In a previous blog post titled “CRA coming for contractors?” we discussed the recent decision of the Federal Court of Appeal in Rona Inc. v. Canada (Minister of National Revenue), which seemed to suggest that CRA may have a special project on the go to target Canadian home improvement contractors that are currently operating in the underground economy.
An email and website post from PayPal to its users earlier this week seems to indicate that the CRA is now going after all Canadians that buy and sell online.
Under subsection 231.2(3) of the Income Tax Act and subsection 289(3) of Excise Tax Act, the CRA can issue a Request for Information (RFI) from third parties specifying information sought for audit purposes. If the information being sought pertains to an unnamed or unknown third party, the CRA must obtain a court order for the RFI.
In the past, RFIs have generally not been approved by a court unless the party about whom the information is being sought is ascertainable, and the RFI is legitimately aimed at determining whether that party is complying with its tax obligations.
It is for this reason that the RFI granted against PayPal is so surprising, because it is one of the broadest RFI orders that we have ever seen. In particular, pursuant to a Federal Court order issued on November 10, 2017, within 45 days PayPal must disclose information pertaining to all “PayPal business account holders who received or sent a payment between January 1, 2014 and November 10, 2017” including:
- The full name of every individual or corporation holding a business account that has a Canadian address;
- The date of birth of each individual holding a business account;
- The business name, if applicable;
- The telephone number(s) of the corporation or individual holding the business account, if available;
- The full address(es) of the corporation or individual holding the business account;
- The email address of the corporation or individual holding the business account;
- The Social Insurance Number and/or Business Number of the corporation or individual holding the Business Account, if available.
PayPal is also required to provide the following information for each identified account:
- The total number and value of received transactions for each calendar year between January 1, 2014 and November 10, 2017.
- The total number and value of sent transactions for each calendar year between January 1, 2014 and November 10, 2017.
The information that PayPal has been ordered to disclose will clearly be very relevant to the CRA as it will help them identify individuals and business that have failed to report income or collect or remit GST/HST. That said, the whole point of requiring judicial approval for RFIs pertaining to unknown or unnamed parties is to balance the CRA right to identify those individuals or businesses that may not be complying with their tax obligations with the general privacy rights of the general public. It is for this reason that Federal Courts have in the past limited the CRA’s ability to obtain overly broad and general RFIs.
It is therefore a bit concerning that the RFI granted by the Federal Court against PayPal is so broad that it covers every single business account holder who has “sent or received” a payment on PayPal over an almost 3 year period. This would seemingly include information on individuals who have sent or received a payment only once and accounts with transactions totaling only a few dollars.
Will the Federal Court next grant the CRA an RFI against Visa or Mastercard to disclose all purchases made by Canadians?
Given that PayPal has only 45 days to comply with the Federal Court order, anyone who has received or sent a payment between January 1, 2014 and November 10, 2017 who may have undeclared income or who has failed to collect or remit GST/HST should immediately contact a tax lawyer. The clock is ticking but there may still be ways for anyone falling into this category to help themselves, including through the CRA’s voluntary disclosure process.
Do you require assistance in this area? If so, contact us here.