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

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

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

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

intl-updates

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.

halpern-shavim.jpg
gelkopf.jpg

Zvi

Halpern-

Shavim

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 & shared bottom lb ros

More from across our site

Rishi Joshi, of the Institute of Chartered Accountants of India, warns of potential judicial overreach as assets are recharacterised to bypass a legislative exclusion
Only 2% of in-house survey respondents said they were ‘heavy’ users of AI for TP, Aibidia’s report also found
There was a ‘deeply embedded culture within PwC that routinely disregarded formal confidentiality obligations,’ the chairman of Australia’s Tax Practitioners Board said
Jennifer Best was most recently the acting commissioner of the IRS’s large business and international division
Section 899’s exclusion from the One Big Beautiful Bill does not mean it has been nipped in the bud, Aruna Kalyanam also tells ITR
Thanks to operational slickness and sheer force of will, A&M Tax will continue hoovering up talent across the globe
Setu Kamal became the first practising barrister to be added to the UK’s tax avoidance promoter list; in other news, UHY expanded its network in Canada
US President Donald Trump’s tariffs may get thrown out by courts in the future and taxpayers should already be planning for that possibility, BDO’s Dustin Stamper tells ITR
Awards
ITR is delighted to reveal the first shortlisted nominees for the Middle East Tax Awards
The firm has appointed Deloitte’s former tax leader for Thailand to lead the new operation, which builds on considerable Asian investment in recent months
Gift this article