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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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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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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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This is an update of our May 2018 blog regarding Samaroo v. Canada Revenue Agency (2018 BCSC 324), a landmark decision for a successful claim against the Canada Revenue Agency (“CRA”) for malicious prosecution.  The underlying prosecution involved allegations that Tony and Helen Samaroo (the “Samaroos”) and their companies evaded income tax by not reporting income generated by their businesses.  The Samaroos were also charged criminally for tax evasion. After their acquittals of all the charges in the criminal trial, the Samaroos brought an action against the CRA for malicious prosecution.  The trial judge found the CRA liable principally because its investigator knew that the actus reus of the tax evasion offence could not be proven, misled others involved in the prosecution and, by abusing his office, acted with malice.  At the end, the trial judge ordered the CRA to pay approximately $1.7 million in damages to the Samaroos.

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