Federal Court authorises CRA to obtain taxpayer information directly from PayPal Canada
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Federal Court authorises CRA to obtain taxpayer information directly from PayPal Canada


The Canada Revenue Agency (CRA, or the minister) has broad powers to audit and assess Canadian taxpayers, which leads to a variety of disputes in the courts.

In the case of MNR v PayPal Canada, an application was made by the minister (to the Federal Court of Canada) under subsection 231.2(3) of Canada's Income Tax Act (ITA) and subsection 289(3) of the Excise Tax Act (ETA) for judicial authorisation to impose on PayPal Canada (PayPal) a requirement to provide information and documents related to certain unnamed persons. These unnamed persons were corporations and individuals that had held a business account with PayPal and that had used PayPal's online payment platform in the course of their commercial activities during the period from 2014 through to autumn 2017.

This request by the CRA for information about 'unnamed persons' was a classic 'fishing expedition'. The CRA had no particular information that it was acting on, but it argued that such information was necessary to combat tax non-compliance in the underground economy. PayPal raised concerns that there was not even a threshold amount for each transaction targeted by the requirement, and that the requirement would interfere with the privacy of PayPal's clients. Overall, PayPal argued that the authorisation sought by the minister was an overly broad interference with the privacy of PayPal's clients and was unreasonable.

The information required by the CRA from PayPal included: (a) the full name of every individual and corporation holding a business account in the relevant period that provided PayPal with a Canadian address; (b) the date of birth of each individual; (c) business names; (d) telephone numbers; (e) full addresses; (f) email addresses; and (g) social insurance numbers and/or business numbers, if available. The CRA also requested information regarding the transactions made by the accountholders.

Subsection 231.2(3) of the ITA (and the equivalent provision in the ETA) allows a judge of the Federal Court to authorise the CRA to impose a requirement to produce documents or information relating to one or more unnamed persons if the judge is satisfied by information on oath that: (a) the person or group is ascertainable; and (b) the requirement is made to verify compliance by the person or persons in the group with any duty or obligation under the ITA (or ETA, as applicable).

The court held that both of these conditions were satisfied by the minister. The persons or group of persons were ascertainable, as the unnamed persons were corporations and individuals holding a business account with PayPal that have used PayPal's online payment platform in the course of their commercial activities during the period covering the calendar years 2014 to the date of service of the unnamed persons requirement; and (b) the unnamed persons requirement was made to verify compliance by these unnamed persons with their duties and obligations under the ITA and ETA. The court did not question the breadth of information that the CRA demanded, but held that the "expectation of privacy with respect to business records is very low". The order was therefore granted and the requirement was issued.

One should expect that the CRA will continue to use requirements relating to unnamed persons as a means of identifying taxpayers who may not have complied with income and sales tax reporting obligations.





Allan Gelkopf

Zvi Halpern-Shavim (zvi.halpern-shavim@blakes.com) and Allan Gelkopf (allan.gelkopf@blakes.com), Toronto

Blake, Cassels & Graydon LLP

Tel: +1 416 863 2355 and +1 416 863 2634

Website: www.blakes.com

more across site & bottom lb ros

More from across our site

Amount B is meant to increase simplicity and reduce uncertainty, but US TP specialists claim it may lead to controversy
Tax Foundation economist Alan Cole also signalled that pillar two has a 'considerable chance' of failing
The Labour Party is working hard to convince business that it will bring stability to tax policy if it wins the next UK general election. But it will be impossible to avoid creating winners and losers
Burrowes had initially been parachuted into the role last summer to navigate the fallout from the firm’s tax leaks scandal
Barbara Voskamp is bullish on hiring local talent to boost DLA Piper’s Singapore practice, and argues that ‘big four’ accountants suffer from a stifled creativity
Chris Jordan also said that nations have a duty to scrutinise the partnership structures of major firms, while, in other news, a number of tax teams expanded their benches
KPMG has exclusive access to the tool for three years in the UK, giving it an edge over ‘big four’ rivals
But the US tax agency’s advice is consistent with OECD guidance and shouldn’t surprise anyone, other experts tell ITR
A survey of more than 25,000 in-house counsel reveals that diversity initiatives are a high priority when choosing external counsel
The report is aimed at helping 'low-capacity countries', the OECD has claimed
Gift this article