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One of the emerging areas in criminal law in the 21st 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.

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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’.

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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.

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The Canada Border Services Agency (CBSA) is responsible for reviewing imports to ensure compliance with Canada’s trade laws. In doing so, the CBSA sometimes focuses on what it deems “audit priority” areas. These are tariff classification codes where the agency believes that there is significant risk for misclassified imports under the Customs Tariff, which leads to the unlawful evasion of duties on those goods.

 

The CBSA recently released a new round of 2020 Trade Compliance Verifications, which dealt with a number of these priority areas.

In the report, the following “audit priority” areas had updated enforcement information, leading to several million dollars in fines and penalties for importers who misclassified their goods.

 

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In an earlier blog, we covered the oft-forgotten power of the CRA to issue Requirements for Information (“RFIs”) which can be used to compel a third party to deliver evidence in its possession to the CRA. The CRA then uses that evidence to determine if another taxpayer (typically a customer or supplier of the third party) has unremitted tax or undeclared income.
 
 
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The International Chamber of Commerce’s (“ICC”) Incoterms® are relied on across the world by businesses to simplify and standardize the delivery of internationally shipped goods. The terms function so that the obligations on both buyers and sellers are clear, which eliminates surprises in the case of disputes. Use of the terms, in a manner consistent with the underlying international sales agreement, is critical to not only commercial obligations, but critical to the application of international taxes, including the Canadian GST/HST valued added tax.

The ICC updates Incoterms® periodically to stay up to date with modern realities in global trade and a new set of terms, to be called Incoterms® 2020, comes into effect on January 1, 2020.

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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.

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The Canada Border Services Agency (CBSA) is responsible for reviewing imports to ensure compliance with Canada’s trade laws. In doing so, the CBSA sometimes focuses on what it deems “audit priority” areas. These are tariff classification codes where the agency believes that there is significant risk for misclassified imports under the Customs Tariff, which leads to the unlawful evasion of duties on those goods.

The CBSA recently released its next round of 2019 Trade Compliance Verifications, which dealt with a number of these priority areas.

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Canada has many rules which govern the import and export of property. However, importers and exporters are often not aware of the many supplementary laws which govern the trade of specific goods and services across international borders. One of these often-overlooked areas are the rules governing rare archeological/cultural artifacts.

A recent case from the United States has highlighted the pitfalls involved with importing and exporting rare cultural artifacts from Egypt.

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When assessing a taxpayer’s income, the CRA has an often-overlooked auditing power that allows it to consider a taxpayer’s net worth at specific points in time and use it to calculate the taxpayer’s unreported income. This is called a ‘net-worth assessment’. This alternative audit methodology is often employed when the CRA finds that the books and records of the taxpayer are either incomplete or unreliable—and can result in assessments on undeclared income and unremitted GST/HST!

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The Canada Border Services Agency’s (“CBSA”) Administrative Monetary Penalty System (AMPS) imposes monetary penalties (“AMPs”) for non-compliance with trade rules. AMPs levied are proportionate to the type, severity, and frequency of the infraction. According to the government, the goal of the system is to create a level playing field for Canadian businesses by ensuring that there is a cost for non-compliance with trade rules.

A (fairly) recent announcement from the CBSA has indicated that the AMPs associated with 22 different contraventions related to commercial trade will be increased, effective April 1, 2019.

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Buying a home is usually the largest investment individuals will make in their lives. As such, it is extremely important that both buyers and sellers and builders are aware of the rules surrounding the collection and remitting of tax on real estate transactions, lest they be caught by the net cast by the CRA and are assessed penalties in addition to paying unremitted tax.

A recent announcement from the Minister of National Revenue spoke directly to this point.

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The CRA has a number of rules, found in the Income Tax Act (“ITA”), and the Excise Tax Act (“ETA”) requiring taxpayers to keep books and records, and to keep them available for audit and inspection for up to seven years after the current year.

The CRA also has a number of quasi- criminal provisions that they can rely on when dealing with situations where taxpayers and their businesses attempt to use false or incomplete records to underreport revenues, income, or GST obligations.

It does not usually go well for the taxpayer when this is uncovered, and the taxpayer can face both criminal fines and civil assessments of taxes interest and penalty. In one recent case, the taxpayer ended up paying twice for this mistake!

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When it comes to policing Canada’s voluntary tax compliance system (for income taxes and the GST/HST), the CRA has several effective enforcement weapons in its arsenal. One weapon that one does not often see employed is international extradition of individuals wanted for Canadian tax evasion and/or fraud.

One recent case made the headlines in Canada, when the CRA announced March 11, 2019 that a man living in Costa Rica has been successfully extradited to Canada under charges of tax fraud.

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