Understanding the CRA’s Power to Compel Interviews Under Section 231.1
The Canada Revenue Agency (CRA) has several key powers regarding the administration and enforcement of Canadian income tax laws. These powers allow the CRA, for any purpose related to the administration or enforcement of the Income Tax Act (ITA), to audit, inspect, or examine relevant documents, property, processes, or premises.
Specifically, one of the CRA’s powers is found under section 231.1 of the ITA, whereby it allows the CRA to require a taxpayer or any other person to provide “all reasonable assistance” and to answer “all proper questions” relating to the enforcement of the ITA. Subsection 231.1(d) can be understood as the CRA’s power to compel interviews.
Scope of the CRA’s Power to Compel Interviews
The CRA can compel interviews and oral questioning from a taxpayer or any other person that may have relevant information. “Any other person” may include:
- Taxpayers and their representatives
- Officers, directors, and shareholders of corporations
- Trustees, partners, employees, advisors, suppliers, and customers
Consequences of Non-Compliance under Section 231.1
Should a taxpayer or any other person act in an uncooperative manner, remain non-compliant with CRA requests, or even just partially comply with a request made under section 231.1 of the ITA, the following consequences may apply:
- Making inferences or assumptions where no response is provided and assessing on that basis
- Making an assessment based on the information available
- Seeking information from other persons or foreign jurisdictions
- Asking the Department of Justice (DOJ) to apply for a compliance order
- Applying penalties
- Making a referral to the Public Prosecution Service of Canada (PPSC) for prosecution
Limitations on the CRA’s Power to Compel Interviews
The CRA’s power to compel interviews is substantial and may concern taxpayers with respect to their privacy, but this power is also more limited than it appears. As mentioned above, the references to “proper questions” and “reasonable assistance” can be interpreted broadly and are in place so that interview requests are not excessively burdensome, intimidating, or irrelevant.
However, where the changes that came into effect after Bill C-32 (A’s New Audit Powers) and the ‘New Policy Document” allowed the CRA to compel interviews and require answers, taxpayers have not been required to do so under oath. Taxpayers need to be aware that this proposed change to the ITA poses considerable risks, as statements made under oath may legally bind a taxpayer to the evidence given.
Conclusion
If you are facing a CRA audit or have been asked to attend an interview under section 231.1 of the ITA, it is important to understand your rights and obligations before responding. These situations can be complex and carry significant consequences if handled incorrectly. Our firm has extensive experience dealing with CRA audits and information-gathering requests. We can help you navigate the process, protect your interests, and ensure compliance without unnecessary risk.
Contact us today for guidance and representation.
Relevant Links:
https://rosentaxlaw.com/cras-new-audit-powers/
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice, nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a lawyer.
Elias Zafiridis