The Federal Court of Canada has ordered U.S.-based PayPal to hand over details about its business account customers to Canadian tax authorities.
The court order, obtained by the Canada Revenue Agency, forces the U.S.-based payment processing firm to release information about Canadians with PayPal business accounts who processed transactions between the start of 2014 and last Friday.
PayPal must hand over the names, dates of birth, contact information and — in some cases — social insurance numbers of any business account holders in Canada. The court order was issued last Friday, and the company has until Dec. 25 to comply. PayPal says it has already contacted affected customers about the order, but has not yet handed over the data.
The company has more than 6 million Canadian customers. The majority have personal accounts, which are unaffected by the court order, the company told CBC News in a statement.
In the U.S., PayPal already submits information on any customers who either processed $20,000 US over the network, or made more than 200 transactions in a given year, to that country's tax authorities. But the company hasn't been obligated to do the same in Canada.
PayPal also notes: "This is a one-time disclosure of information to the CRA for Canadian PayPal Business Account holders that sent or received a payment between 2014 and 2017. This is not an ongoing request for information."
Hamilton tax lawyer Craig Burley said in an interview that the court order is a watershed moment in Canadian tax circles.
"They went on a fishing expedition," he said. It's common for tax authorities to request information on individual tax filers under investigation, "but this is different," Burley said. "This is: 'give us all your customers.'"
By going after what's known as "unnamed persons" through the courts, the tax agency is taking a much wider comb in trying to find unreported taxable income.
"This will almost certainly prove to be the largest CRA information dump that they have ever gotten with this method," Burley said. "Anyone who has not been fully disclosing income has a real problem here."
In a statement to CBC News, the CRA said the move is part of the tax agency's ongoing crackdown against the underground economy.
"The information obtained through the unnamed persons requirement will allow the CRA to ensure that these corporations comply with their tax obligations under the Income Tax Act," the CRA said. "The CRA has ... considerably stepped up efforts to identify individuals and businesses that do not file tax returns and to settle their files."
Jonathan Farrar, an associate accounting professor at the Ted Rogers School of Management at Ryerson University in Toronto, says it's the first time he can recall the CRA going after unreported tax income in such a major and comprehensive way.
"It's a more aggressive approach," he said in an interview. "It's a big net, and they're saying, 'Let's see who we can catch here.'"