The short answer to the question of the connection between Canada’s new anti-terrorism laws and taxes is that recent amendments to the Income Tax and Excise Tax Acts which arise through the Anti-Terrorism Act permit more extensive disclosure and sharing of private and confidential taxpayer information. The longer answer is that this is part of a trend of CRA offering greater levels of cooperation and assistance with other agencies, both domestically and internationally, with the result that the phrase, “except as authorized by law”, which qualifies the prohibition upon disclosure of taxpayer information has once again grown in scope.
Bill C 51, which is now the Anti-Terrorism Act received Royal Assent on 18 June 2015. Along the way to becoming law, debate and popular discussion revealed a significant division of opinion on whether the Bill represented the proper balance between the protection of individual rights and the collective need for security.
Two changes, which are now law and which received less public attention than many other features of the Act are tax related. Tax and taxpayer information is private and confidential and the use and dissemination of that information is controlled by section 295 of the Excise Tax Act and section 241(9) of the Income Tax Act.
The Anti-Terrorism Act amended these provisions to expand the list of circumstances under which this information may be shared. Under the amendments, this information may now be shared when there are reasonable and probable grounds for believing that the information is relevant to the investigation of a terrorism related offence.
As a first point, it should be noted that the test for disclosure, which is that the information is relevant to an investigation, is a very low threshold and easy to satisfy. It is only necessary that the information be a piece, if only a very small piece of the investigative puzzle. As long as this precondition has been satisfied, disclosure is permitted.
The increased sharing of confidential taxpayer information is consistent with a trend that continues to develop. For example, the Canadian and U.S. governments entered into an agreement to implement FATCA which requires Canadian financial institutions, under specified circumstances to provide account information to CRA and requires CRA, under specified circumstances, to in turn provide the information to the IRS.
Similarly, in June of this year the Minister of National Revenue issued a news release announcing that she signed an international Multilateral Competent Authority Agreement which is described as “an important step towards implementing the Common Reporting Standard for the automatic exchange of financial account information with other tax jurisdictions.” According to the announcement, the Agreement is part of the government’s commitment to addressing international tax evasion and improving tax compliance.
Canada has also entered into treaty agreements with several countries, some of which have not yet been ratified, through which Canada can accept a request from another country to commence collection action against a person in Canada, who has a tax debt to that other country. Through these agreements and with this cooperation, the reach of a foreign jurisdiction can, in some circumstances, now extend into Canada for the purpose of tax debt collection.
There can be no doubt that a government’s ability to detect, investigate and prosecute tax evasion, and to take enforcement measures against non-compliance will be enhanced through the increased sharing of financial information collected through financial institutions and taxpayer information collected through the relevant tax authorities. Equally, it is likely that Canadian courts will one day be called upon to examine the use of information by the CRA in civil or criminal tax proceedings which was shared and collected in these ways. Finally, there can be no doubt that the trend toward increased sharing of information between tax authorities, and cooperation between countries is not about to change and, in this way, for purposes of either lawful tax planning or unlawful tax evasion, the world is becoming a much smaller and more transparent place than it used to be.