The Canada Revenue Agency (the “CRA”) has wide audit powers set out in the Income Tax Act (the “ITA”). They can request a taxpayer to produce documents and records, answer written questions, and to seek and provide information from your accountants, solicitors, and bank. They can inspect a taxpayer’s books, records and property inventories. The CRA can even enter a taxpayer’s premises or places of business and require any person on such premises to provide reasonable assistance in the CRA’s inspection of books, records and property inventories. If you don’t comply with their request then the CRA can apply for a “compliance order” from the Federal Court.
Up until recently, however, the CRA could not compel you to attend an oral interview to answer questions. This was so stated by the Federal Court of Appeal in a case called Canada (National Revenue) v Cameco Corporation. However, under recent amendments to paragraph 231.1(1)(d)(i) of the ITA, the CRA can now require any person to attend “any place designated by the CRA,” or attend by videoconference or by another form of electronic communication, in order to submit to oral questioning.
Under the new paragraph 231.1(1)(d), the CRA’s power to conduct oral interviews is limited to requiring you to provide “reasonable assistance” and answering “proper questions relating to the administration and enforcement of [the Income Tax Act] ”. So they don’t have carte blanche to compel you to answer anything they want or to go on a fishing expedition. Ultimately what constitutes “reasonable assistance” and a “proper question” will depend on the facts of each case and will likely have to be determined by the Federal Court.
If you are faced with an audit interview request you should immediately contact a tax attorney or other tax professional with experience in tax audits.