CRA can Compel Oral Interviews - Cameco - 2021 Federal Budget
Oral Interviews, CRA Audits and the Cameco Decision
In did not take long for the Federal government to nullify the decision in Canada (National Revenue) v. Cameco Corporation, 2019 FCA 67 (CanLII). In Cameco, the Federal Court of Appeal (“FCA”) ruled 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.) did not authorize CRA to require taxpayers to answer questions orally.
The FCA in Cameco upheld the lower Federal Court decision in Canada (National Revenue) v. Cameco Corporation, 2017 FC 763 (CanLII),  2 FCR 524.
Federal Budget 2021 - Oral Interviews during CRA Audits Allowed
In the 2021 Federal Budget , amendments to the legislation have addressed the Federal Courts’ rulings and the term “orally” has been added to section 231.1, along with additional modifications:
28 (1) Subsection 231.1(1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by replacing the portion of that subsection after paragraph (b) with the following:
(c) require the owner or manager of a property or business of a taxpayer — and any particular person on the premises or place where the business is carried on, the property is kept, anything is done in connection with the business or any books or records of the taxpayer are or should be kept — to give the authorized person all reasonable assistance and to answer all proper questions and, for those purposes, the authorized person may require
(i) the owner or manager to attend at the premises or place with the authorized person, and
(ii) the owner, manager or the particular person to answer those questions orally or in writing, in any form specified by the authorized person. [emphasis added]
Best practice is to not have to rely solely on the CRA auditor’s written record of questions and answers, especially if the matter leads to a tax dispute at the Notice of Objection or Tax Court of Canada stages.
If only the auditor takes notes of the conversation, there is a chance that the answers will be recorded incorrectly. Also, the taxpayer may have misunderstood the question, or did not have an answer, but felt compelled to answer due to the stress.
Accordingly, taxpayers should request that CRA provide questions in written form. The taxpayer can respond in writing, in addition to an oral interview if required. If the auditor refuses to provide written questions, the taxpayer should ask the auditor’s Team Leader for same. If CRA still refuses, the taxpayer should make sure to take notes of the questions asked and of their answers. It is best to have someone assist you with this for an accurate as possible record.
Following the oral interview the taxpayer can create a document containing the questions and answers (modified where it is believed the question was misunderstood, the answer was incorrect or missing information, etc.) and send a copy of that document to the auditor as an accurate record of the conversation.
SpenceDrake Tax Law