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Published: March 4, 2020

Last Updated: March 17, 2020

Introduction: CRA Powers to Acquire Information About Taxpayers and Third Parties Known to the Taxpayer

The CRA has general powers to require persons to provide information related to a tax audit however these general powers are limited, such that, the CRA cannot require persons to provide third party documents without judicial authorization. A Canadian tax lawyer can help protect yourself from the CRA request for third party information by arguing against judicial authorization. In this case, the CRA is seeking information from the taxpayer about their clients who are residential and commercial contractors. The taxpayer unsuccessfully argued against the judicial authorization requirement to provide information during a tax audit to third parties. The taxpayer, Roofmart, sought to prevent the CRA from requiring it to provide information related to third parties, specifically its contractor customers. The CRA applied for judicial authorization under section 231.2(3) of the Income Tax Act, to require the taxpayer to provide information and documents relating to contractors who had an account with the taxpayer. The CRA sought this information to verify whether the contractors, who purchased roofing and building supplies from Roofmart, had complied with their duties and obligations under the Income Tax Act (“ITA”) and the Excise Tax Act (“ETA”). The case demonstrates the importance of seeking proper legal advice from an experienced Canadian tax lawyer upon receiving a requirement to provide third party documents to the CRA.

Legislation Empowering the CRA to Require Taxpayers to Provide Information

Subsection 231.2(1) provides general powers to the CRA to require a person to provide information related to a tax audit done in good faith. These general powers are limited by subsection 231.2(2), such that, the CRA cannot require the person to provide third party documents, that is, documents or information relating to one or more unnamed persons. In the case of Roofmart, the judicial authorization under section 231.2(3) authorizes the CRA to require third party documents if the judge is satisfied the person or group is ascertainable and the requirement is made to verify compliance of the person, in this case the contractor clients of the taxpayer, with any duty or obligation under the Act.

Court Ruled in Favour of CRA – The Taxpayer is Required to Provide Third Party Documents

In the case of MNR v Greater Montréal Real Estate Board (“GMREB”), 2007 FCA 346, the court interpreted the duty or obligation under the Act to include the situation where the information is needed for a tax audit conducted in good faith. In this case, the taxpayer was undergoing a tax audit project being conducted in good faith which is included under the umbrella of a good faith tax audit.

The application by the CRA was allowed because the unnamed persons were an ascertainable group and the CRA was conducting a good faith tax audit. The judge accepted the group was ascertainable because the threshold of billed amount was sufficient to establish a target group, and the taxpayer maintained records for its customers and their identities were known to the taxpayer. The judge also accepted that the CRA that it had issued the requirement to verify the target group’s compliance with the ITA and the ETA. A good faith tax audit can include a “tax audit project,” as opposed to a tax audit of particular individuals already underway. For the above reasons, the judge allowed the application for judicial authorization and required the taxpayer to provide the third party documents to the CRA.

Tax Tips: Protection from CRA Requests for Documentation

While the taxpayer was unsuccessful, this case is useful as it demonstrates the third party information powers of CRA and why taxpayers should seek tax law advice from an experienced Canadian tax lawyer before advancing any case against CRA. Taxpayers should not represent themselves or else they may likely become tripped up by the complex rules and procedures in a tax law case.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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