Canada Revenue Agency Obtains Broad Court Order for Years of PayPal Data

The Canada Revenue Agency has obtained a federal court order requiring PayPal to hand over years of transactional information from all business accounts in Canada. The scope of the order is incredibly broad, covering any business account holder who sent or received a payment over a nearly four year period from January 1, 2014 to November 10, 2017. The information to be disclosed includes:

  • The full name of every individual or corporation holding a business account that has a Canadian address;
  • The date of birth of each individual holding a business account;
  • The business name, if applicable;
  • The telephone number(s) of the corporation or individual holding the business account, if available;
  • The full address(es) of the corporation or individual holding the business account;
  • The email address of the corporation or individual holding the business account;
  • The Social Insurance Number and/or Business Number of the corporation or individual holding the Business Account, if available.
  • The total number and value of received transactions for each calendar year between January 1, 2014 and November 10, 2017.
  • The total number and value of sent transactions for each calendar year between January 1, 2014 and November 10, 2017.

PayPal has indicated that it must comply with the order within 45 days from November 10th (the date the order was issued). The order will presumably allow CRA to conduct audits of thousands of small businesses that use PayPal for transactions. The issue has arisen in other jurisdictions. For example, the UK has been working on legislation that would allow for the collection of “bulk” information from Internet companies.

The Canadian order indicates that CRA intends to use the information to “combat the underground economy” and that there is no obligation to demonstrate that there is an existing investigation or audit. In fact, there is not even the need to demonstrate that “a genuine and serious inquiry” exists.  The order also reveals that PayPal objected to the breadth of the order.  It states that the court:

“considered the concerns expressed by PayPal with respect to the proposed Unnamed Persons Requirement, namely that the authorization sought by the Minister would interfere with the privacy of PayPal’s clients and that the Unnamed Persons Requirement is overly broad and unreasonable given the absence of any threshold amount for each transaction targeted by the requirement;”

It rejected those arguments, observing that the expectation of privacy with respect to business records is very low.  It also concluded that PayPal had the relevant information and that it did not file evidence that the order was overbroad or reached a disproportionate number of persons.

Ensuring that tax laws are respected is obviously important, yet many of PayPal’s business account records are presumably not similar to those typically found in larger businesses. Indeed, the business account may be often be closer to individual, identifiable records that might carry a higher level of expectation of privacy. PayPal apparently fought against the order, but having lost, will now be required to hand over a massive trove of financial data dating back years to Canada’s tax authorities without a threshold or other limitations.

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  1. Speaking of the CRA and audits and tax evasion, will any of these “small businesses” get a “secret amnesty deal” like KPMG tax evaders did?

    Once again, the 1% get the spoils while the rest of us just get fucked over.

    • I hear ya Brian. Chances are they wont be connected the way those people were and as a result will bear the full brunt of CRA

    • I also hear you, Brian. The KPMG deal reeked to high heaven. This was full on tax evasion to even a casual observer. Yet, both KPMG and its clients got off with nothing more than not-so-severe scoldings. Makes you wonder if you’re the only one honestly paying your taxes.

  2. mike duhamel says:

    hi Brian great post!

    I received this letter as well…

    basicalky I attempted to start an internet traffic company where I purchased internet traffic and resold it to others (i was a middle man)

    2015 i paid a few thousand dollars to get set up buying traffic to fill my auto responder.
    in 2016 i managed to withdraw a total of 9k into my bank account throughout the year, and my fees to operate in 2015 and 2016 were 3k so total 6k revenue.

    in 2017 i shut down by march because it want profitable and withdrew $800 into my bank account, and paid $600 to operate so i profited $200 that year.

    should i be concerned?

    • Declare the income under the cra voluntary disclosure program and you should only have to pay interest on the profit. If they approach you first then there could be penalties applied in the undeclared income.

      • michel duhamel says:

        Thanks Ron, I spoke with my accountant and he said because the amount is so low, CRA will just send me a letter and from there we can dispute the amount with what I paid into the business. Only owing 6k from that one year he thinks is pretty insignificant and easy to seal with.

        • Have another discussion with your accountant… CRA may initially assess at the Gross Income level… and you may find yourself spending time and money defending the expenses…it’s a strategy I’ve seen used for income assumed to be unreported…

        • Having been a collections investigator for over 30 years for the CRA, I’d say your accountant’s advice was solid. Generally CRA won’t raise an assessment if the amount owing would be less than $1K

        • Do you still have your Paypal account or did you close it in March?

    • Mike, do you still have your Paypal account or did you close it in March?

  3. CRA needs to deal with processing the T1 adjustments of average Canadian citizens that are owed a tax refund! 8 1/2 month service standard to process these refunds is an abomination. If we “ the people “ owed them money we’d be garnished already. Not fair CRA.

    • Only took 3 years sending and resending to get the Disability tax credit. Now waiting since July for the tax adjustment.

      • Just watch when they do the adjustment, they only go back 8.5 years and not ten. I filed mine in 2016 and they should have gone back to the beginning of 2006 with their payments, because that would have been 10 years. In stead they went back to July 2007, claiming that they were going off the base year of 2006. When you do receive your payment could you do me a favor and let me know if you got the full ten years back pay or I’d they do the same as they did to me? I cam give you my email or phone number even.

        Thank kindly

    • Only took 3 years sending and resending information and reapplying to get the Disability tax credit. Now waiting since July for refund

  4. As a “data guy” I’ll point out an important omission from your piece, Michael. The last two bullet points, beginning with “The total number and value”, lack the preface included by Paypal in their post. Their preface says CRA demand the totals for _each_ business account.

  5. Is every small business guilty, until proven innocent of hiding from the taxman?

    • Under CRA rules, and their interpretation of the Income Tax Act, yes you are guilty, till you prove you are innocent. I was audited and was charged tax and fines on what they stated was undeclared income. This so called income was from selling our house furniture and belongings when we were moving. Most were sold through yard and garage sale. Because receipts are not issued for those types of personal sales, the CRA called them undeclared income.

      • Normally used furniture and belongings would sell for less than their original price so shouldn’t this have been a loss not an income?

        • Exactly. Yet if you deposit any monies received from sale of personal belongings, or CRA finds it about such monies, they will tax it as undeclared income. Unless you provide receipts proving it wasn’t income. Which is the most retarded thing they came up with. How many garage sales have any of us been too, where seller issues us receipts. Besides that. If I issued receipts, that would make it appear that I am indeed selling as a business (ie: junk dealer), and not selling personal belongings. Unfortunately, the CRA don’t care, you are guilty until you prove innocence.

  6. Problem is If you set up a PayPal business account it doesn’t distinguish when you use it for personal rather than business reasons.

    • The CRA doesn’t care about that. They will go after both business or personal and declare them the same.

  7. Drive on the roads? Ever go see a doctor? Need surgery, have a baby? How about your kids… they go to school? There is a tax system for a reason.
    Why should some Canadians pay and others not. Hiding income through PayPal to avoid paying for the blessings we have in Canada is stealing from all Canadians far as im concerned. Next time you need or want a service funded by canadian taxpayers perhaps you may want want to ask yourself who’s paying for it.

    • michel duhamel says:

      I totally agree with you. we all have to support our Country and paying our fair share of taxes is what keeps us going. In my situation, I never gave it much thought because I figured the deductions cancelled itself out. Either way, looking forward to getting this solved.

    • Welfare, immigration increases, other poor Gov’t spending, you name it. Even the “holy” tax payers are being ripped off through bad Gov’t money management, and you turn a blind eye. Its time we spineless Canucks get our shit together and FIGHT so that our tax dollars stop paying for these governmental assholes to bring in so many immigrants on our dime. Yeah, that right, they try so hard to beat down and police our thoughts and many have caved. Maybe people would consider working less under the table. Everyone is guilty of some sort of tax evasion somewhere in their lives. I was reading that a very high percentage go on welfare once their Immigration status and funding is taken away So who the fuck is ripping off who? I think its safe to say that if you believe in how the government wastes the tax payers dollars, then the ones who back up those leftist theories need to give their heads a good shake or Kick!

    • I don’t think income tax is a good deal for the rich. I think the average canadian receives say 50k to 100k in annual government services, but the poor pay 5k, the average middle class pays $50k and the rich pay $200k to $500k. Doesn’t look like a good deal. At some point makes sense to leave the country and just get private health care. I was recently offered a contract for $50k from a company in Australia. I said no. I’ve lost the will to work paying 50% tax. Contract went to some guy in the UK. Canada is out $25k in incremental tax revenue and now I work 30-40 hours per week.

      • I think your numbers are off by about a factor of 10. Per capita spending is about 8k per person at the federal level, and about the same at the provincial level. Per capita personal taxes paid are about 10k federally and 5k provincially. Middle class person is not paying 50k in taxes. Median income in Canada is only 70k per family, or about 30k for an individual. If you’re paying 50k in taxes, you aren’t middle class; you’re top 1% of incomes for sure, maybe top 0.1%.

        I doubt that there is a single person anywhere in the country that pays 50% of their income in taxes.

  8. So we pay terrorists millions because they are supposedly innocent but the small Canadian business owner gets screwed and treated like crap. They harass and bully their own countrymen. Time to rise up and take back our country

    • You know what? Its going to happen at some point. freaken tax the shit out of everything we do or buy. Nothing gets by. For those of you that think the the HST will stop don’t kid yourself. We pay 13 percent now and you wait to see what it will get to be in 10-20 years from now. The farmers are one of the BIGGEST abusers selling crops, hay and firewood all under the table. We were way better off with the Harper Gov’t rather than this aholio ass clown with flying his rainbow flag on the hill. We live in a seriously demented world and it our own spineless attitudes that have created it. We follow Gov’t ruling more than anyone ever followed jesus christ.

  9. You can’t help wonder if this will push more people to use crypto currencies like bit coin instead of paypal?

  10. Eileen McRae says:

    When a customer purchases an item and pays through Pay Pal, is there not a reasonable expectation of privacy? I would be afraid that a lot of Canadians who read about this will stop purchasing on-line using Pay Pal. This will seriously affect the Canadian economy.
    This government is determined that by “hook or by crook” it is targeting small businesses only because the government “thinks” that they are not paying their fair share of taxes! What about going after the millionaires and billionaires who use off-shore accounts to shelter their companies and thus avoid paying taxes?

    When small businesses close up shop, who will employ the thousands of Canadians that small businesses employ? Now, don’t get me wrong! I believe that everyone needs to pay taxes that are due, starting with the Prime Minister, himself, followed by Finance Minister Morneau, etc. The rot starts from the top down, in my opinion.

    • I can’t imagine that the expectation of privacy for using PayPal ought to be any different from the expectation of privacy for using a credit card.

  11. This is a huge privacy breach for the average citizen. How they can get away with collecting a list of my purchases, from food to books to computer parts, is beyond me. I should not have to reveal all my purchases.

    I use Paypal a lot. Probably most PP accounts are set up as business accounts because it’s basically the default and anybody, including old age pensioners like me, would have it set up that way. The information Paypal has on me is an email address and a shipping address. Period. Things like full name would have to be gotten from further investigation, like going to the bank that holds the linked account. I must say, I don’t understand the list of information that CRA is demanding. I doubt things like full name and date of birth would be linked to most accounts. I mean, “date of birth”, that has got to be the most out of touch and ridiculous request. Perhaps the CRA is out of their depth here and are just being bullies for the sake of making a few bucks and perhaps hurting a few people just to keep us on our toes.

  12. I’m surprised this possible loophole has remained open this long. Not defending the CRA’s actions but if I am an online store or online service and am based in Canada and have customers subscribing to something on my site from overseas, I can invoice them through Paypal, charge them through Paypal then I can have the money sit in my paypal account and then use it to buy goods and services on the outward end. There is essentially no funds coming into a Canadian bank account and nothing being invoice out or in which I would need to file with my taxes. If I collect $5000 from a customer in Australia and they pay by paypall and then i use the balance to buy something personal for $5000, then surely none of that up until now would even be flagged by the CRA nor would have to go on my business taxes as revenue and expense?

    • Why wouldn’t making a sale and being paid via PayPal have to go on your business tax filing as income any less than if you’d have made a cash sale? If you are being honest and law abiding and all of that of course.

      I suppose if you are not going to report cash sales, then you are not going to report PayPal or any other *assumed* un-audit-able method of payment.

      I can’t believe anyone has been believing that PayPal is an un-audit-able payment method and banking (NPI) on that to not pay their taxes.

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