Christen v. Canada (Revenue Agency), 2021 FC 1440, aff’d 2023 CAF 101, is of interest on a number of levels, perhaps especially for lawyers who practice administrative law. The case also yields some interesting insight into the CRA’s approach to its own voluntary disclosure program (VDP) and how the CRA’s approach can go wrong.
The taxpayer in Christen held assets in Switzerland that she had not disclosed to the CRA. It appears the CRA found out about the assets because French customs officials found Swiss bank account statements in her car as she attempted to cross the border. Apparently, the French authorities passed this information along to the CRA, which began an audit of the taxpayer’s offshore affairs in the fall of 2014, unbeknownst to the taxpayer.
In May, 2015, the taxpayer, still ignorant of the CRA audit, engaged a lawyer to assist her with making a voluntary disclosure. The taxpayer did not make the disclosure right away, however, because she found it difficult to obtain some documentation from Switzerland. In September, 2015, CRA audit sent a letter to the taxpayer informing her she was under audit. About a month later, the taxpayer submitted a voluntary disclosure, which the CRA rejected, in three different decisions, on the basis that the disclosure was not truly voluntary.
The CRA ended up “withdrawing” the third decision (Is that a thing?) and admitting that the first two decisions were flawed because they lacked transparency and impartiality. The taxpayer was able to demonstrate the flaws in the CRA process leading to the decisions using CRA internal communications including email messages. The communications showed CRA personnel sending messages that appeared to be attempts to improperly influence the relevant decision-makers. The CRA did not even attempt to argue that the decisions should stand.
The taxpayer, however, applied to the Federal Court to ask it to order the CRA to treat the disclosure as voluntary, essentially on the basis that the CRA could not be trusted to treat the taxpayer fairly. The Court rejected the application but ordered the CRA to undertake the review on an expedited basis and in a manner that would guarantee its impartiality.
