Taxpayers must comply with Canada Revenue Agency demands for information

Overview — Case One

Two cases the Office investigated last year illustrate the Canada Revenue Agency's (CRA's) authority to require taxpayers to provide very private information.

In the first case, during a routine audit of an Ontario man's 2001 tax return, the CRA asked him to provide a copy of the separation agreement with his former spouse to substantiate the amounts he claimed as child support payments. Although he agreed to provide those portions of the separation agreement that dealt specifically with the payments, he objected to the CRA's insistence that it be given a complete unsevered copy.

Overview — Case Two

In the second case, a Quebec woman complained about the detailed questions posed by a CRA officer attempting to collect an outstanding tax debt. She had been unable to pay the full amount of her tax debt within a reasonable period and requested an extended payment arrangement.

Actions taken by the OPC

Following our investigation of the first case, we explained to the complainant that the CRA had the legal authority under the Income Tax Act to demand this information in order to satisfy itself that there were no other clauses in the agreement about child support that might have an impact on his tax situation.

In the second case, we determined that the CRA tries in such cases to reach a mutually acceptable payment schedule with tax debtors based on their financial situation. This requires the individual to make full disclosure of his/her income and his/her monthly expenses as well as assets and liabilities. If an acceptable arrangement is not reached, the CRA may take legal action to recover the debt, including seizing and selling the debtor's assets.

Outcome of OPC Actions

In the first case, in an effort to limit the privacy intrusion, the CRA agreed to keep for its records only those portions of the agreement pertinent to the man's child support payments that it needed to determine his entitlements. The man was pleased with the compromise, and the case was closed as "settled during the course of investigation."

In the case at hand, the CRA officer questioned the woman's expenses for costly prescription drugs to deal with her medical condition, which she claimed precluded her from making significant advances in reducing the debt. The officer asked the woman to obtain a note from her treating physician confirming her condition, which would be factored into the CRA's assessment of her monthly expenses. The complainant accepted our explanations about the CRA's rationale for such an unusual request and the implications should she not comply. The file was closed as "settled during the course of investigation."