Charter Protection Cannot be Taken for Granted


By: Adam Aptowitzer

It is almost trite to say that the Canada Revenue Agency is dedicated to the administration of the income tax system in this country. There are exceptions to this, of course, the most obvious being the regulation of charities. However, a recent amendment to the Income Tax Act giving the CRA new powers may have gone beyond adding ancillary duties and created a secondary mandate for the agency.

New subsection 241(9.5) requires the Agency to deliver evidence of certain criminal code offences gleaned in the course of its normal activities to the appropriate ‘police organization’.  The Act was amended to include this subsection in a July 12, 2013, technical amendments which received Royal Assent June 19, 2014. Prior to the passage of this amendment, the CRA only had certain limited discretion to pass on information to the RCMP where the Agency uncovered information relating to terrorism offences. Subsection 241(9.5) goes further and allows the agency to hand over information collected only if the CRA has ‘reasonable grounds to believe that the information will afford evidence of an act or omission in or outside of Canada that if committed in Canada would be”… any of the following offences:

  1. Section 3 of the Corruption of Foreign Public Officials Act;
  2. Criminal Code sections 119 to 121 (bribery and fraud on government);
  3. Criminal Code sections 123 to 125 (municipal corruption, selling or purchasing an office, influencing appointments ) and 426 (secret commissions) of the Criminal Code;
  4. Criminal Code section 465 (conspiracy to do any of the above);

3.Criminal Code sections 144 (prison breach), 264 (criminal harassment), 271 (sexual assault), 279 (kidnapping), 279.02 (material benefit from trafficking in persons), 281 (abduction of a person under 14), and 333.1 (motor vehicle theft), paragraphs 334(a) (theft over $5000), and 348(1) (breaking and entering a dwelling) and sections 349 (being unlawfully in a dwelling), 435 (arson for fraudulent purposes), and 462.31 (laundering the proceeds of crime);

  1. Terrorism offences or criminal organizations offences (defined terms in the Criminal Code) for which the maximum sentence is at least ten years; or
  2. An offence which has a minimum term of imprisonment, a maximum term of imprisonment of 14 years or life or for which the maximum term of imprisonment is ten years and that:
  3. a) resulted in bodily harm;
  4. b) involved the import, export, trafficking or production of drugs, or
  5. c) involved the use of a weapon;

The provision was a recommendation from the OECD that the tax authorities be more closely aligned with the evidence gathering mechanisms for the purpose of dealing with serious crime. And, we would point out, the CRA is not restricted from providing the evidence to police authorities in another country if the offences listed would be similar crimes in those countries. From a law and order perspective, it seems relatively obvious that if a government agency uncovers evidence of a crime that the government prosecutes based on that evidence. And indeed it seems somewhat artificial that the government should be able to investigate one’s records for tax purposes but not be able to act on it (except in certain specific circumstances) but there are a number of questions which must be asked of this provision.

The most obvious question is why only the crimes listed? Surely, once we allow the CRA to share evidence of a crime with the police authorities the principal of information sharing has been established. On what basis should there be a distinction between sharing information about arson for fraudulent purposes but not arson for vindictive purposes. That being said, the selection of offences may provide some insight into another obvious question, namely how likely is it that the CRA in auditing financial records may come upon evidence at all. However, at least some of the offences may have a financial motive or financial payoff (i.e. bribery, trafficking in persons, arson for fraudulent purposes, or money laundering) and it is this type of evidence which is the CRA is more likely to stumble upon.

On a deeper level, one must also question the sanction of providing evidence in this way to foreign police organizations that will prosecute under their own laws. It seems vaguely Orwellian to submit to a tax audit in Canada yet, as a result, be charged with a crime in Russia.

Perhaps more concerning is the implication of giving the CRA what is effectively a secondary mandate of investigating crimes. Given that there are no restrictions on who the CRA can audit and precious few on the information it can request – the CRA audit powers can be a valuable tool for the police. And there is nothing to prevent the CRA from auditing people (their normal course of activities) at the request of the police in order to gather more evidence.

In R. v. Jarvis[1] the Supreme Court stated that the CRA must inform the individual when the predominant purpose of an audit changes to the investigation of a crime. When the relationship between the CRA and the individual becomes adversarial (in a criminal context – all audits in our experience are adversarial) Charter rights attach themselves. Underpinning the Court’s decision in Jarvis though is the understanding that CRA only wears one hat at a time. Either it is conducting an audit for tax purposes or it is investigating for purposes of a criminal charge.

Subsection 241(9.5) requires the CRA to wear two hats concurrently. It specifically states that information is to be handed over to the police authorities when the CRA is acting in the normal course of its operations (i.e. a tax audit). This effectively gives the CRA a twin mandate and one has to wonder whether the decision in Jarvis can still hold or whether an individual’s charter rights must be expanded to any time the CRA is going to undertake a civilian audit!

Obviously, the application of the Charter to every audit would dramatically increase the costs and inefficiency of a tax audit but if the Crown can demand a Canadian hand over self-incriminating evidence under the guise of a tax audit then what is the point of the Charter in the first place? In some ways, the Guindon case that is currently under consideration by the Supreme Court may supply some guidance as arguments at the Supreme Court there dealt (in part) with the application of the Jarvis decision to third-party penalties. However, regardless of the decision in Guindon, one would imagine that the very first set of criminal charges laid as a result of information gleaned from a civilian audit will result in Charter arguments and perhaps an appeal to the Supreme Court.

Originally posted in “The Canadian Taxpayer”, Volume XXXVII, June 19, 2015 p.95-96

[1] [2002] 3 SCR 757