Powers include ability to compel people to answer questions under oath, affirmation, by affidavit
While the federal government proposed new audit powers for the Canada Revenue Agency in the recent federal budget, Marie-France Dompierre and Jacob Yau, partners in the tax practice at Davies Ward Phillips & Vineberg LLP, say questions remain about how they will be applied in practice.
In December 2022, legislative amendments gave the CRA the power to require a taxpayer to participate in an interview, either in person or by videoconference, or to answer questions in a CRA-specified written format. Ottawa’s 2024 budget proposal includes adding a provision to the Income Tax Act that would allow the tax authority to require that the taxpayer deliver the requested information under oath, affirmation, or by affidavit.
“It raises all sorts of questions,” says Yau, who practises in Toronto. Typically, when a person delivers a statement under oath or affirmation, they understand that they are subject to the criminal offence of perjury if they give a false statement. But the CRA has not clarified whether it will prosecute taxpayers for perjury, use their sworn statements in other proceedings, or how they will use the evidence, generally, he says. Under the Criminal Code, perjury carries a maximum prison sentence of 14 years.
“These are all questions that remain in the air,” says Yau.
Also concerning, says Dompierre, is that the requirement to provide information under oath, affirmation, or affidavit does not just apply to the taxpayer and their designated representatives. It could apply to “any person,” including an employee or representative of the company the CRA is auditing. “There's no guidance or safeguards at this point in the draft legislation that we've seen,” she says.
“The other concern is that this just raises the cost of compliance for taxpayers,” says Yau. Those called on to provide information under oath, affirmation, or by affidavit may want to call a lawyer before they do so and may wonder whether they need a lawyer present during the interview. He says that the cost of compliance in responding to CRA audits has already been increasing as the CRA have obtained more and more powers.
“This just adds more complexity, time, and expense to something that taxpayers have to deal with.”
In an article Dompierre, Yau, and Davies colleague Caroline Harrell co-wrote recently, they suggested that foreign jurisdictions may have inspired Canada. In the U.S., the Internal Revenue Service can summon taxpayers “or any other person deemed proper” to produce information or provide testimony under oath. In Australia, the tax authorities can also require taxpayers to provide information or evidence under oath or affirmation.
