The CEO of Shopify is vowing to fight a request from the Canada Revenue Agency asking the e-commerce company to provide it with six years’ worth of merchant records.
“I don’t particularly want a fight with the CRA (Canada’s tax authority)- but we got asked to backchannel them six years of records for all Canadian Shopify stores,” Tobi Lutke wrote on Twitter late Friday.
“This feels like low-key overreach to me. We will fight this.”
In an email response Monday about the reported request for merchant records, the CRA told Global News it uses the information obtained through Unnamed Persons Requirements (UPRs) to “identify taxpayers that may have been non-compliant,” and then verifies income has been reported appropriately and have satisfied “their filing obligations under the Acts administered by the CRA.”
“We collect information where it is lawful and directly related to compliance activities,” wrote Sylvie Branch, a spokesperson for the CRA. “The CRA must obtain judicial authorization before issuing a requirement to a third-party to get information about one or more unnamed persons.”
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Branch wrote that due to confidentiality provisions “of the Acts we administer,” the CRA cannot comment or disclose taxpayer information. It also did not specify Ottawa-based Shopify’s name in its response.
This would not be the first time the CRA has requested an e-commerce company to provide information to the agency. In 2017, the CRA gave PayPal 45 days to turn over information about its account holders and the amount and number of payments they paid or received between January 2014 and November 2017.
Global News reached out to Shopify for more information on the request by the CRA but did not hear back by publication time.
Federal Court documents show the minister of national revenue began seeking the records from Shopify in April.
The government said the records were being sought in order to verify that Canadian merchants were obeying the Income Tax Act and the Excise Tax Act.
In a notice of application, it maintained that Shopify’s records include the identity, sales amounts and other relevant account details of the merchants, but said “the minister does not know the identities of the relevant merchants.”
All parties involved are asking for a one-day hearing on the matter to take place between Feb. 13 and March 17, 2024.
The request comes after Shopify laid off thousands of staff over the last two years and watched its stock fall after Lutke admitted he wrongly estimated how much the COVID-19 pandemic would accelerate Shopify’s growth.
Lutke took responsibility for the first round of layoffs, admitting he wrongly estimated how much the COVID-19 pandemic would accelerate Shopify’s growth.
He positioned the second set of cuts as a way to help Shopify stop expending resources on “side quests,” and instead focus on its main goal: making commerce easier.
The additional layoffs were delivered after Shopify’s share price began to fall as consumers reverted to pre-pandemic shopping habits and tech valuations sank as investors became spooked by recession rumours.
Along with the cuts, Shopify recently sold its logistics business to supply chain management firm Flexport, has reduced the number of meetings staff have and retooled its approach to employment and compensation.
Shopify split workers into two career tracks – managers and crafters – with equivalent compensation levels and gave employees a “total rewards wallet” last year that allows them to choose between cash and stock options for their compensation.
– with files from The Canadian Press
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