The Income Tax Act gives CRA expansive audit and investigative powers. One class of powers is the ability for CRA to require a taxpayer or a third party to provide certain information. If the party fails to produce those documents, CRA has the ability to seek a compliance order from the Federal Court of Canada to provide the requested information. Any breach of the compliance order would be considered contempt of court, which could lead to a fine or jail time.
Although CRA has these expansive audit and investigative powers, CRA does not have the ability to review documents that are protected by solicitor-client privilege. Solicitor-client privilege is the right a client has to not be compelled to disclose certain information that was conveyed to a lawyer when the client sought confidential legal advice. Therefore, one can establish solicitor-client privilege by simply discussing a matter with a lawyer and intending that the communication be considered confidential. It should be noted that the term “solicitor-client privilege” is defined in the Income Tax Act which modifies its meaning from its general common-law meaning.
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