Release of Taxpayer Information to Police: Possible Legal Conflicts

New subsection 241(9.5), which is described in Melanie Kneis’s article above, may conflict with other components of the Canadian legal system. The subsection gives CRA officials a broad power to disclose taxpayer information, whether or not it is related to a tax issue, to “an appropriate police organization.” The test to be applied is whether, in the CRA’s view, it has “reasonable grounds” to believe that the information will afford evidence of an act or omission in or outside Canada that if committed in Canada would be an offence listed in that subsection.

Any disclosure of taxpayer information by the CRA to the police must not contravene the Privacy Act, which governs the collection, use, and disclosure of “personal information” by “government institutions.” Under section 8(2)(b) of the Privacy Act, however, a government institution may disclose personal information without the consent of the individual “for any purpose in accordance with any Act of Parliament . . . that authorizes its disclosure.” Given that the specific authority to disclose is now provided for in subsection 241(9.5) of the Act, it appears that the general requirements for disclosure under the Privacy Act are met. However, if a taxpayer wanted to make a complaint to the privacy commissioner in a particular case, he or she might do so on the basis that the CRA did not have “reasonable grounds” to disclose in that situation.

A more significant issue is the scope of “reasonable grounds.” In oral evidence given on May 7, 2014, the Ontario Provincial Police told the Standing Senate Committee on National Finance that pre-charge taxpayer information would be very useful if, “[f]or instance, someone . . . is declaring $50,000 in income but living in a million-dollar house.” Those circumstances might be reasonable evidence of tax evasion, but they are dealt with in other ways and need no further statutory authority. However, the example does not seem to constitute reasonable evidence for the offences listed in subsection 241(9.5).

Another question is whether the sharing of information in this way could be challenged under the Canadian Charter of Rights and Freedoms. In particular, although the right not to incriminate oneself is set out in section 13 of the Charter, providing information to the CRA is not optional. Filing a tax return is legally required for many, and of course there is no provision allowing illegally obtained income to be excluded from one’s return. Further, pursuant to her authority under the Act, the minister may examine the books and records of a taxpayer in the context of an audit, demand that a taxpayer provide any document for any purpose related to the administration of the Act, and take other actions as permitted by the Act—and the taxpayer is subject to the sanctions in section 231.7 of the Act for remaining silent or otherwise not complying. Information so obtained that may be self-incriminating is permitted to be shared under the new subsection.

A second Charter challenge may be possible on the ground that the CRA’s obtaining of information from the taxpayer without a warrant, followed by supplying that information to the police without court supervision at that stage, may constitute unreasonable search and seizure under section 8 of the Charter.

Note, however, that any Charter challenge must take into account the application of the “reasonable limits” clause in section 1 of the Charter, which contemplates that any rights guaranteed in the Charter (such as those against self-incrimination and unreasonable search and seizure) are subject to “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society.” It is possible that the prevention of the serious offences listed in subsection 241(9.5) of the Act could justify limiting those rights.

Nicole K. D’Aoust
Wilson & Partners LLP, Toronto
nicole.k.daoust@ca.pwc.com

Canadian Tax Focus
Volume 4, Number 3, August 2014
©2014, Canadian Tax Foundation