Introduction: CRA’s Power to Compel Oral Interviews
Since December 15, 2022, the Canada Revenue Agency (CRA) has the authority to require taxpayers or relevant individuals to attend oral interviews during a tax audit. This power stems from the Federal Court case Minister of National Revenue v Cameco Corporation, 2019 FCA 67 and subsequent legislative changes under Bill C-32.
Specifically, under paragraph 231.1(1)(d) of the Income Tax Act, taxpayers must provide “all reasonable assistance” and answer questions necessary for administering or enforcing tax laws. The CRA’s official position is that interviews help ensure compliance and expedite audits. The CRA also takes a restrictive stance, indicating that refusal to participate may suggest a lack of transparency and a higher risk of non-compliance. However, if taxpayers decline an interview, the CRA may use alternative methods to verify compliance.
Format and Process of Tax Audit Interviews
A CRA auditor may schedule an interview with a taxpayer or other relevant individuals, either virtually or in person. In-person interviews typically occur at the taxpayer’s business location or a CRA office. During the interview, auditors will ask questions and review relevant documents.
If you attend with an accountant, they can help address the auditor’s questions appropriately. If the auditor asks inappropriate questions or requests privileged information, your accountant can intervene to protect your rights.
After the interview, the CRA may have follow-up questions or request additional documentation. The CRA can require working papers related to your books and records, as long as they are relevant to the audit. An accountant’s presence helps ensure the CRA’s requests are reasonable and not unnecessarily burdensome.
Recording Policies for Tax Audit Interviews
The CRA does not permit its auditors to be recorded during interviews, whether conducted in person or via videoconference. However, paragraph 4.6.5 of the CRA’s Income Tax Audit Manual states that the CRA has no legal authority to prevent taxpayers from recording interviews held on their own premises.
If you attempt to record an interview, CRA policy dictates that the meeting must be terminated immediately, and alternative arrangements will be made.
Conversely, if taxpayers are concerned about the CRA recording the interview, privacy laws protect their rights. In Ontario, for example, the Freedom of Information and Protection of Privacy Act and the Federal Privacy Act restrict unauthorized recordings. The CRA must inform you of the purpose of any recording and obtain your consent beforehand.
Pro Tips – Know Your Rights Before a CRA Tax Audit Interview!
Tax laws and CRA policies are continuously evolving. Without knowing your rights, you may inadvertently disclose unnecessary information during an audit interview. Even though the CRA cannot record the interview without your consent, any answers you provide can be used in their assessment.
Engaging an experienced accountant before attending a CRA tax audit interview is advantageous. They can advise you on your rights and obligations, help you prepare, and ensure the process is conducted fairly.
Frequently Asked Questions (FAQ)
Do I Have to Attend a Scheduled CRA Tax Audit Interview?
You are not legally obligated to attend a scheduled CRA audit interview. However, refusing to attend may lead the CRA to view you as uncooperative, which could negatively impact your audit outcome. If the proposed date or time doesn’t work, you can request to reschedule.
What Happens During and After an Oral Tax Audit Interview?
During the interview, CRA auditors will ask questions related to your tax situation, including any information provided in a pre-interview questionnaire. New findings may also prompt additional questions. The interview is unlikely to be recorded, and any attempt to record it may lead to the interview’s termination.
After the interview, the CRA may request follow-up information or additional documentation to complete the audit.
This article is written for educational purposes.
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