Can The CRA Force A Taxpayer To Provide Any Document During A GST/HST Audit?

We regularly get asked whether the Canada Revenue Agency ("CRA") can ask for particular documents during the course of a goods and services tax ("GST") / harmonized sales tax ("HST") audit or during a GST/HST appeal. Usually, the question is in the form of a statement "they are not allowed to ask for that". Our answer to the question "Can the CRA force me to give them this document" depends upon the document that is being requested and the relevance of the document to the issue. That being said, in most cases, the document has to be produced and it is not worth fighting with the CRA and turning a routine audit into an acrimonious audit.

There are many cases in which the Court, when asked to compel a taxpayer to give the CRA a document, does so. Recently, the Federal Court of Canada issued a decision, Canada (National Revenue) v. Atlas Tube Canada ULC, 2018 FC 1086 (November 11, 2018) which addressed the issue of production of a requested document. In this case, the Minister of National Revenue (the Minister who oversees the CRA) brought an application to compel Atlas Tube Canada ULC ("Atlas") to produce a draft due diligence report that had been prepared by Ernst & Young. The draft due diligence report described certain tax attributes of related parties and ability to take certain income tax related matters. The CRA had requested the draft report during the course of an income tax audit. Atlas refused to provide the draft report on the basis that (1) it was not relevant, (2) it was subject to solicitor-client privilege, and (3) it was prejudicial.

After considering the evidence and the law, the Federal Court ordered Atlas to produce the draft report. This would allow the CRA auditor to see what changed from the draft report to the final report.

The issue for the Federal Court was whether Atlas was required under section 231.1 of the Income Tax Act to provide the Minister with access to the Report following the Minister's requests therefor. A similar provision, section 288, is contained in the Excise Tax Act. Subsection 288(1) of the Excise Tax Act provides as follows:

"An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Part, inspect, audit or examine the documents, property or processes of a person that may be relevant in determining the obligations of that or any other person under this Part or the amount of any rebate or refund to which that or any other person is...