Redeemer Unredeemed

The Supreme Court of Canada today issued its decision in Redeemer Foundation v. Canada (National Revenue), 2008 SCC 46. Four members of a seven-person panel rejected the charity’s appeal from the decision of the Federal Court of Appeal.

The reasons given by the majority and minority are relatively clear and to the point, and so I will let them speak for themselves. The fact is that two important but competing values are at play in the interpretation of subsection 231.2(2) of the Income Tax Act (Canada) (the “Act”): the CRA needs to be able to conduct its audits without constant resort to the courts with requests for prior judicial authorizations; but, at the same time, Canadians have some privacy rights even in the income tax context. As Rothstein J. put it for the minority:

[55] In their reasons, my colleagues deal with the policy arguments surrounding the interpretation of the Act. They state in para. 25 that individuals have a very low expectation of privacy in their business and tax records and that it is indeed the case that s. 231.1 may reveal a great deal of information about audited taxpayers and unnamed persons. However, this case is one of statutory interpretation. I agree that individuals and entities may have a low expectation of privacy in their business and tax records, but in my view, it is still necessary to interpret the Act in a manner that gives coherent meaning to the relevant provisions as read together.

[56] The Chief Justice and LeBel J. say the CRA is entitled, without resort to s. 231.2(2), to request information that ought to be in the records of a taxpayer according to the Act. However, as stated, the relevant sections of the Act are extremely broad. Because the authority of the CRA under the Act is so broad, it should be required to follow the procedures provided in the Act rigorously. Section 231.2(2) was intended to provide some minimal restraint on those broad powers, and in my respectful view, in the course of an audit of a taxpayer, when the CRA forms the intention to obtain information pertaining to unnamed persons, judicial authorization under s. 231.2(2) is required. [Emphasis added.]

My concern is that, while taxpayers never had much privacy under the Act before the Supreme Court’s decision in Redeemer, they have even less now.