Canada (National Revenue) v. Montana, 2019 FC 900
As established in multiple decisions, including Canada (National Revenue) v. Cameco Corporation, 2019 FCA 67 (CanLII), CRA has the authority to compel a taxpayer to “provide” CRA with the documents they wish to audit. But what is the definition of “provide”?
The scope of the “provide” requirement was considered in Canada (National Revenue) v. Montana, 2019 FC 900 (CanLII). The issue was whether a taxpayer had to physically provide or deliver documents for audit to the respective CRA office. The answer is yes. However, a courier paid for by CRA was sufficient under the circumstances.
Do you have to Deliver the Documents to the CRA Auditor?
According to the Federal Court at paragraph 18, the issue triggering a multi-year and multi-hearing dispute leading to the Applicant’s motion “appears to be simple at first glance: when ordered “to provide” documents to the CRA, must they simply be made available by the taxpayer, or must the taxpayer physically deliver them to the auditors?”.
The CRA, Applicant, first requested documents from the Respondent in May of 2014. The taxpayer refused multiple times and since then compliance, contempt and sentencing orders were issued by the courts. According to the Federal Court at paragraph 40:
Clearly, to say that there has been a history of non-cooperation is an understatement. The Applicant has now been trying to audit the Respondents for over five years, but the Respondents have resisted at every turn. For instance, and most recently, the Respondents rejected the Applicant’s seemingly simple solution to send a courier to the Burlington address to pick up the boxes…
The taxpayer insisted that it was not obligated to provide the documents directly to the auditors but invited the auditors to attend at the corporate premises where the documents would be made available. The taxpayer also rejected CRA’s offer to send a courier to pick up the documents from the taxpayer.
Subsection 231.7(1) of the Income Tax Act
When asserting its right to demand that the taxpayer physically provide the documents, the CRA relied on subsection 231.7(1) of the Income Tax Act which reads as follows:
231.7 (1) On summary application by the Minister, a judge may, notwithstanding subsection 238(2), order a person to provide any access, assistance, information or document sought by the Minister under section 231.1 or 231.2 if the judge is satisfied that
(a) the person was required under section 231.1 or 231.2 to provide the access, assistance, information or document and did not do so; and
(b) in the case of information or a document, the information or document is not protected from disclosure by solicitor-client privilege (within the meaning of subsection 232(1)).
Scope of the Definition of "Provide" in Subsection 231.7(1)
Key to the Federal Court decision was the definition of “provide” in section 231.7 of the Income Tax Act and it held, at paragraphs 27, 31 and 32, that “provide” has a flexible meaning and can encompass various forms:
As the statute reads, and given that “provide” is not defined in the ITA, the word “provide” could include various appropriate methods of “providing” information and documents to the CRA, depending on the circumstances…
While there is a lack of case law interpreting the meaning of “provide” pursuant to section 231.7 of the ITA (and section 289.1 of the ETA), the wording of subsection 231.7(1) of the ITA speaks of a judge being able to order a person to “provide any access, assistance, information or document sought by the Minister” in exercising her audit powers under sections 231.1 or 231.2…
If it were only “access” that must be provided, as the Respondent argues, Parliament would not have added “assistance, information or document”. Parliament clearly intended that the word “provide” have a flexible meaning…
CRA has the Authority to Compel a Taxpayer to Deliver Documents to its Premises
Ultimately the court ordered that CRA was permitted to arrange a courier to pick up the documents at their expense. In addition, it upheld the sentencing order for the taxpayer’s rejection of the compliance order.
In conclusion, CRA has the authority to compel a taxpayer to deliver documents to its premises. However, in this case a courier paid for by CRA was sufficient.
Canada (National Revenue) v. Montana, 2019 FC 900
Canada (National Revenue) v. Montana, 2019 FC 900 (CanLII)
SpenceDrake Tax Law