Toronto tax lawyer Philippe DioGuardi believes the internet is a dangerous place to look for tax problem help.
“The internet is fine if you’re shopping for shoes,” Mr. DioGuardi says. “But when it comes to your tax life, and in particular a tax problem, you might as well stand naked in the street and shout your troubles to the world. There is no privacy on the internet.”
“Every ad you click on, every search term you enter into your browser, every site you visit leaves a permanent record that the Canada Revenue Agency can request to view, through legal channels.
If you’re clicking on sponsored ads with headlines like ‘Breaking Income Tax Law? – and by the way that’s a real headline – you’ve just raised your hand and suggested that you might have something to hide from the CRA. And suddenly you’re at the head of the class for an audit or investigation. ”
Mr. DioGuardi supports his opinion with a thorough understanding of how the internet works as a research medium. It is fact that all internet activity – email, social media and search engine browsing history – is traceable to a specific IP address, and therefore an individual. This tracking ability is the foundation upon which the internet search engine industry is built.
When a search term is entered in a web browser, the search engine reaches deep into the profile of the IP address (the individual) to present relevant results which have been parsed according to a number of criteria which include: geographic location of the IP; previous search requests originating from the IP; previous search results presented to the IP; and the content of ads clicked through on previous searches, including box/ banner ads, and “sponsored links” (commonly referred to as google ads) which are optimized to “adwords” or search terms chosen by the advertiser.
Every search term entered into an internet browser, every organic link clicked on, and every sponsored ad clicked through, is captured by the search engine to be automatically re-purposed to provide more refined (as defined by the algorithms of the search engine) results on subsequent searches from the IP address.
You probably don’t care much about this tracking when you’re looking for the latest Manolos in fire engine red. But if you’re cybersurfing a tax issue, you might want to keep your problem offline.
Philippe DioGuardi explains why:
“Any permanent record related to a taxpayer can be requested by the Canada Revenue Agency for examination in the course of an audit or investigation.
“Section 231 of the Income Tax Act, specifically s. 1 and s 2, gives the Canada Revenue Agency the power to demand production of documents related to a taxpayer for the purposes of administration or enforcement the ITA.
“Under the provisions of s. 231 of the ITA, the CRA can seek access to the permanent record of a taxpayer’s internet search activity, which is stored in the database of the search engine provider, at any time. The fact that this permanent record is in the databanks of an American interest search engine, such as Google, or Bing, or Yahoo, is not a barrier to access, given that ss2 of s. 231 permits the CRA to extend its request for information beyond the borders of Canada into records kept in a jurisdiction with whom Canada has a tax treaty.
And information, once demanded by CRA, can most certainly be used in the course of an audit or investigation.”
The real question, however, is will the CRA really ask to see your internet searches?
And how much cyber-spying does the CRA actually do? Today?
After 20 years of legal practice in what he calls “adversarial tax”, Philippe DioGuardi is closer to the policies and tactics the CRA employs than perhaps any other lawyer in Canada. It is his personal opinion that the Canada Revenue Agency will consider any and every opportunity presented by technology to monitor and review the financial behaviours of taxpayers for the purposes of administering and enforcing the Income Tax Act. That’s a long way of saying “yes” to the foregoing questions. And even more frightening, Mr. DioGuardi warns that “information available from internet activity was given freely by the taxpayer in the normal course of using the internet, and thus is fully admissible in the course of an audit or investigation of a taxpayer’s compliance.”
If we accept that CRA is interested in, and capable of gaining access to, your internet searches, where will the Taxman find this information?
The answer will scare your pants off.
Commencing June 6, 2013, disclosures by NSA contractor and analyst Edward Snowden revealed that the NSA, in partnership with the governments and security agencies around the globe, including Canada, has been given direct access to all the internet searches, emails, and social media activity flowing through the world’s leading search engine providers, being Google, Facebook, Apple and Microsoft.
The scope of these search engines is broad enough to encompass virtually anyone, anywhere, who uses the internet.
How, and why this data is aggregated by analysts at NSA, or any other government agency who seeks access to it, through channels or by purchase, creates a serious risk to the searcher, in that the profile created by the aggregation may create a misleading picture of the searcher, or may exposure facts about the searcher – such as the existence of a problem with the tax authorities, or behaviours that are in breach of tax laws – that he or she may wish to keep private.
In light of the foregoing facts, Philippe DioGuardi warns that there is demonstrable risk that a taxpayer’s internet records, now or at any time in the future, may be sought by the Canada Revenue Agency, in the course of a targeted review, or as part of general review of a group of individuals who match a specified profile. “The greatest risk,” says Mr. DioGuardi, “ is that internet searches related to tax problems, or clicks on sponsored ad links headlined by such terms as “tax evasion”, “breaking income tax law’, ‘unfiled taxes’, and more, when aggregated in the taxpayer’s internet history, may raise a red flag with respect to the taxpayer’s behaviours and expose a taxpayer to both the random and targeted scrutiny of the CRA.”.
A Toronto Star newspaper article quoted a Canada Revenue Agency spokesperson, who that “When warranted, during the conduct of a criminal investigation, [CRA] may request information from ISP’s in order to obtain evidence of transactions that have taken place”. The same newspaper article quoted Allison Christian, the H. Heward Stikeman Chair in the Law of Taxation at the McGill University Faculty of Law on the CRA’s abililty to seek access to your internet searches. According to Ms. Christian, “They need a subpoena, they need to have a reason to search your Google history, but the threshold for that search is pretty low. You have very little privacy from the CRA.”
How governments, including the Government of Canada, are using information about private citizens captured from internet search providers (Google being the largest and most dominant) has been the subject matter of significant news stories in the United States and Canada recently. These examples are well documented now as further information is revealed daily, of use by governments of information on the internet. The CRA’s history of using whatever means are available for collection of tax revenues, as well as developing new methods to recover the billions of dollars of taxes owed by tax payers, is well documented.
“Why would the CRA not use information about internet history to profile potential candidates for audit?” asks Philippe DioGuardi. “Other branches of government already seek access to ‘big data’ to profile candidates for security investigations, immigration investigations, and even marital status reviews. The US Government clearly makes use of the data captured from internet search engine providers, and shares their discoveries with relevant international allies. According to a recent article on mashable.com, the IRS is all fired up to use big data to hunt for tax cheats. Where the IRS goes, the Canada Revenue Agency inevitably follows.”
Bottom line: Philippe DioGuardi believes “It’s just not safe to google the internet for tax help. In my opinion, any lawyer who uses online advertising to attract taxpayers with tax problems is negligent.”
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