be in violation of the law but knows that the third party possesses information on that person. In this “unnamed” person situation, the CRA must obtain court approval before they issue the RFI.

A recent case before the Federal Court dealt with this very issue.