In the execution of a transfer pricing audit ("TPA"), the Minister served a s. 231.6(2) Requirement on the taxpayer relating to four corporate siblings in the Bahamas, which had charged fees to the taxpayer. The taxpayer's response to the Requirement omitted certain information, claiming that it was confidential or proprietary in nature, or that it would hurt the siblings' competitive advantage. The information withheld included organizational information about the siblings (such as minute books and personnel charts), the names of employees or external contractors that the sibling employed, and whether the siblings had provided services to other arm's length or non-arm's length customers.
Russell J dismissed the taxpayer's application for review under s. 231.6(5). The standard of review was reasonableness (paras. 15-18), and the Requirement was reasonable. Russel J stated (at paras. 79, 82):
The Minister seeks specific information related to those payments [to the siblings] to determine whether the services were performed in the Bahamas or Canada and, if in the Bahamas, how the services were provided, and to determine the appropriate transfer pricing methodology to be applied so that the Minister can ascertain whether the transfer price paid was an arms-length transfer. In my view, the information sought from the Applicant is necessary to make these determinations and to verify information that has already been provided.
...
The documents requested in the Requirement need to be both relevant and reasonable, but the cases say that the threshold is low... .
The taxpayer suggested that there were less invasive methods of getting the information, such as interviewing the taxpayer's controlling shareholder (who held 90% of the taxpayer's shares, directly and indirectly), but this would not give CRA the objective confirmation needed to complete the TPA (para. 84). As to whether providing the information would be costly or destroy the firms' competitive advantage, no evidence had been offered.