In Cameco, the Federal Court of Appeal (“FCA”) considered the issue of CRA audits and oral interviews and concluded that the audit powers of the Canada Revenue Agency (“CRA”) under section 231.1 of the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) do not include the ability to compel taxpayers to submit to oral interviews.
According to the FCA at paragraph 12, the legislation “cannot be interpreted so as to permit the Minister to compel oral interviews of a taxpayer or its employees concerning its tax liability. Neither the text, nor the context nor the legislative history of paragraph 231.1(1)(a) supports the Minister’s position.”.
The FCA in Cameco upheld the lower Federal Court decision in Canada (National Revenue) v. Cameco Corporation, 2017 FC 763 (CanLII), [2018] 2 FCR 524.
"The Taxpayer is not even Required to be Present" during a CRA Audit
It is established that taxpayers, or their representatives, must provide access and directions, or deliver to CRA, any records that exist and which CRA requests to review. However, the FCA concluded that insisting on oral questioning was akin to conducting oral discoveries of the taxpayer, a process reserved for the courts.
According to the FCA at paragraph 21, the “taxpayer is not even required to be present – the obligation to provide reasonable assistance falls on the senior person on the premises of the business. The owner or manager is a person who can reasonably be in a position to assist and answer questions in locating documents and records kept on the business premises…”.
CRA Audits & Oral Interviews - Canada (National Revenue) v. Cameco Corporation, 2019 FCA 67 (CanLII)
The issue under consideration in Cameco was “whether the Minister of National Revenue can require employees of a corporation to attend for interviews and compel oral answers to questions posed by auditors of the Canada Revenue Agency…” (paragraph 1).
The CRA sought to enforce a compliance order compelling the attendance at a CRA audit and oral interviews of certain employees of Cameco Corporation, the Respondent. CRA argued that the authority to do so was provided pursuant to paragraphs 231.1(1)(a) to (d) of the Income Tax Act, which state:
231.1 (1) An authorized person may, at all reasonable times, for any purpose related to the administration or enforcement of this Act,
(a) inspect, audit or examine the books and records of a taxpayer and any document of the taxpayer or of any other person that relates or may relate to the information that is or should be in the books or records of the taxpayer or to any amount payable by the taxpayer under this Act, and
(b) examine property in an inventory of a taxpayer and any property or process of, or matter relating to, the taxpayer or any other person, an examination of which may assist the authorized person in determining the accuracy of the inventory of the taxpayer or in ascertaining the information that is or should be in the books or records of the taxpayer or any amount payable by the taxpayer under this Act,
and for those purposes the authorized person may
(c) subject to subsection 231.1(2), enter into any premises or place where any business is carried on, any property is kept, anything is done in connection with any business or any books or records are or should be kept, and
(d) require the owner or manager of the property or business and any other person on the premises or place to give the authorized person all reasonable assistance and to answer all proper questions relating to the administration or enforcement of this Act and, for that purpose, require the owner or manager to attend at the premises or place with the authorized person.
Income Tax Act Subsection 231.1(1)
The CRA asserted that the wording of subsection 231.1(1) was broad enough to include the power to compel oral interviews with taxpayers. The Respondent insisted that the legislation would be explicit in wording if that were the intent.
It is difficult to conclude that paragraphs 231.1(1)(a) to (c), above, imply an authorization to compel attendance for oral interviews. Paragraph 231.1(1)(a) refers to CRA’s authority to “inspect, audit or examine the books and records…”. Paragraph 231.1(1)(b) refers to CRA’s authority to “examine property…” and paragraph 231.1(1)(c) refers to CRA’s right to “enter into any premises or place…”.
In contrast, on a quick reading of paragraph 231.1(1)(d), intent is not immediately clear as it refers to a person having to provide “all reasonable assistance and to answer all proper questions relating to the administration or enforcement of” the Income Tax Act and “[requiring] the owner or manager to attend at the premises or place with the authorized person…”.
However, 231.1(1)(c) and 231.1(1)(d) are preceded by the phrase “and for those purposes…” of 231.1(1)(a) and 231.1(1)(b). Accordingly, the powers granted under 231.1(1)(c) and 231.1(1)(d) relate to “inspect, audit or examine the books and records…” and “examine property…”.
The FCA rejected CRA’s position that the wording in paragraphs 231.1(1)(a) and 231.1(1)(b) imply an oral component and concluded that the provision in its entirety relates to documented information only. Therefore, according to the FCA, 231.1(1)(d), in combination with (a),(b) and (c), only provides CRA with the right to compel a taxpayer to assist with accessing the records CRA wishes to audit.
Canada (National Revenue) v. Cameco Corporation, 2019 FCA 67
Canada (National Revenue) v. Cameco Corporation, [2018] 2 FCR 524
CRA Statement on the Cameco Decision
SpenceDrake Tax Law