Levett – Federal Court of Appeal finds that taxpayer stonewalling satisfied the Swiss exchange-of-information requirement that CRA had “pursued all reasonable [domestic] means available”

Resident individuals and a corporation owned by one of them, whose disclosure that they had no foreign assets was doubted by CRA, brought an application to have CRA requests to the Swiss federal tax administration for information pursuant to Art. 25 of the Canada-Swiss Treaty declared invalid - principally on the ground that CRA had violated the requirement under Art. 25, para 1 of the Canada-Switzerland Treaty that “an exchange of information will only be requested once the requesting Contracting State has pursued all reasonable means available under its internal taxation procedure to obtain the information.”

Before confirming the decision below to dismiss the application, LeBlanc JA set the stage by stating that “[t]he true intentions of the parties, as they emerge from extrinsic materials when it comes to Article 25 (namely to promote the exchange of information to the maximum extent possible with a view, notably, of preventing tax evasion and avoidance), are reflected … in the actual language of that provision, coupled with that of the Interpretative Protocol.”

He then found that “it was reasonably open to the CRA … to proceed with the … RFIs at the time it did in view of the fact that [the taxpayers] had, to that point, denied, on more than one occasion, having any such [foreign] assets, revenues or activities in the taxation years at issue.”

Regarding the taxpayers’ submission that the specific listing in the Protocol, of types of information that could be requested, established a “ceiling” for such requests, LeBlanc JA stated that “paragraph 2(b) of the Interpretative Protocol establishes a threshold, not an upper limit” and that “on a reasonableness analysis … there is no issue with the fact that the CRA provided the Swiss Authorities with more information—essentially background information—than what was minimally required by paragraph 2(b) of the Interpretative Protocol.”

Neal Armstrong. Summary of Levett v. Canada (Attorney General), 2022 FCA 117 under Treaties –Income Tax Conventions - Art. 27.