Canada’s federal tax collection service, the Canada Revenue Agency (CRA) is asking a judge to force Toronto-based cryptocurrency exchange Coinsquare to hand over information and certain documents about all of the platform’s clients using the platform since early 2013. CRA intended to use this information to help fight against tax fraud and the underground economy. More specifically, CRA wanted to make certain of the fact that Coinsquare’s customers had paid taxes and were not using cryptocurrencies to hide assets- as required by Canadian tax laws.
With this filing, it would be the first time CRA has gone after a Canadian cryptocurrency exchange with the intent to use details to find out which Canadians have been trading on Coinsquare’s platform, and then compare it to their past tax filings.
David Piccolo, a tax lawyer at Canada’s tax law firm Tax Chambers said in a report that in the event a Canadian trader on Coinsquare has not declared any cryptocurrency revenue or trading to CRA, then the agency may decide to further audit that person or organization. He added:
CRA could use this information to essentially try to verify or to match certain transactions with what was reported (in Canadians’ tax filings). Then CRA does their internal risk assessment (to determine) whether these are worth pursuing in audit.
Canada’s tax collection agency is known to closely follow crypto-related activities. In fact, back in March, a report had found that CRA was reportedly auditing investors in cryptocurrencies like Bitcoin and that the agency had even sent comprehensive questionnaires. The questionnaire which was 14 pages long had 54 questions and multiple sub-questions pertaining to crypto-related activities.
CRA began taxing cryptocurrencies in 2013, and also established a cryptocurrency unit in 2017 focused on crypto-related risks.