CRA Audit Questionnaires

According to an article published in the February 5, 2011 edition of the National Post, CRA has sent out questionnaires to high net worth Canadians regarding their interests in related entities, including trusts, partnerships, and corporations.  These questionnaires appear to be the latest step by both the CRA and Department of Finance to have taxpayers voluntarily give up information about their financial affairs.  In the 2010 budget, a regime was proposed whereby taxpayers would become obligated to report certain transactions to the CRA.

Despite the creation of these regimes, it appears that the principle of solicitor-client privilege will not be reduced by these measures.  The Canadian Bar Association has sent submissions to the Minister of Finance, Jim Flaherty, regarding this issue and the response from the Minister was positive.  Accordingly, despite the increased reporting requirements, the protective barrier of solicitor-client privilege will remain.

It is clear that these actions are part of the government’s increased focus on ‘tax leakage’.  Other measures include, most prominently, the increased scrutiny on assets held off-shore in tax havens (such as Swiss bank accounts).