The federal government is about to hand CRA three new audit powers that will fundamentally change how tax audits work in this country. These aren’t tools designed for offshore tax cheats or organized crime. Under the proposed legislation, they can be used on anyone CRA decides to audit — salaried employees, landlords, crypto traders, gig workers, small business owners. Anyone.
The draft legislation is already in Parliament. It’s only a matter of time before it passes. Here’s what every Canadian needs to understand — and what you can do about it.
Power #1: Sworn Testimony Under Oath — With No Transcript
Right now, CRA can interview you during an audit and ask questions. But they cannot put you under oath.
Under proposed section 231.41 of the Income Tax Act, CRA will be able to require you to answer questions under oath or affirmation — not in a courtroom, not in front of a judge, but in their office during a routine audit. And the legislation puts no threshold on when this power can be used. It’s available for any audit, on any taxpayer.
Why this is dangerous:
Nobody is required to tell you that you can have a lawyer present. There is no official transcript and no recording — CRA’s policy is that if you try to record the meeting, they leave. The only record of what you said is whatever the auditor writes down.
If you say something under oath that CRA later considers inaccurate — even if you were nervous or confused — perjury is a criminal offense. And anything you say under oath can be used in other proceedings, including criminal ones. What starts as a tax question can become a sworn record that follows you.
Power #2: $50/Day Penalty — No Judge Required
Under proposed section 231.9, CRA creates a brand new tool called the Notice of Non-Compliance (NNC). Currently, if CRA believes you’re not cooperating, they must apply to Federal Court for a compliance order. A judge reviews it. Rules apply. Due process.
Under the new law, CRA skips the court entirely. They issue the NNC themselves, and a $50/day penalty starts immediately. A single auditor can make this call — no supervisor, no second opinion, no internal review.
The partial compliance trap:
The NNC doesn’t require total non-compliance. Partial non-compliance is enough. You can cooperate fully, hand over boxes of documents, and CRA can still decide it’s not enough.
Consider this scenario: you sold your home and claimed the principal residence exemption. CRA wants proof you actually lived there. You provide utility bills, your driver’s license, bank statements. But CRA says the bills are in your spouse’s name, or they don’t like that you moved twice in five years. They want affidavits from neighbours, municipal records — things you can’t easily produce. Notice of Non-Compliance. Fifty dollars a day.
This isn’t a small deduction you can walk away from. The principal residence exemption can be worth hundreds of thousands of dollars. But now the meter is running.
CRA promises won’t protect you:
CRA may promise internal guidelines and careful use. But the legislation doesn’t require any safeguards. There’s nothing in the law that prevents a single auditor from issuing an NNC based on their own judgment. And auditors are human — they face performance pressures, targets, and when audits get contentious, these tools are readily available.
You can challenge an NNC, but CRA reviews their own decision first — giving themselves 180 days. If they uphold it, you have 90 days to go to Federal Court. The $50/day penalty ticks the entire time. If the court ultimately throws out the NNC, the penalty is cancelled. But you’ve been out of pocket for up to a year while you fought it.
Power #3: No Limits — The Clock Freeze
For most Canadians, CRA has three years from the date of your original assessment to reassess your taxes. After that, the year closes. You have certainty.
When an NNC is issued, that clock stops. And this is where it gets truly alarming.
No limit on who: The clock freezes for every non-arm’s length party — your spouse, your holding company, your family trust, your kids’ corporation. Even if they had nothing to do with the audit. Even if they don’t know the NNC was issued.
No limit on what: The freeze applies across all issues and all taxation years. An NNC about a rental property deduction can freeze your crypto reporting from three years ago.
No limit on time: There is no maximum duration. CRA decides when they’re satisfied. Until then, your files stay open indefinitely.
CRA benefits from being wrong:
If CRA internally reviews the NNC and decides they were wrong, everything resets. But if you take it to Federal Court and a judge rules that CRA should never have issued the NNC — CRA was wrong — the clock is still suspended for the entire period of the judicial review. You spent a year fighting. A judge ruled in your favour. And CRA still gets to keep that extra year on your file.
Why This Matters Beyond Tax
These three powers don’t work in isolation. They work as a system. CRA’s AI flags your file. One auditor puts you under oath with no transcript. They decide you haven’t cooperated enough, issue an NNC, and $50/day starts ticking. Your spouse’s tax files freeze. Your holding company freezes. Everything connected to you — frozen.
And if CRA gets these powers, what stops other government agencies from following the same playbook? This doesn’t stay in the tax system. It becomes the blueprint for unchecked government power — no judicial oversight, no accountability, and penalties that start before you even have a chance to respond.
CPA Canada has called these proposals an overreaction to the Auditor General’s 2018 report. The Canadian Bar Association has raised serious concerns. Tax professionals across the country are saying this goes too far.
What You Can Do Right Now
Protect yourself:
- Document every CRA interaction — date, time, who was present, what was said. Your notes may be your only protection.
- Have a tax professional before you need one. Not after the audit letter. Before.
- If CRA invokes the oath power, get a lawyer immediately. This is a criminal law problem, not just a tax problem.
- Get your records organized today. Every receipt, bank statement, contract, crypto exchange record.
- Know what CRA can request — not just returns, but books, records, emails, contracts, and documents that should exist even if they don’t.
Fight back:
These powers haven’t passed yet. The draft is in Parliament, but there is still time.
Download the free MP letter template — it explains these three powers in plain language and asks your MP to oppose the legislation or demand real safeguards. Find your MP at ourcommons.ca by entering your postal code.
Sign the petition on change.org (link below) to add your voice to the growing number of Canadians demanding judicial oversight and accountability.
And share this information with every Canadian you know. The tax community is small — we can’t do this alone. This will only change if enough Canadians find out what’s happening.
Download the MP Letter Template: [LINK]
Find Your MP: https://www.ourcommons.ca/members/en
Sign the Petition: [LINK]
Watch the Full Video Breakdown:
Sankalp (Sunny) Jaggi is a CPA, CA, MTax, CFF, and Tax Principal at Cedar Consulting Group. He has over 15 years of experience representing Canadians in CRA audits and complex tax matters.
The Advisors Table is a Canadian tax podcast that breaks down complex tax strategies into clear, actionable insights. New videos every Tuesday and Thursday.
