There are very few rules in tax law that protect taxpayers. Most are written to protect the Canada Revenue Agency and the government. The doctrine of legal privilege is one of the few rules that are intended to protect the legal system and preserve the rule of law.
Legal privilege is essentially judge made law, which the Income Tax Act attempts to legislatively mitigate. Fortunately, the Supreme Court of Canada has resisted governmental intrusions into the doctrine. However, taxpayers must know the boundaries of legal privilege and protect it.
The law protects professional communications between a client and his or her legal advisors. Legal secrecy is privileged from unauthorized disclosure to third parties. This fundamental doctrine, which is essential in tax planning and litigation, does not extend to accountants.
The starting rule for the admissibility of evidence in litigation is that it should be relevant and of probative value. However, for reasons of public policy, solicitor-client privilege can shield certain relevant and probative materials from being tendered in evidence in a courtroom. Subject to some exceptions, neither counsel (whether barrister, solicitor, law clerk, or intermediate agent of either, or an interpreter) nor the client (whether party or stranger) can be compelled to disclose oral or documentary communications passing between them in professional confidence.
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