Tax Litigation: The expansion of the CRA’s audit program and what that means for you

Even if you’ve done everything properly, a corporate tax audit can have a significant impact on your business. It ties up resources, distracts employees from their jobs, and runs the risk that what you thought was right actually gets you into hot water. Audits are serious and the Government of Canada has decided that a lot more Canadians, and their businesses, are about to have auditors on their doorstep.

In Budget 2019, the Trudeau Government substantially increased CRA’s capacity to crack down on tax evasion and aggressive tax avoidance in Canada. Spending over $150 million in the next five years, the plan includes an expansion of the CRA’s audit program, backing new initiatives like the creation of a data quality team. The funding will also permit the CRA to expand its existing programs and hire more auditors. In other words, the house has shifted the odds significantly in its favour.

Managed improperly, an audit could have serious consequences for your organization. They can be lengthy, disruptive and costly. Auditors will arrive at your place of business, seeking volumes of documentation and answers to a laundry list of questions. What starts off as a fact-finding phase for the CRA can evolve into a significant tax litigation matter.

To protect yourself and your organization, it’s essential that you fully understand the audit process, your rights and responsibilities as a taxpayer and the scope of authority for the CRA. It’s important to realize that while the Income Tax Act provides auditors with significant investigatory powers – extending even beyond our borders – their power is not limitless.

Effective tax dispute resolution often begins at the audit stage and that’s where the dedicated tax team at Stewart McKelvey can help. Our tax lawyers have in-depth knowledge of the audit process and experience dealing with auditors. By engaging us early in the process we can best position your organization to respond to CRA requests and manage the audit document disclosure process. During the audit, we will review auditor demands with you to ensure the CRA is kept within the bounds of its authority. Additionally, we can respond on your behalf to any questions posed by the CRA and, where appropriate, make written arguments justifying your decisions.

Once the audit has been concluded, we will work with you to determine the best response to any concerns raised by the CRA and, when necessary, assist in the negotiation of a fair resolution.

Audits are costly, don’t let them be fatal.

Experience the difference of an expertly handled tax dispute by connecting with a member of our Tax Team.