CRA's Expanded Audit Powers: Courts, Oaths, And Potential Penalties

New proposals to expand the audit powers of the Canada Revenue Agency (CRA) under the Income Tax Act could significantly raise the risk that Canadian taxpayers will find themselves in court or subject to penalties – even before a tax audit is concluded.

Background

The CRA is Canada's largest federal agency by headcount with vast enforcement and compliance powers under the Income Tax Act and Excise Tax Act. The federal government has allocated billions of dollars of funding for tax compliance and enforcement each year, and the CRA alleges there is a "tax gap" of uncollected tax revenues in the range of $20 billion per year.

The CRA has stated that, in its view, uncollected taxes are due in large part to the domestic underground economy, aggressive international tax planning, and payment non-compliance. The CRA selects files for audit based on risk assessment, which may involve factors including industry risk, complex corporate entities or structures, assets