Pacific Network Services Ltd. v. MNR, 2002 DTC 7585 (FCTD)

Upon receiving a request for information relating to the taxpayer including a list of shareholders and their percentage shareholdings, CCRA was required to obtain the information by the administrative measures available to it (rather than being only obligated to exchange information already gathered by it), with the result that a requirement for such information issued to the taxpayer pursuant to s. 231.2(1) was valid. In the absence of any evidence that information relating to the tax returns or liability of unidentified Canadian taxpayers was being requested, there was no requirement to comply with the procedure in s. 231.2(3).

"The applicants' assertion that Article 26 of the Canada-France Income Tax Convention should receive a strict and literal interpretation should be rejected. The basis for the principle that bilateral tax convention should be given a liberal interpretation in light of their object and purpose, rather than a more strict and literal interpretation that may be applicable with respect to domestic tax legislation is twofold: first, it recognizes that a tax convention is an international agreement between two states rather than a purely domestic legislation; second, it recognizes that tax conventions are not drafted in the precise and detailed form in which domestic legislation is drafted but in a more general language ..."

Although Article 26 of the Canada-France Income Tax Convention did not specifically provide (as did paragraph 2 of Article 27 of the Canada-U.S. Income Tax Convention) that the requested state was required to endeavour to obtain the requested information in the same way as if its own taxation was involved, it nonetheless was clear, in light of the wording of Article 26 and in light of the Commentary to the OECD Model Convention that the requested state was required not only to exchange information already gathered by it, but also to obtain information by use of administrative measures, such as issuing a requirement under s. 231.2(1) of the Act.