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New CRA Policy on Accessing Taxpayer Documents - Taxpayers and Accountants Beware
In early June 2010, the Canada Revenue Agency ("CRA") released the "Income Tax Act" setting out its documentation retention policy requiring taxpayers and accountants to closely maintain books and records. This administrative policy gives the CRA virtually unrestricted access to taxpayer's documents and records so they may ascertain taxes payable, and amounts to be withheld, collected and deducted. The only protection for taxpayers that exists under this new policy is the solicitor-client or litigation privilege. Taxand Canada examines the new policy and concerns protecting taxpayer documents going forward.
There are several concerns about the effects of the new Income Tax Act, specifically, that CRA's ability to gain full access to accountants and auditor's work papers may cause taxpayers to refrain from seeking advice from the Revenue agency. Similarly, work accrual papers are not necessary to ascertain taxes to be paid thus agents reviewing work papers may be unnecessarily influenced by the comments and evaluations on the papers.
Taxpayers and their advisors need to be prepared to deal with the CRA's new policy on access to taxpayer documents. The most effective way to ensure that confidential tax advice is protected from disclosure to the CRA is to obtain that advice from or with the aid of legal counsel, so that it is privileged.
Your Taxand contact for further queries is:
T. +416 862 3630