CRA’s Statement on the Cameco Decision
On May 31, 2019, the CRA stated that it would not seek leave to appeal MNR v. Cameco Corporation (2019 DTC 5042) to the Supreme Court of Canada. In this decision, the Federal Court of Appeal (“FCA”) upheld a decision which found that the Minister may not use its audit powers to require employees of a company to submit to oral interviews. In this statement, the CRA emphasizes the importance of participation in oral interviews to the tax compliance process. Further, as a result of the Cameco decision and BP Canada Energy Company v. MNR (2017 DTC 5028), the CRA has published policy no. AD-19-02, Obtaining Information for Audit Purposes.
Notwithstanding the FCA’s Cameco decision, the policy document provides the CRA’s policy on requesting oral interviews with employees:
“The FCA decision does not diminish the responsibilities of owners, managers and other persons on the premises of a business to cooperate and answer questions during the course of an audit. Therefore, CRA officials should continue to request oral discussions and interviews with taxpayers to expedite the audit process. If a taxpayer refuses to be interviewed, the FCA stated that the CRA is free to make inferences and assumptions and to assess on that basis. The Department of Justice should be consulted in these types of situations.”
In the BP Canada decision, the FCA concluded that the CRA may not compel taxpayers to provide their tax accrual working papers with no restrictions. The updated CRA policy document now provides detailed guidance to CRA auditors on the matter of under what conditions they may request tax working papers, including a list of the taxpayer’s uncertain tax positions:
“This can be done in circumstances where CRA officials determine there is a higher risk of non-compliance. Factors that may be considered include the taxpayer’s past level of compliance, the existence of large unexplained tax reserves, and the potential tax-at-risk.”