The Canada Revenue Agency (CRA) recently made headlines when it asked Shopify for six years' worth of records for more than 120,000 of its Canadian customers. This broad request follows on the heels of the CRA's significantly expanded powers under Bill C-32, which came into force on December 15, 2022.

This article is Part I of a series that discusses the amendments to the CRA's audit powers and the implications for taxpayers. In this part, we discuss the CRA's ability to compel certain individuals for oral interviews, and when (and why) to engage a lawyer.

Amendments to the Act

Prior to Bill C-32, the CRA had no legal authority to compel taxpayers or their employees to submit to oral interviews. This was confirmed in Canada (National Revenue) v Cameco Corporation, 2019 FCA 67 (Cameco),Cameco, in which the Federal Court of Appeal held that the CRA's pre-Bill C-32 audit powers, while expansive, could not be interpreted to confer "a general power to compel oral answers with respect to tax liability."

At the time, the CRA generally conducted audit interviews by submitting a list of questions to the taxpayer, who would provide written answers within a reasonable time. If the auditor wanted to conduct an oral interview, the taxpayer's consent was needed and the auditor was limited to interviewing the business owner or manager.

In response to the decision in Cameco, Parliament enacted Bill C-32, which introduced new subparagraphs 231.1(1)(d)(i) and (ii) of the Income Tax Act, giving the CRA expanded audit powers that, among others, allow it to require the taxpayer or "any other person" to attend at a place designated by the CRA or by video conference or other form of electronic communication and to answer questions orally:

231.1 (1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act.

(d) require a taxpayer or any other person to give the authorized person all reasonable assistance, to answer all proper questions relating to the administration or enforcement of this Act and

(i) to attend with the authorized person, at a place designated by the authorized person, or by video-conference or by another form of electronic communication, and to answer the questions orally, and

(ii) to answer the questions in writing, in any form specified by the authorized person.

[our emphasis]

The expanded powers under Bill C-32 are notable for a number of reasons. First, the CRA can now compel taxpayers or other persons to attend oral interviews in person. This means that taxpayers will need to take valuable time away from their businesses to prepare for and attend these interviews or risk being non-compliant. More significantly, the new powers introduce a number of concerns about how a taxpayer's oral responses could be used by the CRA in the future.

Second, the CRA was previously limited to interviewing the owner or manager of the property or business or any other person "on the premises or place." The new authority to compel an interview with "any other person," even those off-premises, is a notable expansion of CRA power. It also raises the concern that the CRA will compel a taxpayer's third-party advisors, such as lawyers and accountants, to answer questions in person. Could this mean that the responses provided by an accountant, bookkeeper, lawyer or other advisor could trigger an audit of their clients? The implications of this development remain uncertain, and it is a matter advisors should stay informed about.

Lastly, there is the concern that the CRA can request answers in writing in any form.This requirement could mean that taxpayers will be obligated to produce written responses in the form imposed by the CRA, such as graphs, charts, spreadsheets or other summaries, potentially shouldering taxpayers with another significant administrative burden.

When and why to engage a lawyer

Taxpayers are entitled to legal representation and to have legal counsel throughout the audit process. In light of the CRA's expanded powers and the uncertainty as to how they will apply or could be used in the future (particularly if matters proceed to court), it is strongly encouraged that taxpayers retain legal counsel early in the audit process.

A lawyer can ensure that the auditor's questions are proper and that the taxpayer's or their representative's answers are precise and not protected by solicitor-client privilege. The strategic decision to involve a lawyer in any initial interviews may pay off should the audit result in a reassessment.

Generally, a tax dispute begins with a taxpayer objecting to the reassessment and, if the CRA disagrees with the taxpayer, appealing the dispute to the Tax Court of Canada. After this stage, the parties will conduct "examinations for discoveries," in which the CRA's counsel will have the opportunity to examine (by way of oral questions) the taxpayer (or their nominee) and the taxpayer's counsel will examine the CRA's nominee (often the auditor). Examinations for discovery allow each party to learn the facts and positions of the opposing party, so that the parties understand the issues in dispute and are better prepared for trial.

Importantly, any notes or transcripts from audit interviews are typically fair game during examinations for discovery, meaning that what is said or disclosed during these initial interviews could be scrutinized during the discovery. Without proper preparation and assistance from a lawyer, what was said (or not said) during these initial interviews may be used during examinations for discovery. In contrast, with forethought to potential litigation, a lawyer engaged during the audit interview can ensure that the taxpayer's business is fairly and accurately represented.


The CRA's newly expanded powers to compel oral interviews may add to the complexities associated with the already stressful and complicated audit process. However, engaging a lawyer early can avoid or mitigate any challenges that arise on an audit, while also ensuring that taxpayers are better positioned should the audit lead to a tax dispute down the road.

Dentons' Tax Group can help you and your clients navigate CRA audits and tax disputes. For more information, please reach out to the authors, Jacob Yau and Caroline Harrell.

In Part II, we will discuss the changes to the CRA's powers to collect information.

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