Tax Administration and Tax Disputes Measures

Overview

CRA has broad audit powers under tax legislation to administrate the tax system and levy taxes. Budget 2024 proposes to broaden the scope of certain powers allowing CRA to request information from taxpayers, and sets out new consequences for non-compliant taxpayers. Budget 2024 also increases CRA’s power to assess when third parties participate or assist taxpayers in the avoidance of tax debts. 

Who will this affect?

These measures will affect all Canadian businesses as well as foreign entities doing business in Canada. 

Key features

Non-Compliance with Information Requests

Budget 2024 proposes measures to enhance the efficiency and effectiveness of information gathering in the context of tax audits and tax debt collection by introducing the concept of “notice of non-compliance,” which would be sent to taxpayers who do not comply with information requests made by the CRA. 

Taxpayers under a notice of non-compliance would: 

• not benefit from the normal reassessment period (which means that taxation years at issue would not become statute-barred); and 
• face penalties up to $25,000. 

Penalties up to $50,000 could also be levied by CRA in cases where a compliance order to provide information or documents is obtained against a taxpayer before the Federal Court. 

Budget 2024 also proposes to strengthen CRA’s information gathering power by requesting taxpayers to answer to information requests under oath or by affidavit. 

These measures are proposed to come into force on royal assent of the enacting legislation.

Avoidance of Tax Debts

Section 160 allows the CRA to assess and collect tax from a transferee to whom property has been transferred from a non-arm’s length tax debtor for no or inadequate consideration. Budget 2024 proposes to strengthen this rule by adding subsections 160(6) and (7), which would apply if (i) there has been a transfer of property from a tax debtor to another person; (ii) as part of the same transaction or series of transactions, there has been a separate transfer of property from a person other than the tax debtor to a transferee that does not deal at arm’s length with the tax debtor; and (iii) one of the purposes of the transaction or series is to avoid joint and several, or solidary, liability. 

In such circumstances, the property transferred by the tax debtor would be deemed to have been transferred to the transferee for the purposes of section 160 and subject to the existing penalty of subsection 160.01(2). 

This measure is proposed to apply to transactions or series of transactions that occur on or after Budget Day.

How we can help

NRF’s tax disputes team has vast experience in assisting taxpayers during tax audits and collection measures, ensuring the tax authorities exercise their powers legally and reasonably. Our team has successfully challenged CRA information requests and compliance orders before Canadian courts in domestic and cross-border contexts.