In Part I of our two-part series on the Canada Revenue Agency's (CRA) expanded audit powers, we discussed the CRA's ability to compel individuals for oral interviews. In this part, we discuss the CRA's expanded powers to demand information from taxpayers and other parties.

Expansion of the CRA's audit powers

Prior to December 15, 2022, paragraph 231.1(1)(a) of the Income Tax Act (Act) permitted the CRA to request documents or records of a taxpayer that related to (i) information that is or should be in the taxpayer's books and records or (ii) any amount payable by the taxpayer under the Act.

New paragraph 231.1(1)(a) expands the scope of these powers in two notable ways.

First, the CRA can request documents or records of a taxpayer as long as they may be relevant in determining the obligations or entitlement of the taxpayer under the Act. This broader language means the CRA is not limited to requests that relate to any amount payable under the Act, but can now make the request if it's relevant to any obligations of a taxpayer (for instance, filing or other compliance or reporting obligations, even if no amounts are payable).

Second, and more troubling, the CRA is now permitted to request documents and records from the taxpayer or any other person if they relate to the obligations or entitlements of the taxpayer or any other person. In other words, the CRA can now audit taxpayer X determine the tax liability of taxpayer Y.

The breadth of these new powers are reinforced by new paragraph 231.1(1)(e), which allows the CRA to require a taxpayer or any other person to provide all reasonable assistance with anything the CRA is authorized to do under the Act.

Implications for taxpayers and third parties

Third parties

The expanded powers mean that third parties, including a taxpayer's advisors, customers, suppliers, contractors and other service providers, could be subject to even more frequent and demanding requests for information.

Similar to the concerns raised in Part I about the CRA compelling third parties to an oral interview, there is a concern that information provided by a third party in this manner could trigger an assessment and/or audit of the third party itself or other clients, or be used as part of an audit or assessment of another taxpayer.

It is unclear whether and how these expanded powers could conflict with the CRA's powers under section 231.2 of the Act, which generally permits the CRA to compel any person to produce any information or any documents for the general purposes of administration or enforcement of the Act.

Notably, section 231.2 includes certain safeguards to protect taxpayers' rights and privacy while section 231.1 does not. For example, subsection 231.2(3) requires the Minister to obtain judicial authorization before seeking information related to an "unnamed person" from a third party record holder.

The courts have previously opined on the interplay between old section 231.1 and section 231.2. The Supreme Court of Canada rejected the argument that old section 231.1 should be read down to avoid redundancy with section 231.2. Specifically, the court rejected the argument that old section 231.1 should be read as not permitting access to third-party records without judicial authorization because section 231.2 "serves no purpose if section 231.1 is read as authorizing the Minister to obtain information on unnamed third parties during the audit of the taxpayer."1 Recently, the Federal Court of Appeal confirmed that although old section 231.1 and section 231.2 overlapped, they were not redundant, particularly because section 231.2 of the Act granted "the Minister broader and different powers" and is not limited to the audit context.2 How the new section 231.1 will be reconciled with the prior case law, considering its increased breadth, remains to be seen.

Confidentiality and privilege

These broadened powers also raise concerns about confidentiality and privacy, particularly since the CRA may request information from one taxpayer that relates to information about another taxpayer. It is unclear how confidential information will be safeguarded and who will bear the damages caused by improper sharing of information.

A lawyer engaged during the audit process (or when the CRA requests documents about a taxpayer) can ensure documents subject to solicitor-client privilege remain protected and are not inadvertently disclosed.

Administrative burden

Finally, from a practical perspective, taxpayers may be required to shoulder even more of the administrative burden of an audit to support the CRA in determining another person's tax liability.


While these broad powers may be cause for concern, engaging a lawyer at the outset of the audit process, or when a third party has been sent a request, can ensure the taxpayer's rights are protected. 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.

We wish to thank Ann Chen, Articling Student, for her contributions to this article.


1. Redeemer Foundation v Minister of National Revenue, 2008 SCC 46.

2. Ghermezian v Canada (National Revenue), 2023 FCA 183.

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