Can An Auditor Compel A Taxpayer To Create Documents?

In the Minister of National Revenue v. Amdocs Canadian Managed Services Inc. 2015 FC 1234, it was contemplated whether or not the Minister of National Revenue (Minister) could issue a compliance order to a taxpayer, compelling the taxpayer to create and provide information pursuant to section 231.7 of the Income Tax Act (ITA) when the taxpayer had proven that it did not possess such information.

Facts

Amdocs Canadian Managed Services Inc. (ACMS) was a Canadian taxpayer, incorporated under the Canada Business Corporations Act, and was a member of the Amdocs Group, a multinational corporation with establishments across the world.

In 2013, the Canadian Revenue Agency (CRA) initiated a transfer-pricing audit on ACMS. In light of this audit, the CRA issued numerous queries, of which three represented grounds for a compliance order. These three queries, which became the subject of the dispute in question, were as follows:

Query 1: request for a detailed organizational chart for each of the Amdocs Group entities involved in the intercompany transactions with ACMS; Query 2: request for financial statements and detailed working papers containing the details of cost pools involving ACMS; and Query 3: request for the filing of financial statements for Amdocs Inc. and detailed working papers to support back office charges. Federal Court Decision

The Minister brought these queries before the Federal Court as the Minister deemed the documents provided by ACMS were insufficient. However, as evidenced by several correspondences between ACMS and the Minister, ACMS exercised significant efforts and complied to the best of their abilities with the CRA's requests for information, by handing over the documents they had on hand in response to the queries.

The Court stated that the Minister has the entire prerogative to determine the scope of the...