Date: 20171110
Docket: T-564-17
BETWEEN:
MINISTER OF NATIONAL REVENUE, applicant,
and
PAYPAL CANADA CO., respondent.
COURT/JUDGE/DATE:
Federal Court, Gascon J., November 10, 2017, (Docket: T-564-17)
ORDER
The Honourable Mr. Justice Gascon:—
UPON the Application made by the Minister of National Revenue [Minister] under subsection 231.2(3) of the Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA] and subsection 289(3) of the Excise Tax Act, RSC 1985, c E-15 [ETA] for judicial authorization to impose on PayPal Canada Co [PayPal] a requirement to provide information and documents relating to certain unnamed persons [Unnamed Persons Requirement];
AND UPON considering that PayPal has filed a Notice of Appearance in the present matter;
AND UPON determining that, in the circumstances of this case and given PayPal's consent, it is appropriate to dispose of the Minister's Application by way of a motion in writing, without personal appearance, pursuant to Rule 369 of the Federal Courts Rules, SOR/98-106 [Motion];
AND UPON reviewing the Minister's Notice of Motion supported by the Information on Oath of Mr. Éric Paquet [Information on Oath], the written submissions made the Minister, PayPal's Response to the Minister's Motion, and the Minister's Reply;
AND UPON noting that, in order for the Minister to be successful on her Motion and for the Court to authorize the imposition of the Unnamed Persons Requirement, the Court needs to be satisfied that 1) the Minister meets the conditions of paragraphs 231.2(3)(a) and (b) of the ITA and paragraphs 289(3)(a) and (b) of the ETA for the issuance of the Unnamed Persons Requirement; and 2) it is appropriate, in the circumstances, to exercise its discretion in favour of the Minister and to grant the authorization sought (Canada (National Revenue) v RBC Life Insurance Company, 2013 FCA 50 [RBC Life ] at para 23; Canada (National Revenue) v Derakhshani, 2009 FCA 190 [Derakhshani ] at paras 17-20);
AND UPON being satisfied that the conditions of paragraphs 231.2(3)(a) and (b) of the ITA and paragraphs 289(3)(a) and (b) of the ETA for the issuance of the Unnamed Persons Requirement have been satisfied in that the Information on Oath establishes that:
a) The persons or group of persons are ascertainable, as the unnamed persons are corporations and individuals holding a business account with PayPal [Business Account] that have used PayPal's online payment platform in the course of their commercial activities during the period covering the calendar years 2014 to the date of service of the Unnamed Persons Requirement [Unnamed Persons]; and
b) The Unnamed Persons Requirement is made to verify compliance by these Unnamed Persons with their duties and obligations under the ITA and the ETA;
AND UPON determining that, for the Court to grant the authorization sought, the Minister has to demonstrate that the Unnamed Persons Requirement is needed to verify compliance with the ITA and ETA by the Unnamed Persons, but that the Minister is not required to demonstrate that the Unnamed Persons are already under investigation or audit for failure to comply with their duties and obligations under the ITA or the ETA, or that a “genuine and serious inquiry” exists (eBay Canada Ltd v Canada (National Revenue), 2008 FCA 348 [eBay ] at para 55; Canada (National Revenue) v Greater Montréal Real Estate Board, 2007 FCA 346 [GMREB ]at paras 21, 48);
AND UPON noting that the Application was brought by the Minister in furtherance of an audit undertaken to combat the underground economy, among other purposes;
AND UPON being satisfied, based on the Information on Oath, that 1) the audit initiated by the Minister in January 2017 was for a valid purpose, namely to verify compliance by the Unnamed Persons with their duties and obligations set out in the ITA and ETA; 2) the information sought in the Unnamed Persons Requirement is required in the context of verification activities undertaken in good faith by the Minister to combat the underground economy; 3) the information to be obtained from PayPal will be used by the Minister for the purposes of administering and enforcing the ITA and ETA, and to determine whether the Unnamed Persons have filed their required tax returns; and 4) the Unnamed Persons Requirement is necessary for the Minister to verify compliance with the law (RBC Life at paras 43-46; Derakhshani at para 48; eBay at paras 54-69);
AND UPON being satisfied that the Information on Oath provides the Court with the detailed evidence and facts required to confirm that all the conditions of paragraphs 231.2(3)(a) and (b) of the ITA and paragraphs 289(3)(a) and (b) of the ETA for the issuance of the Unnamed Persons Requirement have been met;
AND UPON having considered the concerns expressed by PayPal with respect to the proposed Unnamed Persons Requirement, namely that the authorization sought by the Minister would interfere with the privacy of PayPal's clients and that the Unnamed Persons Requirement is overly broad and unreasonable given the absence of any threshold amount for each transaction targeted by the requirement;
AND UPON not being persuaded that PayPal's confidentiality policy towards its clients or the absence of a threshold amount for each transaction of its clients constitute sufficient grounds to oppose the issuance of the Unnamed Persons Requirement;
AND UPON observing that the expectation of privacy with respect to business records such as those targeted by the Unnamed Persons Requirement is very low (Redeemer Foundation v Canada (National Revenue), 2008 SCC 46 at paras 25 and 55; eBay at para 67), and that intrusion into the privacy of third parties can be authorized if the requirements of paragraphs 231.2(3)(a) and (b) of the ITA and paragraphs 289(3)(a) and (b) of the ETA are met (MNR v Sand Exploration Ltd, [1995] 3 FC 44 (FCTD) at para 10);
AND UPON being satisfied that the Unnamed Persons Requirement relates to an ascertainable group of persons and is not overbroad, as it is limited to corporations and individuals holding a Business Account with PayPal and seeks transactions information aggregated on a yearly basis, for a period of four years;
AND UPON being satisfied that, in light of the uncontradicted evidence provided in the Information on Oath, the lack of a threshold for the transaction amounts in the Unnamed Persons Requirement is justified and necessary to enable the Minister to take action in order to ensure compliance with the requirements of the ITA and the ETA;
AND UPON being satisfied that the information sought through the Unnamed Persons Requirement is relevant to the Minister's audit in this case;
AND UPON noting that PayPal has not filed any evidence to support a claim that the Unnamed Persons Requirement is overbroad or reaches a disproportionate number of persons or transactions;
AND UPON considering that PayPal has indicated to the Minister that the information sought in the Unnamed Persons Requirement is available in PayPal's computer systems, and that PayPal has not submitted any evidence showing that it is not feasible to provide the information or that it is unable to comply with the proposed Unnamed Persons Requirement;
AND UPON being satisfied that, in the circumstances of this case and in light of the fact that the requirements of the ITA and the ETA are satisfied, it is appropriate and in the interests of justice to exercise my discretion in favour of the Minister and to authorize the Minister to impose the Unnamed Persons Requirement on PayPal;
THE COURT ORDERS AS FOLLOWS:
[1] The Minister's Motion allowing the Minister's Application is granted.
[2] The Minister is authorized to impose on PayPal the Unnamed Persons Requirement found in the Annex to this Order.
[3] Each party shall bear their own costs.
"Denis Gascon"
Judge
ANNEX
This requirement to produce information and documents relating to unnamed persons (“Unnamed Persons Requirement”) is served on you pursuant to an Order issued by the Federal Court on November 9, 2017, under subsection 231.2(3) of the Income Tax Act, RSC 1985, c 1 (5th Supp) and subsection 289(3) of the Excise Tax Act, RSC 1985, c E-15, for purposes of administering and enforcing these statutes.
The Canada Revenue Agency (“CRA”) is seeking information and documents concerning transactions made through your online payment platform from January 1, 2014, to the date of service of this Unnamed Persons Requirement (“Relevant Period”) by Business Account holders who gave a Canadian address.
You are hereby required to provide within forty-five (45) days from service of this Unnamed Persons Requirement in Excel format, or in another format by agreement with the CRA, the required information and documents listed below, concerning transactions made by your Business Account holders in the Relevant Period, namely:
I. Account holder information:
(a) the full name of every corporation or individual holding a Business Account in the Relevant Period that gave you a Canadian address;
(b) the date of birth of each individual holding a Business Account;
(c) the business name, if applicable;
(d) the telephone number (s) of the corporation or individual holding the account, if available;
(e) the full address (es) of the corporation or individual holding the account
(f) the email address of the corporation or individual holding the account
(g) the Social lnsurance Number and/or Business Number of the corporation or individual holding the account, if available;
II. Information on transactions made by the account holder:
(a) the total number of credit transactions (payments received) for each of the relevant years;
(b) the total value of the credit transactions (payments received) for each ofthe relevant years, in Canadian dollars;
(c) the total number of debit transactions (payments sent) for each of the relevant years;
(d) the total value of the debit transactions (payments sent) for each of the relevant years, in Canadian dollars;
III. An appendix giving an explanation, and/or definition for each abbreviation or symbol that may appear in the information provided, if applicable.
Your attention is drawn to subsections 231.7(1), 238(1) and (2) of the Income Tax Act and subsection 289.1(1) of the Excise Tax Act. Should you fail to comply with this Unnamed Persons Requirement, contempt proceedings could be initiated against you and criminal sanctions could ensue.
To comply with this Unnamed Persons Requirement, you must provide the required information and documents on a USB key or by any other means agreed between PayPal and CRA to be sent to the Non-Filer Section of the Non-Filer and Non-Resident Division, Eastern Québec Tax Services Office, Canada Revenue Agency, located at 2575 Ste-Anne Boulevard, Québec, Québec G1J 1Y5.
Subsequent requests for information and documents may be sent to you in order for CRA to complete its audit.
For further information, please contact Mr. Éric Paquet at 418-634-2885 or Bernard Cailloux at 418-634-2719.
Yours sincerely,
Director
Eastern Québec Tax Services Office
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