Canada: Ministry Of National Revenue v Cameco Corporation–Limitations On CRA Tax Audit Powers–Toronto Tax Lawyer Case Comment

Last Updated: November 13 2017
Article by David Rotfleisch

Introduction – Ministry of National Revenue v Cameco Corporation

Cameco Corporation ("Cameco") refused to grant the Canada Revenue Agency ("CRA") oral interviews with 25 employees and former employees during the course of a transfer pricing tax audit. The CRA applied for a compliance order to the Federal Court of Canada to force the interviews to take place on the grounds that its tax audit powers gave it the right to compel oral interviews. The Federal Court of Canada sided with Cameco and gave a number of different reasons for their decision. Most prominently, the Court was aware that Cameco had an active appeal at the Tax Court of Canada dealing with similar issues from earlier taxation years, and found that it was prejudicial to Cameco to allow the CRA to use its tax audit powers to assist its case at Tax Court.

Facts - Ministry of National Revenue v Cameco Corporation

Cameco is a large Canada based uranium producer that operates in many countries through a corporate group that includes wholly owned subsidiaries situated outside of Canada. Cameco was audited by CRA multiple times regarding its transfer prices with its foreign subsidiaries. A transfer price is the price paid in exchange for goods or services from a related party, such as a subsidiary, located in a different country. The Canadian Income Tax Act imposes a requirement that taxpayers must use the price that arm's length parties would have agreed to for their transfer prices. In the absence of this requirement, taxpayers would be able to shift profits by choosing their transfer prices such that the party in the jurisdiction with lower corporate income tax rates earned all of the profits.

The CRA audited Cameco's transfer pricing for its 2003 taxation year. In the course of that tax audit, the CRA interviewed key personnel from Cameco with Cameco's consent in 2006, 2007, and 2008. The CRA tax auditors disagreed with Cameco's transfer pricing position and reassessed Cameco's 2003 through 2007 taxation years. Cameco appealed the reassessments to the Tax Court of Canada. As of August 2017 when Ministry of National Revenue v. Cameco was decided this appeal was still ongoing.

The CRA began auditing Cameco's transfer pricing for its 2010-2012 taxation years in 2013. The CRA tax auditors requested interviews with approximately 25 key Cameco personnel. Many of the requested interviews were with people who had been interviewed in 2006 through 2008. Some of these employees had since retired or moved to jobs at different companies. The CRA offered to interview each employee either in Canada, the United States, Switzerland, or by video conference.Cameco refused to consent to these interviews, so the CRA brought an application for a compliance order before the Federal Court of Canada.

Federal Court Decision - Ministry of National Revenue v Cameco Corporation

The CRA took the position that section 231.1 of the Canadian Income Tax Act granted them the power to conduct oral interviews of taxpayers during the course of a tax audit. Section 231.1 allows the CRA to inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer that may relate to any amount payable to the taxpayer under the Canadian Income Tax Act. Section 231.1 also allows the CRA to enter premises where business is carried on and have the owner of the business or other people on the premises answer questions relating to the administration of the Canadian Income Tax Act and provide all reasonable assistance. The CRA interprets this section as granting them broad tax audit powers including the right to oral interviews with the employees and former employees of a corporation being audited. The CRA also took the position that it would be absurd to interpret the section as explicitly allowing tax auditors to ask questions when they visit the premises of a business but not compel oral interviews.

The CRA also argued that it was normal practice for tax auditors to orally ask questions to taxpayers in person and over the phone, and that the relevant provisions of the Canadian Income Tax Act should be interpreted in a way that is consistent with normal audit practice. The CRA also pointed out they have a limited amount of time to audit returns before they become statute barred and that it is more efficient to conduct oral interviews instead of being required to prepare written lists of questions. The CRA also argued that since Cameco is a large company, a request to interview approximately 25 key employees was proportionate and that they were being reasonable by offering to accommodate the employees regarding the location of the oral interviews.

Cameco argued that although the CRA's tax audit powers are broad, the Canadian Income Tax Act does not grant them the unlimited right to oral interviews with the employees of a taxpayer. Cameco pointed out that the section 231.1 should be read in the context of the objection and appeals provisions and that Cameco's appeal to the Tax Court of Canada would be prejudiced. Cameco also asserted that the compliance order requested by CRA was disproportionate, vague, and overbroad.

The Federal Court of Canada rejected the CRA's application for a compliance order and gave a number of reasons for doing so. One reason given by the court is that courts should be reluctant to give wide interpretations to already powerful provisions. As support for this, the court cites a recent Federal Court of Appeal Case, BP Canada Energy Company v MNR, in which the Federal Court of Appeal found that section 231.1 of the Canadian Income Tax Act could not always be used to compel the production of tax accrual working papers. Tax accrual working papers are used by taxpayers to keep track of their potential tax liabilities if the CRA disagrees with the uncertain aspects of their filing positions. The Federal Court of Appeal found that despite the broad wording of section 231.1, parliament could not have intended the tax audit powers granted to CRA to be so sweeping that taxpayers could always be compelled to reveal which specific aspects of their tax positions they viewed as uncertain.

The court also emphasized that allowing the CRA an unlimited ability to compel oral interviews would effectively allow CRA a much broader form of examination for discovery than is available in appeals before the tax court and without any of the corresponding procedural safe guards. This suggested to the court that the CRA's interpretation of section 231.1 is not harmonious and consistent with Canada's tax dispute legislation. The court noted that this concern is important to the present case because the interviews requested in the application for a compliance order in fact deal with subject matter that is currently the subject of an appeal before the Tax Court of Canada. The court also pointed out that requiring the interviews was disproportionate and wasteful because the subject matter of the interviews would be dealt with through the Tax Court of Canada's discovery process as well.

The Court also observed that by failing to provide oral interviews, Cameco was not limiting the information that could be requested by the CRA, only the form, written vs oral, that the answers to their queries would take.

Tax Tips

The basic lesson of this case is that the CRA cannot always compel oral interviews with taxpayers, their employees, or other related people. More broadly, the CRA is not always able to rely on their tax audit powers under the Canadian Income Tax Act to determine the form questioning in a tax audit will take, so long as the taxpayer provides the information they request. The decision does not specifically state whether the existence of the ongoing Tax Court of Canada appeal on the same subject matter was a necessary condition for denying the compliance order. The Court assigned weight to that fact, but also to other arguments, so it is unclear whether taxpayers who do not have an active appeal before the Tax Court of Argument will be able to succeed in opposing similar applications for compliance orders.

Together with BP Canada Energy Company v MNR this case shows some of the limits of the CRA's tax audit powers. Both cases involve an appeal to basic features of the Canadian income tax system to reign in a very broad provision of the Canadian Income Tax Act. In this case, it was the showing that an attempted use of the CRA's tax audit powers was in tension with parliament's regime for the resolution of tax disputes. In BP Canada Energy Company v MNR it was the tension between the broad power of CRA tax auditors to request information and Canada's self assessment system. This suggests that the Courts will be sympathetic to similar legal strategies in future cases regarding the CRA's tax audit and other administrative powers.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions