Mutual Administrative Assistance in Tax Matters: Limits on Assistance

The recent decision of the Federal Court of Canada in Canada (National Revenue) v. Shopify Inc. (2025 FC 968)  is a rare decision on the Joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters, 25 January 1988 (as amended on 27 May 2010), ETS 1988 No 127 (The Mutual Assistance Convention).

The case concerns a request from the Australian Taxation Office (ATO) to the Canada Revenue Agency (CRA) to provide information on merchants who sell to Australian customers through the Shopify platform. Shopify, a Canadian corporation, is a leading provider of online e-commerce infrastructure.

Information requested

The Australian Exchange of Information Request stated that vendors established outside of Australia must register for Australian Goods and Services Tax (GST) if their sales to Australian consumers total AUD $75,000 or more in any 12-month period and the ATO believed that a proportion of the online stores to which Shopify provided web services were required to register for GST. This belief was based data available to the ATO and information obtained from other tax authorities. The ATO was not, however, able to determine which exact stores meet the GST threshold or the amount of any GST owing.

The CRA was not in possession of the relevant information and therefore could only provide information that it could obtain from Shopify. Canadian domestic  law distinguished between the rules to obtain information from third parties about named persons and unnamed persons. In the case of information about unnamed persons, the CRA could only require such information from third parties with the prior permission of the court. The ATO request concerned unnamed persons. The Court declined to authorise obtaining the information.

While much of the Court’s decision concerns Canadian domestic law on the information powers of the CRA, the Court also considered the limitations on the obligation of Contracting States to give assistance set out in Article 21 of the Mutual Assistance Convention.

Interpretation of the Mutual Assistance Convention

Despite similarities with Article 26 of the OECD and UN Models’ exchange of information rules the Mutual Assistance Convention, as amended by the 2010 Protocol, differs both as a matter of drafting and protections for taxpayers and others.

The Court relied heavily on the Explanatory Report to the Mutual Assistance Convention (the Explanatory Report). The Court only partially explained the role of the Explanatory Report saying that it did not form part of the context or other mandatory material within Article 31 of the Vienna Convention on the Law of Treaties. The Court held that the proper function of the Explanatory Report is to  “facilitate the understanding of the Convention’s provisions,” (Explanatory Report). Such a conclusion implicitly treats the Explanatory Report as supplementary material within Article 32 of the Vienna Convention.

Exchange of information on request

Article 5(1) of the Mutual Assistance Convention requires contracting states to exchange information on request and Article 5(2) requires the requested state, if it does not  have the information, to “take all relevant measures to provide the applicant state with the information requested”. The Court, unsurprisingly, held that such measures include the procedure for seeking information about unnamed persons.

Article 21(3), added by the 2010 Protocol, corresponds broadly with Article 26(3) of the OECD and UN Models. It requires a requested state to use its domestic information gathering measures to obtain the requested information even though the requested state does not need the information for its own powers.  The Explanatory Report elaborates that the term “information gathering measures” means "“laws and administrative or judicial procedures that enable the requested State to obtain and provide the requested information”.

The Court concluded that Article 21(3) has a relatively narrow scope. It held that the provision simply  limits the reason why a state may decline to supply information to another state to exclude the lack of domestic interest in such information. The better view is that the lack of a domestic tax law need for the information does not prevent the requested state from exercising its domestic tax information gathering powers to seek to obtain requested information on behalf of the requesting state.

Article 21(3) does, however, impose limitations on the exercise of domestic information gathering measures: the protections given under Articles 21(1) ( the rights and safeguards under by the laws or administrative practice of the requested State) and 21(2) (mostly corresponding to the protections in Article 26(3) of the OECD and UN Models). Again the Court considered these as limitations on supplying information to the applicant state, rather than constraining the exercise of information gathering measures for that purpose.

Limitations on assistance

The Court noted that Article 21(2)(a) does not require the requested State to carry out measures at variance with its own laws or administrative practice or those of the applicant State. Thus the treaty provides for no mechanism to obtain information beyond that provided under the domestic law or practice of the two states. This is bolstered by Article 21(2)(c) which prevents a state from supplying information which is not obtainable under its own laws or its administrative practice or those of the applicant State.  Thus, the Mutual Assistance Convention enables states to offer mutual administrative assistance in tax matters while maintaining the rights and protections both states provide to their taxpayers.

In this case, the only relevant Canadian law  to obtain information about a group of unnamed persons required judicial authorisation. The CRA therefore complied with the Mutual Assistance Convention by seeking the authorisation of the Court. That authorisation was  dependent on the Court being satisfied through information on oath that the mandatory preconditions  provided in the domestic statute had been met.

Exhaustion of reasonable measures

There is no obligation to provide administrative assistance if the applicant state has not pursued all reasonable measures available under its laws or administrative practice, except where recourse to such measures would give rise to disproportionate difficulty (Article 21(2)(g).

The ATO issued an “informal information request” to Shopify, and then declined to take any additional steps after receiving Shopify’s initial response. Shopify argued that there was no evidence that the ATO had exhausted its domestic options before seeking assistance under the Mutual Assistance Convention. Furthermore, there was no evidence that the CRA made any inquiries as to whether the ATO had in fact pursued all reasonable measures available to it. Shopify contended that the ATO, would at least need to issue a valid subpoena, warrant, or order that compels Shopify to produce the requested information. In such a case, Canada was not  obliged to provide assistance under the Mutual Assistance Convention.

Object and purpose of the Mutual Assistance Convention

Overall, the Court found that there is no obligation under the Mutual Assistance Convention to authorise a demand for  information behalf of treaty partners when such a measure would be inconsistent with domestic laws. It is “contrary to the to remove or dilute those protections for the sake of international compliance, especially when the applicant state has not pursued all reasonable measures available to obtain the information under its own laws, and may not have similar powers to obtain UPR information on their own territory.”

Given the lack of judicial pronouncements on the Mutual Assistance Convention and importance of the issues, it would be  unsurprising if the case did not end up in the Supreme Court of Canada.