This content is from: Canada

Canada: Canadian authorities may access taxpayer self-assessments for uncertain tax positions

Jeffrey Shafer
Evan Schmid
The Federal Court of Canada recently ruled that the Canada Revenue Agency (CRA) can compel a taxpayer to produce material related to the taxpayer's assessment of its own uncertain tax positions.

In MNR v BP Canada Energy Company, 2015 FC 714, CRA applied for an order compelling BP to disclose the list of tax issues considered uncertain in connection with the preparation of financial statements for BP's ultimate parent. BP argued that mandatory production of the 'issues list' was not necessary for CRA to perform its audit, was unfair to BP, and was contrary to CRA's longstanding policy that "although not routinely required, officials may request tax accrual working papers".

The Court agreed with CRA and ordered BP to produce the issues list. The Court found that:

  • it was irrelevant that CRA did not need the list to conduct and conclude a comprehensive and complete audit;
  • it was sufficient that CRA wanted the issues list for purposes of assisting with ongoing and future audits;
  • the mandatory production of the issues list did not constitute a 'self-audit' requirement for the taxpayer;
  • it was irrelevant that the issues list was not required to be kept by BP pursuant to the Income Tax Act (Canada); and
  • the issues list, even though based on BP's subjective views, was within the scope of CRA's audit powers because it relates to the enforcement of the Income Tax Act.

The Court also rejected the arguments that an order compelling production of the issues list would be unfair or discriminatory, or that the order should be refused because of alleged CRA bad faith during the audit.

This decision fits with a trend of decisions focussing on increased transparency (including, for example, the recent Superior Plus Corp. case requiring CRA to disclose internal documents relevant to the decision to apply the general anti-avoidance rule (GAAR)). It is not clear whether the decision will change CRA's practice in terms of when it demands production of accounting working papers. As of the writing of this article, BP's appeal period has not yet lapsed.

Jeffrey Shafer ( andEvan Schmid (, Toronto
Blake, Cassels & Graydon

Tel: +1 416 863 3187 and +1 416 863 4341

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