Battle over secret CRA tax deal divided staff, launched complaints, documents show

The Canada Revenue Agency violated its own policy and exposed its reputation to damage when it granted a secret tax deal to a major corporation, according to documents filed in court.

More than 2,000 pages of highly sensitive government records recently filed in Federal Court expose details of an internal CRA controversy over the tax deal. One CRA manager wrote in the documents that an executive tried to make them support the deal, which was "completely unethical and "wrong."

Despite some CRA employees disagreeing with the arrangement — warning it would lead to lower tax revenues — agency executives went ahead with it in 2019, CRA records show.

"There could be negative reputational effects as a result of the atypical process followed … ," reads the preliminary findings of an investigation by CRA's Internal Affairs and Fraud Control Division, tabled in Federal Court. 

CRA defended the deal in a statement to CBC News, saying it was "favourable" to the agency and an investigation by the Internal Affairs and Fraud Control Division cleared those accused of wrongdoing. But the agency would not share a copy of that investigation report or name the company involved, citing the privacy rights of staff and taxpayers.

Internal documents show the deal set off a torrent of allegations and counter-claims between executives and staff that triggered a series of internal investigations and a settlement to drop retribution claims.

Two CRA employees have filed an application for judicial review in Federal Court arguing the integrity commissioner shouldn't have ceased investigations into other claims of wrongdoing at CRA including a toxic workplace environment. The allegations contained in the documents have not been tested in court.

The controversy centres on a division of CRA that approves payment agreements between multinational firms and the Canadian government to prevent tax avoidance.

The CRA is sensitive about this topic because of recent news stories about Canadians stashing offshore fortunes in tax havens. The agency also made headlines in the past for a high-level decision to offer amnesty to wealthy KPMG clients caught using offshore tax avoidance schemes in the Isle of Man.

Court documents confirm an investigation by the CRA's internal affairs and fraud control division in 2019 probed three anonymous complaints alleging preferential treatment was given to a "prominent global company that is alleged to use aggressive tax avoidance schemes to shift profits from Canada to an Irish Tax Haven."

"Please take immediate action to stop this … deal which further undermines the entire integrity of the CRA," reads one of the complaints.

The name of the company involved is blacked-out in the documents filed in Federal Court, which also don't say what the company does or where it's based. According to the court documents, the deal saw the CRA waive penalties and interest that the company otherwise would have owed and a controversial advanced pricing arrangement (APA).

Two CRA employees filed similar complaints to the integrity commissioner in 2020 and named three CRA executives at the time as the key players involved in approving the deal: assistant commissioner of the Compliance Programs Branch Ted Gallivan, director general of the International and Large Business Directorate Alexandra MacLean, and director of the Competent Authority Services Division Donna O'Connor.

Those complaints by CRA employees claimed some staff in the Competent Authority Services Division (CASD) were "pressured to rubber-stamp" the "multi-million dollar" agreement without being able to review it substantially themselves.