A sign is pictured in front of the Canada Revenue Agency (CRA) national headquarters in Ottawa, Ontario, Canada March 13, 2017. REUTERS/Chris Wattie/File Photo
Taxpayers could face fines of $50 per day for failing to cooperate with the Canada Revenue Agency, up to a maximum of $25,000, according to draft amendments to the Income Tax Act outlined by the federal finance minister.
Finance Minister François-Philippe Champagne outlined draft legislative proposals for consultation in an Aug. 15 press release, saying they would implement “a range of previously announced and other tax measures.” The proposed legislation is expected to be tabled when Parliament resumes in September.
One proposal would provide the Canada Revenue Agency (CRA) with “enhanced audit powers” to obtain information from taxpayers more easily, and it would include a new penalty for non-compliance, which was first reported by Blacklock’s Reporter. The enhanced audit powers were first announced by the government in Budget 2024.
The finance department proposed making amendments to the Income Tax Act to “enhance the efficiency and effectiveness of tax audits and facilitate the collection of tax revenues on a timelier basis,” Budget 2024’s supplementary information on tax measures says.
The proposed amendments would allow the CRA to issue a new type of notice, called a “notice of non-compliance,” to taxpayers who have not complied with a CRA requirement or notice to provide assistance or information.
A person who received a notice of non-compliance would receive a $50 penalty each day that the notice is outstanding, up to a maximum of $25,000, which would accumulate over 500 days.
The document notes that the penalty would not apply if the notice is vacated by the CRA or a court upon the CRA determining that either it was “unreasonable” to issue the notice of non-compliance or the person had “reasonably complied” at the time of issuance.
The proposed amendments would also allow the CRA to require taxpayers to swear an oath under threat of perjury when submitting information. Taxpayers who knowingly make a false statement when filing a tax return can already face a penalty equal to 50 percent of the additional tax payable.
“Currently, the CRA can obtain a compliance order from a court that directs a non-compliant taxpayer to comply with the CRA’s information requests,” the finance department document says.
However, it says that the orders have generally not been effective in gaining compliance since the primary consequence is a contempt order, which it says doesn’t usually impose a financial penalty and is time-consuming to obtain.
The new amendments would impose a penalty against a taxpayer when the CRA obtains a compliance order that is equal to 10 percent of the tax payable related to the compliance order. The penalty would be applied to one year of owed tax in excess of $50,000.
The department of finance said the proposed amendments are necessary as the current limits to the CRA’s information gathering powers “impede the effectiveness of the CRA’s compliance and enforcement actions.”