CRA Announces it will not seek leave to appeal the FCA’s BP Canada Energy decision

CRA Announces it will not seek leave to appeal the FCA’s BP Canada Energy decision

http://www.cra-arc.gc.ca/nwsrm/stmnt/2017/st170531-eng.html

CRA Press Release May 31, 2017

Précis:  The decision of the Federal Court of Appeal in BP Canada Energy v. Canada (National Revenue) (March 30, 2017 – 2017 FCA 61, Nöel C.J. (author), Stratas, Boivin JJ.A.) was blogged earlier on this site.  The précis read:

The Federal Court of Appeal has reversed the Federal Court’s decision that held that corporate taxpayers can be required to produce their internal tax accrual working papers (“TAMPs”).  This may be one of the most important cases in several years on the extent of the power CRA has in gathering private tax information compiled by Canadian businesses.  The Chief Justice of the Federal Court of Appeal, who is a noted tax expert, has written an intellectually compelling decision.  If the Supreme Court grants leave to appeal, which I think highly likely, it is difficult to predict what the Court will do.  If I were a betting person, I would be inclined to think that the McLachlin Court, which has always exhibited a balanced, pragmatic approach in tax cases, will accept the analysis of Chief Justice Nöel.

Decision:  On May 31, 2017 CRA issued a press release announcing that it will not seek leave to appeal the BP Canada Energy decision to the Supreme Court of Canada:

The Canada Revenue Agency (CRA) confirmed Monday that it will not seek leave to appeal to the Supreme Court of Canada the decision of the Federal Court of Appeal that granted BP Canada Energy Company’s (BP Canada) appeal of an order to release certain records to the CRA.

The CRA believes the ability to obtain all information required to administer and apply Canadian tax laws is central to the integrity of the tax regime, transparency and voluntary compliance. The Government remains firmly engaged in its commitment to obtaining all the information required to administer and apply Canadian tax laws.

The CRA considers the facts and circumstances unique to this case. Rather than appealing the Federal Court of Appeal’s decision, the CRA is addressing the issue on a broader scale by undertaking to update its audit procedures to clarify when and why information is to be requested from taxpayers. This will give the CRA better, and more clear procedures to access information. The CRA has also struck an interdepartmental Access Working Group mandated to support CRA’s ability to request information and to coordinate related litigation.

The Access Working Group will focus its attention on CRA information requirements, including information required as part of a taxpayer’s routine tax filing, as well as information sought by the CRA in activities related to the administration and enforcement of the legislation such as risk assessment, compliance reviews and collections. These efforts will bring greater focus to how the CRA seeks information and national coordination of related litigation.

In recent years, the CRA has taken significant action to detect, correct and deter non-compliance, but more can be done to find those who aggressively avoid or evade tax. In its last two Budgets, the Government of Canada has invested close to $1 billion to enhance the CRA’s continued efforts to crack down on tax evasion and combat tax avoidance and the government is on pace to raise assessments of over $13 billion this year.

Audits are one of the key tools to identify and deter non-compliance, and to conduct effective audits, the CRA needs to assess information from taxpayers. Getting the right information is critical to a review or audit that is fair and effective. CRA auditors only ask for information when appropriate, given the facts and circumstances of individual cases.

In my view this is very good news for the business community allowing them to continue to balance their obligations to their shareholders, securities regulators and CRA.