Tag: Voluntary Disclosure

Two online payment companies that operate within Canada have been ordered to turn over information about their account holders to the Canada Revenue Agency (CRA).

On November 10, 2017, PayPal received a Federal Court Order requiring them to disclose information relating to Canadian users that hold a business account and have received or sent a payment through their account between January 1, 2014 and November 10, 2017.    PayPal Canada says that it has more than 6.4 million active users, although those users with personal accounts are not affected by the CRA Order.

This Order follows a similar Order issued in 2016 to online payment processor Square, Inc., requiring it to disclose information to the CRA about its Canadian sellers.  Each company has been given specific instructions on what information they must turn over to the CRA including sales transaction data, names, social insurance numbers, and business numbers of affected sellers, bank account details, payroll data and other information.  In 2009, the CRA had obtained a similar Order against EBay Canada, targeting its “power sellers”.

Both inquiries are related to the ongoing enforcement efforts by the CRA with respect to tax evasion, which we have discussed previously.  The Globe and Mail reports that in an emailed statement, CRA spokesman Patrick Samson stated, “To better detect activity in the underground economy, the CRA has increased its use of information from third parties, especially in sectors where cash operations are frequent.  The CRA has considerably stepped up efforts to identify individuals and businesses that do not file tax returns and to settle their files”.

Affected individuals may face audit and may be required to pay additional tax, penalties and/or interest on any previously unreported income that is subsequently discovered in the course of the audit.  Affected individuals or businesses may wish to utilize the CRA’s Voluntary Disclosure Program to make a disclosure of such unreported income, before the commencement of any CRA enforcement action.  If a Voluntary Disclosure is made and accepted by the CRA, then the taxpayer can benefit from no penalties, reduced interest, and no criminal prosecution in connection with the disclosure.  There is a risk, however, the CRA will not accept that the disclosure is voluntary by virtue of the PayPal Order and as such, the benefits available under this Program will be denied to the taxpayer.

If you are concerned that you may be impacted by the PayPal Order, if you wish to make a Voluntary Disclosure to the CRA, or if you have questions on any other tax matter, please contact any member of our Tax Group.

“This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.”