The CRA’s New Audit Powers
The expansion of the Canada Revenue Agency (CRA)’s audit powers in the 2021 federal budget came into force December 15, 2022. These changes mean that the CRA can now compel taxpayers or any other person to an oral interview at any designated place. This is a departure from previous practice which was typically sending a list of questions for the taxpayer to respond to in writing in a reasonable timeframe. Some claim that the CRA’s new powers are analogous to police interrogation powers.
What are the changes?
The changes were unveiled during the 2021 Federal Budget and ratified in Bill C-32 on December 15, 2022. Bill C-32 amends section 231.1 of the Income Tax Act to now require taxpayers and any other person to answer, “all proper questions” and provide “all reasonable assistance”. Further amendments in subparagraphs 231.1(1)(d)(i), enable the CRA to require that the person be required to attend “any place designated by the CRA” or any other form of electronic communication to undergo oral questioning.
Why were these changes made?
The changes were made to broaden the CRA’s audit powers. This was in response to a 2019 decision by the Federal Court of Appeal in Minister of National Revenue v. Cameco Corporation (2019 FCA 67) which held that the CRA cannot compel interviews from a taxpayer or its employees and must receive the taxpayer’s consent before interviewing anyone. Typically, the taxpayer was the only one the CRA could compel for questioning. However, the changes made now enable the CRA to also compel anyone else related to the matter to be orally interviewed.
The CRA’s power is limited by the legislation itself to ensure that “reasonable assistance” and “proper question” standards are kept. This indicates that the CRA should be bound to limit their oral interview practices. However, with the newness of these powers, the limits in practice have yet to be seen.
How will this impact taxpayers?
Audit processes are already stressful, and being compelled to engage in the oral questioning process only adds to that. Per the CRA Taxpayer Bill of Rights, taxpayers are allowed to have representation throughout the audit process including oral interviews. Without the help of a tax lawyer, you risk the CRA overstepping their authority in their investigation. To speak to an experienced tax lawyer, please contact us today!
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 this article. If you have specific legal questions, you should consult a lawyer.