CRA Requests Information from PayPal, BMO, Royal Bank, and TD Canada Trust

As part of its push to uncover unreported income, the Canada Revenue Agency (“CRA”) has successfully obtained a requirement for information from the Federal Court of Canada to require PayPal to disclose account information from 2014 to November 10, 2017. CRA’s requirement for information is focused on Canadians with PayPal business accounts. PayPal has until the end of December 2017 to comply with this request.

This is not the first time that CRA has requested information regarding PayPal accounts. In 2007, CRA successfully requested information from eBay Canada Ltd. and eBay CS Vancouver Inc. (which, at the time, included PayPal as part of its corporate family) to identify “PowerSellers”.

Section 231.2 of the Income Tax Act (the Act) allows CRA to apply to the Federal Court of Canada for an order requiring a third party to provide information on unnamed persons where it can satisfy the court that the unnamed person(s) is ascertainable and that the request is made to verify compliance with the Act.

Additionally, CRA has ongoing applications with the Bank of Montreal, Royal Bank, and TD Canada Trust to disclose financial transactions associated with Israeli bank Bank Hapoalim. CRA is targeting transfers between the Canadian banks and Bank Hapoalim that occurred in the period beginning April 1, 2011 and ending September 30, 2017.

In either instance, CRA is seeking to uncover potential unreported business income, investment income, and offshore bank accounts, especially in the wake of the Panama Papers and Paradise Papers.

One potential solution for taxpayers to remedy any tax issues they may have is the Voluntary Disclosures Program. However, effective January 1, 2018, CRA is planning to make substantial changes to the Voluntary Disclosures Program.

As part of their changes, CRA intends to create a multi-stream program for both Income Tax and GST/HST VDPs. Each of the different streams will offer differing levels of interest and penalty relief, with the “Limited Program” offering less relief than is currently available to taxpayers. Additionally, CRA will be requiring immediate payment of the estimated taxes owing unless the taxpayer can illustrate an inability to pay due to extraordinary circumstances.

For taxpayers that may be affected by these information requests, we advise that they seek counsel from a tax lawyer or tax specialist promptly. This is especially so given the upcoming changes to the Voluntary Disclosures Program.

*David M Piccolo is a tax lawyer and partner at TaxChambers LLP.