Aggressive tax planning by wealthy individuals and complex business structures poses a significant challenge to the integrity of Canada’s tax system. In response, the Canada Revenue Agency (CRA) has bolstered its compliance arsenal, including the creation of specialized audit units. Foremost among these is the High Complexity Audit Tax Services Office (TSO) (also known as HCATSO) – a dedicated office within the CRA focused on the most complex and high-risk tax files. The High Complexity Audit TSO exemplifies how the CRA concentrates expertise and resources to identify and address aggressive tax avoidance strategies, particularly those employed by high-net-worth taxpayers and sophisticated corporate arrangements.

Mandate and Structure of the High Complexity Audit TSO

The High Complexity Audit TSO is a specialized Tax Services Office established to handle audits of extraordinary complexity. Unlike regular regional TSOs that serve broad taxpayer populations, this office functions as a national Centre of Expertise within the CRA. It was introduced as part of the CRA’s modernized regional structure to provide focused attention on complex audit cases. For example, in the CRA’s Western Region, the High Complexity Audit TSO operates alongside the usual regional TSOs but is singularly devoted to high-complexity files. The office is headquartered in Surrey, British Columbia – at the CRA’s King George Boulevard campus – reflecting its Western Region origins. However, its reach is not geographically limited; it serves as a hub for specialized auditors across provinces, enabling a coordinated approach to complex compliance issues.

In terms of mandate, the High Complexity Audit TSO’s mission is to audit and enforce compliance in the most challenging cases. These typically involve aggressive tax planning (ATP) schemes, intricate transactions, and structures designed to minimize tax. By centralizing such files in one office, the CRA ensures that its most experienced auditors, legal experts, and technical staff can collaborate on audits that require advanced skill sets. The leadership and reporting structure mirror that of other TSOs – with a director overseeing the office – but with a narrower focus. This alignment allows the High Complexity Audit TSO to integrate with the CRA’s broader Compliance Programs Branch while maintaining a specialized skill pool. It works in tandem with related CRA directorates, such as the High Net Worth Compliance Directorate and the International and Large Business Directorate, which develop strategy and risk assessment for complex cases. In short, the office’s structure embeds it in the CRA’s national compliance regime, but its concentrated mandate is to tackle the most complex, high-stakes audits – often involving aggressive avoidance arrangements that cross multiple tax years, entities, or jurisdictions.

Role in Addressing Aggressive Tax Planning

Aggressive tax planning refers to arrangements that, while not outright illegal tax evasion, push the limits of acceptable tax planning and skirt the spirit of the law. The Canadian government has been explicit that it will not tolerate schemes that abuse loopholes or obscure true tax liabilities. “The Government of Canada and the CRA have zero tolerance for taxpayers who use tax schemes to defraud or avoid paying what they owe,” as a Minister’s briefing emphasized. The High Complexity Audit TSO is a direct embodiment of that stance, serving as a frontline tool to detect and shut down aggressive tax avoidance tactics.

One of the office’s primary roles is to focus on high-net-worth individuals (HNWI) and their related entities, as these taxpayers are often behind the most complex planning schemes. Wealthy taxpayers sometimes use intricate webs of corporations, trusts, offshore accounts, and partnerships to reduce taxes. The office’s auditors conduct in-depth audits of high complexity files, which can involve scrutinizing offshore transactions, related-party dealings, and novel avoidance arrangements. This aligns with the CRA’s broader high-net-worth compliance programs, which have been a priority in recent years.

The importance of this focus is underscored by the numbers. The CRA routinely identifies over $12 billion in additional gross taxes through audits each year, and more than 60% of that comes from tax avoidance by large multinational corporations and aggressive tax planning by wealthy individuals. These figures illustrate that aggressive planning by sophisticated taxpayers accounts for a disproportionate share of non-compliance. The High Complexity Audit TSO’s role is to chip away at this compliance gap. By leveraging specialized audit techniques, the office helps ensure that even the most convoluted tax strategies are brought to light. The office also coordinates with the CRA’s Aggressive Tax Planning program at headquarters, which analyzes emerging tax schemes nationally. This synergy allows field auditors in the High Complexity TSO to benefit from risk assessments and intelligence on new avoidance trends, making their audits more effective.

High-Complexity Audits of Wealthy Individuals and Complex Structures

High Complexity Audit TSO initiatives often target what the CRA calls “high-net-worth groups” – essentially, audits that look at an entire economic group controlled by an affluent individual or family. These audits recognize that aggressive tax planning usually doesn’t occur in isolation. A wealthy individual’s personal return may be relatively simple, but the true picture emerges by examining the constellation of private companies, trusts, holding corporations, and offshore entities they control.

Beyond domestic efforts, the office’s work is tied to the CRA’s international compliance initiatives. Aggressive tax planning frequently has a cross-border element (offshore trusts, international financing, etc.), so High Complexity auditors rely on the CRA’s strong international network. Canada is part of information-sharing agreements with over 90 jurisdictions, and the CRA now automatically receives data on millions of offshore transactions and accounts. These data feeds (such as the Common Reporting Standard information on foreign financial accounts) help the High Complexity Audit TSO pinpoint undeclared offshore income or assets. The office also benefits from leads developed through international collaborations like the Joint Chiefs of Global Tax Enforcement (J5), where Canada and partner countries coordinate on investigating high-profile tax evasion and avoidance cases. In sum, the High Complexity Audit TSO functions as the CRA’s heavy artillery against sophisticated tax avoidance: it examines entire networks of related entities, utilizes advanced analytics and international data to trace hidden wealth, and does not shy away from the complexity or controversy that these high-stakes audits entail.

Enforcement Strategies and Notable Initiatives

The establishment of the High Complexity Audit TSO is part of a broader escalation in the CRA’s enforcement posture against aggressive tax planning. Several notable initiatives and strategies illustrate how this office and the CRA at large are tackling the issue:

• Targeted Funding and Resources: The federal government has significantly increased the CRA’s funding to combat aggressive tax avoidance. Starting in Budget 2016 and through subsequent fiscal updates, the CRA received dedicated funds to hire specialists and extend audit coverage of high-risk taxpayers. Budget 2022, for example, provided an additional $1.2 billion over five years for the CRA to expand audits of larger entities and non-residents engaged in aggressive tax planning. This investment was explicitly aimed at uncovering complex avoidance schemes and was expected to recover approximately $3.4 billion in additional revenue over five years. Similarly, the Fall Economic Statement 2020 committed resources for over 600 new full-time staff focused on high-net-worth and aggressive tax planning audits. These infusions of resources have directly benefited the High Complexity Audit TSO, allowing it to staff up with experienced auditors, forensic accountants, and lawyers capable of dissecting intricate tax arrangements.
• Enhanced Data Analytics and Risk Assessment: With more data than ever at its disposal, the CRA has modernized how it identifies aggressive tax planning. The Agency uses advanced analytics and business intelligence tools to parse through large datasets (such as international fund transfers and corporate filings) to flag high-risk structures. For instance, the CRA’s risk models can detect anomalies like individuals reporting low personal income while controlling high-value assets through holding companies. The High Complexity Audit TSO uses these risk assessments to prioritize its audit files.
• Litigation and the General Anti-Avoidance Rule (GAAR): A key enforcement mechanism in aggressive planning cases is the GAAR, a rule that allows the CRA to deny tax benefits from abusive arrangements even if they technically comply with the literal wording of tax law. The High Complexity Audit TSO works closely with the CRA’s Legislative Policy and Legal teams to apply GAAR in audits and to defend GAAR assessments in court. Over the years, the CRA has brought numerous GAAR cases to court to set precedents on what schemes are offside. As of 2014, 54 GAAR cases had been litigated and the courts upheld the GAAR in 28 of them (roughly half). The High Complexity Audit TSO, with its mandate, often originates these GAAR assessments on complex files, which then proceed to the Tax Court of Canada if taxpayers challenge them.
• Third-Party Penalties and Promoter Crackdowns: Aggressive tax planning often involves advice from accountants, lawyers, or financial planners who promote questionable schemes. The CRA has not hesitated to use third-party civil penalties against these promoters. According to an Auditor General audit, the CRA imposed third-party penalties in at least 48 cases, totaling about $63 million in fines, to sanction advisors who facilitated non-compliance. The High Complexity Audit TSO contributes to these efforts by identifying promoters in the course of audits and referring cases to the CRA’s Criminal Investigations Program or applying civil penalties under the Income Tax Act (Canada)’s promoter penalty provisions.
• Collaboration with Finance Canada on Closing Loopholes: The CRA’s findings from high-complexity audits often inform legislative changes to shut down loopholes. There is a continual feedback loop whereby the CRA flags aggressive strategies to the Department of Finance, which can then amend laws or introduce new anti-avoidance rules. For example, Finance Canada has responded to CRA-identified schemes by tightening rules on offshore corporate ownership (as seen in Budget 2022’s measures on preventing CCPC status manipulation).

Results and the Road Ahead

The concerted efforts of the High Complexity Audit TSO and related initiatives are yielding measurable results. The CRA’s enforcement focus on aggressive planning and high-net-worth compliance has identified significant revenues that would otherwise have been lost. As of the 2022–23 fiscal year, the CRA reported that its audit programs (bolstered by the dedicated funding and specialized offices like the High Complexity TSO) had uncovered over $14 billion in additional fiscal impact for that year alone. This figure represents taxes assessed through audits of offshore non-compliance, complex GST/HST schemes, and aggressive income tax plans.

Moving forward, the High Complexity Audit TSO is expected to remain a cornerstone of the CRA’s strategy against aggressive tax avoidance. The Agency’s official messages to the public – and to tax professionals – stress that while most Canadians comply, there is “a small minority choosing not to pay their fair share,” and the government is tightening the net on sophisticated taxpayers who attempt to game the system. In practical terms, this means continued political and financial support for the CRA’s high-complexity audit capacity. Budget 2023 and beyond have signaled ongoing investments to further increase the CRA’s enforcement capabilities, including new technologies (for example, AI-driven analytics) to uncover hidden relationships and income streams.

For tax professionals advising clients, the clear implication is that aggressive tax planning faces unprecedented scrutiny. The CRA’s High Complexity Audit TSO and its related programs treat complex avoidance schemes not as clever financial engineering, but as aggressive non-compliance subject to challenge. The CRA emphasizes that it is better positioned than ever – through enhanced data, inter-agency cooperation, and expert audit teams – to target wealthy individuals who deliberately push the limits of legal tax planning. And when those cases are identified, the CRA is prepared to pursue them with all available tools, from extended audits to litigation and penalties.

Conclusion

In summary, the High Complexity Audit Tax Services Office serves as a specialized strike force within the CRA’s broader compliance regime. Its establishment and work underscore the Canadian government’s commitment to protecting the tax base against sophisticated avoidance. High-net-worth taxpayers and complex tax structures are a prime focus. Through this office’s audits and the CRA’s aggressive tax planning program, Canada is sending a strong signal that aggressive tax avoidance will be detected and challenged – ensuring that all taxpayers, regardless of wealth or complexity of affairs, pay their fair share under the law.

If you’re a corporate director in Canada, you could face personal liability for certain unpaid tax debts of your company. The Canada Revenue Agency (CRA) can assess directors personally for unremitted GST/HST and payroll source deductions (income tax, CPP, EI) under section 227.1 of the Income Tax Act (Canada) (ITA) and section 323 of the Excise Tax Act (Canada) (ETA). However, there is an important safeguard for responsible directors: the due diligence defence. This article explains what a CRA director’s liability assessment is, how the due diligence defence works under Canadian law, and practical strategies for proving due diligence.

What Is a CRA Director Liability Assessment?

A director’s liability assessment is a tool the CRA uses to collect certain corporate tax debts from a company’s directors personally. If a corporation fails to remit trust funds like employee withholdings or GST/HST collected, the CRA becomes an “involuntary creditor” and can pursue directors for the unpaid amounts. Typically, this happens with unpaid payroll deductions (income tax, CPP, EI that were deducted from employees’ pay) or unremitted GST/HST that was collected from customers. Before the CRA can tap directors, though, three conditions generally must be met:

• Corporate Default & Execution: The company has failed to pay the amounts, and the CRA has tried to collect from the company (e.g. by seizing assets or in bankruptcy) without success.
• Two-Year Limit: The CRA must issue the director assessment within two years of the person ceasing to be a director.
• Lack of Due Diligence: The director is unable to demonstrate “due diligence,” meaning they did not exercise the degree of care, diligence, and skill to prevent the failure that a reasonably prudent person would have in similar circumstances.

Understanding the Due Diligence Defence

The due diligence defence is a statutory protection codified by subsection 227.1(3) ITA and subsection 323(3) of the ETA. The defence generally provides that if every reasonable measure was taken to avoid the failure to remit, a director should not be personally liable. But this defence has limits and has been interpreted strictly by the courts. Key points to understand:

Objective Standard of Care:

The standard for due diligence is largely objective. In the leading case, Canada v. Buckingham (FCA 2011), the Federal Court of Appeal held that the director’s conduct is measured against what a “reasonably prudent person” in similar circumstances would have done.

Timing – Prevention, Not Cure:

Due diligence is about preventing the failure to remit, not fixing it afterward. Courts draw a line at the moment when things start to go wrong. The clock starts when a director knew or ought to have known the company was in financial trouble. From that point on, a prudent director would actively try to avert a remittance failure. If you only took action after the taxes went unremitted (for example, negotiating a payment plan with CRA once arrears piled up), that’s considered “curative” rather than preventive and usually won’t satisfy the due diligence test.

No Using CRA as a Bank:

A common scenario is a company in a cash crunch that uses the withheld taxes to pay suppliers or keep the lights on, intending to catch up later. Courts have repeatedly rejected due diligence claims in this scenario. The law was designed precisely to prevent directors from financing operations with money owed to the Crown.

Active Oversight is Required:

Being a passive director is dangerous. The ITA and CRA guidance make clear that all directors – even volunteers or nominal directors – are expected to actively ensure tax compliance. You cannot hide behind “I left it to my accountant” or “I was just an outside director”. The law does not distinguish between hands-on and absentee directors. In fact, if you delegate bookkeeping or tax duties, you still must monitor and verify that withholdings and remittances are being made. Failing to ask questions or to implement basic controls can sink a due diligence defence. For example, in Newhook v. The Queen, a director who relied on an accountant was still found liable because he did not oversee or review the accountant’s work.

Experience and Skill Level:

While the standard is objective, courts do consider the context and the director’s role. A more experienced businessperson may be expected to foresee and address issues that a novice might not. In Hall v. The King, the Tax Court noted the director was an experienced entrepreneur and held him to a higher standard of diligence than a brand-new director. Similarly, if you have an accounting or legal background, you might be held to knowing more about compliance. Conversely, genuine incapacity might be a factor: recent cases suggest that serious mental or physical illness could excuse a director’s inaction, but only if it truly made them incapable of understanding or performing their duties. This is a high bar – generally, partial impairment or stress is not enough to succeed with due diligence on that basis.

Practical Strategies to Prove Due Diligence

If you are a director and want to protect yourself (or if you’re facing a director’s liability assessment and need to build a defence), here are practical steps and proof strategies:

1. Implement Clear Internal Controls:

From day one, set up a system to ensure tax remittances are made. For example, maintain a separate account for payroll withholdings and GST collections. Treat that money as untouchable for other expenses. Regularly check that payments to the CRA are scheduled and executed. Document these procedures in board meeting minutes or internal memos. Showing that you established a reasonable system is strong evidence of diligence.

2. Monitor and Document Compliance:

Don’t just trust – verify. Require that your CFO, bookkeeper or payroll service provide you with monthly reports on all source deduction and GST remittances. Follow up on any anomalies immediately. Keep emails or signed reports that confirm remittances have been made each period. If you’re a non-active director, make inquiries periodically in writing. CRA expects directors to maintain effective communication and be aware of what’s happening in the company.

4. Plan for Financial Stress:

If the business hits a rough patch, prioritize tax remittances in your cash flow. It can be tempting to pay suppliers or wages first, but remember that Crown debts are special. Consider speaking with your bank about a bridge loan or line of credit that covers making CRA remittances on time.

5. Don’t Delay Difficult Decisions:

If it becomes clear the company cannot meet its tax obligations, exercise your duty by taking decisive action. That might mean cost-cutting, temporarily holding back other payments to make the remittance, or even ceasing operations if continuing would rack up unremittable tax debts. The courts praise directors who act quickly to address tax arrears. Conversely, the longer you let a tax debt slide, the more it looks like you were using CRA as an unofficial line of credit.

6. Keep Evidence of Your Diligence:

In a dispute, you’ll need to prove what you did. Keep copies of relevant documents: bank statements showing separate tax accounts, correspondence with accountants or CRA, meeting minutes where tax compliance was discussed, emails where you urged timely remittances or raised concerns about cash flow, etc. If you ever directed someone to make a payment or raised a red flag about falling behind, record it. Also log any professional advice you sought – for example, if you consulted a tax lawyer or advisor when trouble started, that shows proactiveness.

7. Use Professional Help Strategically:

Engaging a tax lawyer early can bolster your due diligence story. Not only can a lawyer advise on how to manage or dispute a director’s liability, but the fact that you sought expert help is evidence that you took the issue seriously. If a director’s liability assessment is proposed, respond to the CRA’s pre-assessment letter. This is often a last chance to persuade CRA officials that you exercised due diligence, potentially avoiding the assessment. A lawyer can help frame your response effectively, citing the evidence of your actions.

Consider Resignation if Necessary:

As a last resort, if you realize you cannot prevent further tax arrears and the business is failing, you might choose to resign as director. Resignation won’t absolve you of liability for amounts that became due while you were a director, but as noted, if you’re no longer a director for 2 years, the CRA cannot assess you for new amounts.

Conclusion

Facing a CRA director’s liability assessment is stressful, but knowing about the due diligence defence gives you a fighting chance if you truly acted responsibly. The courts have set a high bar for this defence – it’s not enough to show you were well-intentioned or busy with other matters. You need to demonstrate concrete actions and vigilance, especially once your company started struggling financially. Many honest directors have fallen short of this standard simply by delaying tough choices or failing to document their efforts. The key lessons are: be proactive, stay informed, document everything, and never assume CRA will wait while you sort things out.

Introduction and Objective

The Canada Revenue Agency’s Related Party Initiative (RPI) is a specialized compliance program targeting high-net-worth taxpayers and their interconnected entities. The RPI’s core objective is to identify, risk-assess, and take compliance action on instances of tax non-compliance among the wealthy and their related networks. In practice, this means the CRA examines entire groups of related parties – individuals, corporations, trusts, partnerships, and other entities – rather than auditing a single taxpayer in isolation. By taking a holistic, group-based audit approach, the RPI aims to ensure that affluent individuals and families with complex financial structures pay their fair share of taxes and do not exploit those structures for aggressive tax avoidance or evasion. This initiative is a key element of the CRA’s broader strategy to protect the integrity of the tax system and maintain fairness by addressing non-compliance in the high-wealth segment.

Scope and Target Population

From its inception, the Related Party Initiative has focused on high-net-worth individuals (HNWIs) who control extensive economic networks. The CRA formally defines this population as individuals who – either alone, with family members, or through related entities – control business activities across multiple entities and have a combined net worth of at least $50 million. In other words, the RPI targets the wealthiest families and their business interests, sometimes informally dubbed “global high-wealth groups.” These groups often include privately held corporations, family trusts, partnerships, joint ventures, and foundations interconnected through ownership or financial dealings. The RPI examines the entire corporate web surrounding a high-net-worth person, recognizing that significant tax risks can arise from complex structures and related-party transactions within those networks. By focusing on this wealthy population segment, the CRA addresses a cohort that has greater opportunity to engage in sophisticated tax planning – for example, shifting income to offshore entities or using intra-group transactions to minimize tax.

Importantly, the scope of the RPI has expanded over time. When the program began as a pilot in the mid-2000s, it had very high thresholds for inclusion (initially targeting ultra-wealthy individuals meeting a net worth test and a minimum number of related entities in their group). In recent years, the CRA broadened the reach of the program by relaxing some of these entry criteria to capture more high-wealth groups. Notably, the agency removed the earlier requirement that an individual have a specified large number of related corporations or trusts (e.g. 25+ entities) to fall under the program’s ambit. This change means even wealthy individuals with somewhat simpler – but still significant – structures can now be reviewed under the RPI. The CRA’s 2017–18 Departmental Plan explicitly stated that it is “expanding the scope of the wealthy population segment and its related party initiative through new risk assessment strategies and additional audit teams.” In essence, the RPI’s net has widened: if a taxpayer’s overall economic group represents substantial wealth or complexity, it may be selected for this initiative even if the number of entities involved is fewer than in the past. The main target group remains high-net-worth individuals and their related networks, including corporations and trusts.

Program Content and Approach

The RPI was originally launched as a pilot project in 2005 and became a fully established program over the subsequent years. It was significantly scaled up in 2016 with new resources and tools to strengthen its effectiveness. At its core, the RPI follows a three-stage process: identification, risk assessment, and compliance action. Each stage is described below:

• Identification of High-Wealth Groups: RPI analysts devote considerable effort to identify wealthy individuals and their “economic webs” of related parties. Because taxpayers report income – not net worth – on tax returns, the CRA must rely on extensive research and data analysis to pinpoint individuals who likely meet the high-net-worth criteria. This involves leveraging internal CRA data (e.g. ownership information, tax filings of private corporations, trust returns) as well as external intelligence (public records, disclosures, international financial data) to build a profile of a taxpayer’s total wealth and affiliations. Once a potential HNWI is identified, the CRA maps out all associated entities and associates – for example, companies where the individual or family members are shareholders or directors, trusts where they are settlors or beneficiaries, partnerships they participate in, etc. The result is a comprehensive group dossier for each high-wealth taxpayer, detailing the structure of their related parties and financial relationships.
• Risk Assessment: After building these group profiles, the RPI conducts a thorough risk assessment of each network. This means evaluating where the greatest tax compliance risks may lie within the group. Factors that can elevate risk include complex cross-border arrangements, signs of aggressive tax planning schemes, significant offshore assets or transactions, unusual losses or tax attributes in group entities, and inconsistencies between an individual’s apparent wealth and reported income. The CRA recognizes that wealthy taxpayers often have access to sophisticated tax advice and may utilize intricate structures that serve legitimate business purposes on the surface. Distinguishing aggressive non-compliance from permissible tax planning requires advanced analytics and expert judgment. The RPI uses specialized tools (for example, data mining algorithms and international information exchanges) to flag high-risk activities. Each HNWI group identified is “triaged” based on risk – i.e. ranked and selected for audit review if indicators of non-compliance are strong.
• Compliance Action (Audit and Enforcement): Groups that score as high-risk are referred to RPI audit teams for in-depth compliance action. Here, the CRA employs a holistic audit approach, examining the taxpayer’s entire ecosystem rather than a single return. An RPI audit is typically carried out by a multi-disciplinary team of auditors with expertise in areas like aggressive tax avoidance, international tax, and forensic accounting. For example, a team may include auditors specializing in offshore compliance if the group has foreign entities. The audit will review all relevant entities and transactions in concert – for instance, probing how funds flow between the individual and their companies or trusts, whether income has been shifted or deferred inappropriately, and whether any anti-avoidance rules (such as the general anti-avoidance rule, transfer pricing rules, or trust taxation rules) might apply. By auditing the “related party group” as a whole, the CRA aims to get a full picture of the taxpayer’s affairs and uncover any hidden non-compliance that might be obscured through the use of intermediary entities. This comprehensive method is far more resource-intensive than a standard audit, but it is considered necessary given the complexity of high-wealth cases.

Throughout these steps, the RPI leverages enhanced data analytics and business intelligence. In recent years the CRA has begun using advanced techniques – such as artificial intelligence algorithms and large-scale data matching – to improve detection of high-risk patterns within high-net-worth groups. The CRA’s investment in these tools allows it to parse through vast amounts of information (including international banking data and tax treaty exchanges) to pinpoint transactions or ownership links that merit closer scrutiny. In addition, the CRA coordinates with other tax administrations globally as part of its focus on the “highest risk” taxpayers; this international cooperation (for example through the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration) strengthens the RPI’s ability to identify offshore structures or assets that Canadian HNWIs may be involved with.

Recent Developments and Enhancements

The Related Party Initiative has evolved considerably over the past decade, especially with increased government focus (and funding) on combating offshore tax avoidance and ensuring tax fairness. Key developments include:

• Budget 2016 Expansion: The federal Budget 2016 provided a significant boost to the CRA’s high-net-worth compliance efforts. With additional resources allocated, the CRA enhanced the RPI by adding new risk assessment strategies and hiring more auditors dedicated to this program. The initiative was described as being “enhanced in Budget 2016” to ramp up its capabilities. As a direct result, the Agency formed more RPI audit teams and developed improved analytic techniques to broaden its reach. The CRA itself acknowledged that it “is expanding the scope of the wealthy population segment and its related party initiative through new risk assessment strategies and additional audit teams.”
• Growth in Audit Teams and Capacity: Following the Budget 2016 investment, the CRA substantially increased the personnel devoted to RPI audits. By the 2018–19 fiscal year, the RPI program had 31 dedicated audit teams nationwide (supported by 3 centralized risk assessment teams) focusing on high-net-worth groups. This represented a major scale-up from the program’s early years. In total, roughly 250 senior auditors were assigned to scrutinize high-net-worth individuals and their related entities as of 2018.
• Broadening of Criteria and Reach: As mentioned, the CRA has broadened the RPI’s reach by loosening strict entry criteria. The removal of the “25+ entities” threshold is one such change in recent years, allowing groups with fewer entities (but still significant wealth) to be included. Furthermore, the CRA is not solely looking at individual billionaires; it now considers “significant assets held by a group of individuals” – for example, multiple related families each holding $30–$40 million in assets – if there is economic interdependence among them. Such groups could collectively meet the spirit of the $50 million threshold and therefore come under review. This flexibility in criteria reflects the CRA’s commitment to leave no wealthy cohort outside the compliance net simply due to an arbitrary cutoff. In effect, the RPI’s scope in 2025 is much wider than when it started, covering a larger and more diverse set of high-net-worth taxpayers.
• Increased Audit Yield and Ongoing Efforts: The intensification of the RPI has started to show tangible results in the CRA’s compliance outcomes. Although specific audit results are often confidential, the CRA has reported that its focus on aggressive tax planning by wealthy individuals is paying off. For instance, the CRA anticipated that audits of wealthy individuals would generate roughly $432 million in additional federal revenue over five years as a result of the post-2016 compliance initiatives. By 2019, the Agency disclosed that hundreds of RPI audits were underway at any given time, with many already completed, and over a thousand high-wealth groups identified as potential audit targets going forward.
• Rebranding to RPAP: While the CRA’s official publications still refer to the program as the Related Party Initiative, internally the program has been reframed as the Related Party Audit Program (RPAP) to more clearly describe its function. This terminology shift (which took place around April 2019) aligns with the CRA’s practice of focusing on audit-driven enforcement for these files For practical purposes, RPI and RPAP can be considered the same initiative, with the latter name emphasizing the audit-centric nature of the work.

Conclusion

The CRA’s Related Party Initiative represents a focused and evolving effort to ensure compliance among Canada’s richest taxpayers and their related entities. Its content and approach are tailored to the unique challenges posed by complex tax planning strategies often utilized by high-net-worth groups. The RPI’s objectives are clear – to detect and address aggressive tax avoidance/evasion in the upper echelons of wealth – and its scope encompasses those who wield significant economic influence through intertwined business structures. Over the years, the RPI has grown from a small pilot project into a robust national program, backed by dedicated teams and sophisticated analytics. Recent developments, including enhanced funding, expanded criteria, and greater integration of data-driven risk assessment, have further strengthened the initiative.

By concentrating resources on those most able to engage in elaborate tax planning, the Related Party Initiative supports the CRA’s mandate of maintaining tax fairness. It signals to high-net-worth Canadians that complex structures will not shield them from scrutiny and that the tax system is being actively monitored at the top end. With continued political and public attention on tax avoidance, the RPI is likely to remain a prominent feature of the CRA’s compliance arsenal. Tax professionals should keep abreast of this initiative’s developments – such as any further expansions of scope or changes in CRA’s audit techniques – to better guide their clients who could be impacted. The RPI stands as a prime example of the CRA’s increasingly sophisticated approach to tax enforcement in the modern era, focusing on high-risk areas to protect the federal tax base and promote voluntary compliance across all segments of taxpayers.

The Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) were lifelines for businesses during the COVID-19 pandemic. CEWS alone paid out about $100 billion to help employers cover wages. Now that the crisis has passed, the Canada Revenue Agency (CRA) is auditing those subsidy claims to ensure they were properly claimed. In many cases, these audits are leading to disputes with CRA auditors and appeals officers, and increasingly, in appeals to the Tax Court of Canada (TCC). This article explores the emerging trends as CEWS/CERS audits progress from initial CRA review to formal litigation, and what business owners should know if they find themselves in this situation.

CRA Crackdown: CEWS/CERS Audits by the Numbers

The CRA has undertaken extensive post-payment audits of CEWS and CERS claims to catch any overpayments or ineligible claims. The scale is massive: as of mid-2025, the CRA has reviewed over $18 billion worth of CEWS claims through nearly 53,000 verifications (audits and reviews), resulting in about $1.1 billion of CEWS distributed being denied. In other words, approximately 6% of the audited subsidy dollars were disallowed, while 94% of audited amounts were confirmed as compliant. This suggests that most businesses followed the rules, but the CRA still identified significant non-compliance in a subset of cases.

Why CEWS/CERS Claims Get Disputed

Most CEWS/CERS recipients were legitimate, but common issues have emerged in those cases where the CRA found discrepancies. Understanding these issues can help business owners anticipate and address potential disputes:

• Eligibility Criteria Misunderstandings: To qualify for CEWS or CERS, businesses had to demonstrate a certain percentage drop in revenue for specific periods. Some disputes arise because the CRA determined a company did not meet the revenue decline threshold, even if the business believed it did. For example, the Auditor General identified thousands of companies whose tax filings didn’t show the required drop in revenue. This has led the CRA to deny those claims on eligibility grounds.
• Calculation Errors: The CEWS formula and CERS calculations were complex. It’s no surprise that simple errors in spreadsheets or misunderstanding the rules caused many claims to be overstated. In fact, the CRA noted that a majority of adjustments were due to miscalculations or documentation gaps, not willful cheating. For instance, a business might have miscalculated its wage subsidy amount or included ineligible employees by mistake. These errors often result in partial reductions of the claim.
• Insufficient Documentation: During audits, the CRA requires proof of revenue declines and other eligibility factors. If a business cannot provide adequate documentation(e.g. sales records, receipts, or attestations) to back up its claim, the auditor may deny the subsidy. Some claims were denied in full simply because the claimant failed to respond or submit the needed records. .
• Third-Party Preparers & Fraudulent Claims: A big red flag has been claims prepared by certain third-party consultants. The CRA found that many of these preparer-linked claims were inflated or outright ineligible. In these situations, businesses may have been intentionally misled by bad advice, or in worst cases, colluded in making false claims. The fallout is severe – high denial rates, stiff penalties, and even potential legal consequences. If your CEWS/CERS application was handled by an external advisor who “guaranteed” you’d qualify, expect intense scrutiny.
• Retroactive Rule Changes: The subsidy programs evolved over time. Occasionally, businesses argue that shifting guidance or rule changes confused their compliance. While this isn’t a defense for non-compliance, it can be a point of contention in disputes (for example, debates about how certain revenues are defined or which accounting method to use for the revenue drop test).

In summary, disputes typically center on whether the business truly met the qualification criteria and calculated the subsidy correctly. The CRA’s audit findings show that while outright abuse was not rampant, it certainly existed – and even honest mistakes can lead to a reassessment. If the CRA believes you weren’t entitled to what you claimed, you’ll get areassessment denying the subsidy (or part of it), which you then have the right to object to.

From Audit to Objection: The Path to Dispute a CEWS/CERS Reassessment

What do you do if a CRA audit says you owe money? The process for disputing a CEWS or CERS assessment is much like any tax dispute. It starts with the audit but can progress through several stages:

1. Audit Proposal: After reviewing your records, the CRA auditor may issue a proposal letter outlining any adjustments. For example, they may propose to reduce your CEWS claim because they think you didn’t experience a large enough revenue drop  or disallow certain rent expenses for CERS. It’s critical to respond to this proposal letter with any additional evidence or arguments. This is your first chance to resolve the issue before it becomes final.
2. Reassessment Issued: If the audit concludes with changes, the CRA will send a Notice of Redetermination/Reassessment for the applicable CEWS/CERS period, effectively clawing back the subsidy. If you are assessed penalties, you’ll also receive a Notice of Reassessment for the income tax year in which you received the CEWS/CERS subsidies. Don’t panic. A reassessment is not the end of the road. At this point, you have 90 days to file a formal dispute called a Notice of Objection.
3. Notice of Objection (Appeal to CRA): Filing a Notice of Objection is the next step to challenge the CRA’s decision. This is a written submission where you explain why you disagree with the reassessment and provide supporting documentation. The objection triggers a review by the CRA’s independent Appeals Division – a different team that was not involved in the audit. Submitting a strong, clear objection is crucial; it preserves your legal rights and lays out your case for why the subsidy was validly claimed. If an objection is not filed within 90 days of the date of the reassessment, you must file an extension request to object within 1 year.
4. CRA Appeals Stage: Once your objection  has been received, a CRA Appeals Officer will review all the facts. This is a chance for an impartial second look. The Appeals Officer may contact you (or your representative) to discuss the case or request further info. Be cooperative and responsive – sometimes issues can be resolved at this stage through negotiation or by providing a clarification the auditor missed. In fact, a good number of tax disputes settle at the objection stage with some compromise or a full reversal by CRA Appeals. Statistics show about 65% of objections in Canada result in some change in the taxpayer’s favor (taxpayer.law). You might receive a new adjusted Notice of Reassessment/Redetermination if they partly or fully agree, or a Notice of Confirmation if they stick to denying your claim. At this point, you have 90 days to file a Notice of Appeal to bring your matter before the Tax Court of Canada.
5. Appeal to the Tax Court of Canada: If the CRA Appeals Division also denies your CEWS/CERS claim (in full or part) and you still believe they’re wrong, the final step is to take the matter to court. You can file an appeal in the Tax Court of Canada. This moves the dispute into the judicial system, where an independent Tax Court judge will hear evidence and arguments from both sides. Going to Tax Court is a significant step  and it usually means the amounts at stake are large or the principles are important. The Tax Court process can be legalistic, so most businesses will hire a tax litigation lawyer at this stage (if they haven’t already) to navigate the formalities. The court will schedule hearings, and eventually a judge will render a binding decision.

Throughout this journey from audit to objection to court, deadlines and procedure are critical. Missing the objection deadline or Tax Court filing deadline can forfeit your rights, so it is essential to act promptly if you intend to dispute. And at each stage, well-crafted arguments and detailed documentation can persuade the authorities to decide in your favor. Our firm’s experience is that early professional guidance – even during the audit – can often resolve issues before they escalate. For instance, involving a tax lawyer to communicate with the auditor or draft the objection can set the narrative straight from the start.

Litigation Trends: CEWS/CERS Disputes in the Courts

As the first wave of CEWS and CERS audits wraps up, we’re now seeing an uptick in litigationrelated to these programs. Business owners who firmly disagree with the CRA’s reassessments are increasingly taking their fights to Tax Court. Here are some notable trends and developments as these disputes advance toward the courts:

• Tax Court is the Main Arena: One important clarification that has emerged is which court has jurisdiction over CEWS/CERS disputes. Initially, a few frustrated claimants tried to challenge CRA’s refusal of subsidies through the Federal Court via judicial review. However, the Federal Court of Appeal ruled that subsidy eligibility disputes must go through the Tax Court, not Federal Court (Iris Technologies Inc.). In this 2021 case, the Court struck down a judicial review, stating that if the CRA denies a CEWS claim because it deems the business ineligible, that decision is essentially like any tax assessment and should be appealed to the Tax Court. The only time the Federal Court would be involved is if the CRA agreed you were eligible but then exercised discretion not to pay (for instance, overpayment refund issues), which is rare in CEWS/CERS. This means anyone disputing a subsidy denial should be prepared to follow the normal tax appeal route to Tax Court. The Supreme Court of Canada has since confirmed this division of jurisdiction, bringing clarity – you cannot sidestep the Tax Court for these matters.
• Key Issues Being Litigated: The cases reaching court tend to involve interpretational gray areas or significant sums. For example, debates over the interpretation of the “revenue drop” calculations, the inclusion or exclusion of certain revenues, affiliation rules (some companies restructured to qualify and the CRA challenged their eligibilty), and whether the CRA’s audit methodology was fair. Since CEWS and CERS were rolled out quickly, there are novel legal questions to settle. Courts may have to decide how certain provisions in the law are to be interpreted. Early court decisions have generally upheld the strict letter of the law – if a business didn’t technically meet the criteria, relief is unlikely – but each case’s facts matter.
• Penalties and Allegations of Misconduct: Another trend is the implementation of penalties against taxpayers who are denied CEWS/CERS. The CRA not only demands repayment of subsidies but also, in cases of gross negligence or deliberate misrepresentation, hits businesses with penalties. Some companies are challenging these penalties in Court, arguing they acted in good faith or relied on professional advice. The outcome of these penalty disputes will set the tone for how harshly mistakes in subsidy claims are treated under the law. On the extreme end, a few cases flagged for fraud (tax evasion) could even lead to criminal trials, but those are separate from the Tax Court’s civil process.
• Backlog and Resolution Pace: It’s worth noting that the tax litigation process can be slow. The surge of CEWS/CERS objections has added to the CRA Appeals workload, and any cases that do proceed to Tax Court might take a year or more to be heard (especially if the courts are dealing with the backlog of cases that were put on hold during the pandemic). That said, the mere act of filing a Tax Court appeal sometimes prompts a settlement – the Department of Justice (which represents CRA in court) might negotiate a compromise rather than litigate a borderline case. Early trends indicate that many disputes are settling before trial, as neither side wants protracted litigation over pandemic relief funds if it can be avoided.

In summary, the emerging litigation trend is that CEWS and CERS disputes are moving through the established tax dispute system, and courts are now beginning to shape the jurisprudence. The CRA’s aggressive audit stance (particularly on suspect claims) has led to a wave of objections, and a portion of those are now proceedingto the Tax Court for resolution. Business owners should watch these developments – as cases get decided, we’ll have clearer guidance on the gray areas of the subsidy rules.

Preparing for a CEWS/CERS Dispute: What Should Businesses Do?

If your business is facing a CEWS or CERS audit, or you’ve already been reassessed and asked to repay subsidies, there are concrete steps to protect yourself. Preparation and expert guidance are key, given the high stakes. Here are some tips:

• Get Professional Advice Early: Don’t wait until you’re in court to contact a tax dispute lawyer. Engaging an expert during the audit or objection stage can drastically improve your chances of a favorable outcome.
• Organize Your Documentation: Treat a subsidy audit like a serious financial review – you’ll need to assemble all relevant records. This includes sales ledgers, financial statements, bank records, invoices for rent and leases (for CERS), employee payroll records and sales invoices (for CEWS), and any correspondence or calculators used when applying. The more organized and complete your documentation, the easier it is to demonstrate that your claim was correct. If you find any errors in your original application while reviewing, be upfront about them; honesty can sometimes lead CRA to waive penalties if the mistake was inadvertent.
• Understand the Rules Retroactively: Take the time to re-read the CEWS/CERS eligibility rules as they existed for the periods you claimed. Often disputes boil down to technical definitions – e.g., how to calculate your revenue drop (cash vs. accrual accounting, year-over-year vs. alternate baseline, etc.). By understanding exactly what the law required, you can better argue that you did, in fact, comply (or identify where a misunderstanding happened). The CRA’s administrative guidance and FAQs can be helpful, but remember that in court, the Income Tax Act (Canada) provisions will be the ultimate authority. If something is unclear, that’s where legal arguments about interpretation come in.
• Consider Strategic Concessions: Not every disputed dollar is worth fighting over. If the CRA has solid evidence that, say, one period of your claim was ineligible, it might be wise to concede that point and focus your energy on the periods you have a higher chance of success. Courts appreciate when parties are reasonable.
• Prepare for Litigation (but Use It as Leverage): If you do file an appeal with the Tax Court, start preparing your case early. In litigation, the burden of proof is on the taxpayer to show the CRA is incorrect. However, also recognize that filing an appeal brings the CRA’s lawyers to the table and signals you’re serious. Settlement discussions can occur even after a case is in the court system. Be open to a fair settlement if one is offered; litigation is costly and unpredictable, and considerable money can be saved by accepting a reasonable settlement offer. That said, do not be afraid to see it through if you have a strong case – sometimes a court judgment is needed to resolve a principle or to get a clean win.

Throughout each step, maintain professional correspondence with the CRA. Avoid emotional responses to auditors or officers – stick to facts and law. Every email or letter can become an exhibit in court, so it should reflect well on your position. And importantly, mind the timelines: 90 days to object, 90 days to appeal to the Tax Court after an objection decision, etc. If you’re unsure, consult with your legal advisor so you don’t lose recourse due to a procedural slip.

Turning Challenges into Resolution

Facing a CEWS or CERS dispute can be daunting – after all, these subsidies were supposed to help your business, not lead to a fight with the taxman. The good news is that you do have rights and avenues to contest the CRA’s findings. Many businesses have successfully defended their claims by providing additional context or by pointing out where auditors made a mistake. The process from audit to court is indeed a journey, but it’s one designed to ensure fairness and the rule of law in how these COVID-19 support programs are enforced.

The trend in emerging litigation shows that while the CRA is diligently enforcing compliance, the system also allows taxpayers to push back where they believe the CRA is wrong. From the initial audit proposal to Tax Court, each stage is a chance to resolve the matter. If your business is under the CRA’s microscope for CEWS or CERS, don’t be discouraged.Arm yourself with knowledge and qualified advice.

Our firm specializes in tax dispute resolution across Canada, including CEWS/CERS cases. We’ve helped clients appeal CRA decisions and even litigate when necessary. We understand the nuances of these subsidy programs and the legal arguments that can sway an appeal in your favor.

Feel free to reach out for a consultation.

The Canada Revenue Agency (CRA) has intensified its focus on online sellers using platforms like Amazon, Shopify, Etsy, and eBay. With the rapid growth of e-commerce, the CRA is ramping up audits and investigations to ensure income from online sales is properly reported and taxed. This explains why CRA online seller audits are on the rise and what you, as an online seller, need to know. We’ll cover unreported income risks, GST/HST obligations, digital audit triggers, foreign reporting requirements, and recent CRA enforcement tactics. Finally, we outline how to respond if the CRA comes knocking, and when to seek legal representation.

Why the CRA Is Auditing Online Sellers in 2025

Online marketplace sellers have caught the CRA’s attention in recent years due to concerns about unreported income and tax non-compliance. The agency’s data analytics and risk assessment systems flag cases where a taxpayer’s reported income may not match their online business activity. In fact, self-employed digital entrepreneurs – from Amazon FBA merchants to Etsy crafters – are a growing focus for CRA audits.

Several factors explain this heightened scrutiny:

• Rapid Growth of E-commerce: Millions of Canadians now earn income through platforms like Amazon, Shopify, eBay, and Etsy.
• Information Sharing and Data Analysis: The CRA is obtaining more third-party data on online sales.
• Underground Economy Crackdown: The CRA’s enforcement strategy explicitly targets the “underground economy,” which includes unreported online business income.

In short, if you’re earning income online, expect the CRA to pay closer attention. Next, we delve into the specific tax issues that can put online sellers at risk.

Unreported Online Sales Income – A Major Red Flag

One of the biggest tax risks for online entrepreneurs is unreported income. All Canadian residents must report worldwide income from all sources, including any profits from online sales. It doesn’t matter if you consider your Etsy shop or eBay listings a “side hustle” – if you’re making money, the CRA expects its share.

Failing to report online business income can lead to serious consequences. The CRA can reassess you for back taxes on the unreported income, plus charge interest and penalties. In cases of gross negligence, penalties can be up to 50% of the tax avoided, and criminal prosecution is possible for the most egregious cases. Repeated failure to report income can trigger additional penalties.

Why do many online sellers fall into this trap? Some genuinely believe small online earnings are tax-exempt or “hobby” income. Others might hope the CRA simply won’t notice. However, the CRA now has data indicating potential unreported income by online sellers. The agency has even begun sending “nudge letters” – gentle notices reminding specific groups (like online marketplace vendors) to review and correct their tax filings. These letters imply the CRA has detected a discrepancy and encourage the recipient to come clean through the Voluntary Disclosures Program (VDP).

GST/HST Obligations for Online Sellers in Canada

Income tax isn’t the only concern – online businesses must also comply with Canada’s sales tax laws. If you are selling goods or services online, you need to understand your GST/HST obligations to avoid a possible GST/HST audit in Canada.

Registration Threshold: Generally, a Canadian business must register for GST/HST once it earns over $30,000 in gross revenue from taxable supplies within four consecutive calendar quarters. This threshold applies to Canadian online sellers just as it does to brick-and-mortar businesses.

Collecting and Remitting Tax: Once registered, you need to charge the appropriate GST or HST on your sales. Online marketplace sellers often ship Canada-wide, so you must apply the correct tax for each province (and PST in provinces that have it). You’ll then have to file GST/HST returns (usually quarterly or annually, depending on your revenue) and remit the taxes collected to the CRA.

Digital Audit Triggers and CRA Enforcement Tactics

How does the CRA detect online business non-compliance? The agency uses a mix of traditional audit techniques and digital-era enforcement tactics to find red flags:

• Third-Party Data and Unnamed Persons Requirements: One powerful tool in the CRA’s arsenal is the Unnamed Person Requirement (UPR), which allows the CRA (with court approval) to obtain information about a group of taxpayers from third parties. The CRA has used UPRs to collect data on e-commerce sellers in the past.
• New Digital Platform Reporting Rules: Starting with the 2024 tax year, online platform operators (like Amazon, Etsy, Airbnb, Uber, etc.) must report detailed information about “reportable sellers” to the CRA by January 31, 2025.
• “Nudge” Letters and Assisted Compliance: The CRA often begins with soft-touch tactics. Through its Assisted Compliance Program (launched in 2022), the CRA contacts gig workers and online sellers with educational letters. These nudge letters are designed to prompt you to self-correct any issues.
• Foreign Information Sharing: The CRA participates in international information exchanges. For instance, under treaties and the OECD frameworks, foreign payment platforms or payment processors might report income earned by Canadians.

Foreign Income and Reporting Requirements for Online Sellers

Running an online business often means dealing with foreign platforms, payments, or even inventory abroad. Canadian online sellers need to be mindful of reporting requirements, as the CRA is vigilant about income or assets held outside of Canada.

Worldwide Income: First and foremost, remember that if you are a Canadian resident for tax purposes, you must report all worldwide income worldwide. This includes income from sales to foreign customers and through foreign websites

Foreign Asset Reporting (T1135): One commonly overlooked requirement is the Foreign Income Verification Statement (Form T1135). If you own “specified foreign property” costing over CAD $100,000, you must file this form annually. For online sellers, this could be triggered if you have significant funds sitting in a foreign payment processor or bank account, or if you hold foreign stocks.

How to Respond to a CRA Online Seller Audit or Inquiry

Despite your best efforts, you may someday receive that dreaded notice: the CRA is reviewing or auditing your online sales. How you respond can make all the difference. Here’s a step-by-step approach to handling a CRA inquiry or audit of your e-commerce activities:

1. Stay Calm and Verify the Contact: CRA audits often start with a phone call or a letter. If you get a letter, carefully read what it’s asking for and note the deadline to respond. If you get a call, you can ask the agent for their name and office, then call back through the CRA general line or wait for the official letter to ensure it’s not a scam.
2. Understand What’s Being Reviewed: The CRA might call it a “review” or “audit” or simply a request for information. A “nudge” letter or compliance letter could ask you to confirm specific amounts (for example, “Please confirm the total sales you earned via Amazon/Shopify for 2024”). An audit notice will be more formal, indicating they are examining your returns for certain years.
3. Gather and Organize Your Records: The CRA will request documents – common ones for online seller audits include platform sales reports (Amazon, Shopify, Etsy statements), payment processor reports (Stripe, PayPal), bank statements, invoices/receipts, expense records, and GST/HST filings. Gather the requested documents for the period under audit.
4. Reconcile Platform Data to Tax Returns: This step is crucial. If the CRA’s inquiry is prompted by third-party data, they likely already have, for example, your total Amazon payouts for the year. You need to reconcile that to what you reported. Maybe you reported gross sales of $50,000 on your tax return but Amazon’s reports show $55,000 in payouts. Figure out the differences. Create a reconciliation schedule showing how you go from the platform’s gross figures to your reported net income.
5. Respond Timely and Professionally: Meet the CRA’s deadline, or ask for an extension before the deadline if you truly need more time. Provide the requested info in an organized manner – labeled documents, a cover letter explaining what’s included, and the reconciliation if applicable. Keep copies of everything you send.

Throughout this process, it’s wise to maintain a professional but cautious tone with CRA auditors. Be cooperative and courteous, but if you’re unsure about a request, get advice before responding. Remember, auditors are trained to extract information; inadvertently providing more than necessary or inconsistent answers can complicate your case.

When to Seek Legal Representation

Not every CRA inquiry requires a lawyer. For a simple review letter about a small issue, you might handle it with your accountant. However, when the stakes get higher, involving a tax lawyer can protect your rights and reduce risks:

• Large Adjustments or Sensitive Issues: If the CRA is proposing a significant reassessment – a tax lawyer can negotiate on your behalf and ensure the CRA’s calculations are correct.
• Unnamed Persons Requirement Notices: If you receive a letter clearly based on data obtained from a platform (for example, referencing your Shopify or Amazon sales), it means you were part of a mass data scoop. Consulting a lawyer early can help. We can guide your response to avoid self-incrimination while still fulfilling your legal obligations.
• Audit Turned Dispute: Should the audit result in a reassessment you disagree with, a tax lawyer is essential for the next steps. A tax lawyer can file a Notice of Objection (appeal) on your behalf and represent you in negotiations with the CRA’s Appeals Division. If it goes further to Tax Court, a tax lawyer can help with this step as well.
• CRA Collections or Legal Actions: In worst-case scenarios – e.g. CRA freezing your bank account for tax owing, or investigating possible tax evasion – a tax dispute lawyer is critical. We can communicate with CRA collections to lift liens or negotiate payment arrangements.

Ultimately, involving a tax lawyer provides privileged communication (your discussions are confidential) and strategic expertise in dealing with the tax authorities.

Conclusion: Protect Your Online Business – Consult a Tax Lawyer if CRA Comes Calling

The CRA’s crackdown on online sellers – from CRA online seller audits to data-sharing and new reporting rules – signals a new era of tax enforcement in the digital economy. Amazon sellers, Shopify entrepreneurs, eBay power sellers, and Etsy hobbyists alike are all on the CRA’s radar. To protect yourself, stay informed of your tax obligations, keep meticulous records, and report all required income and taxes (income tax, GST/HST, etc.). The potential costs of non-compliance – back taxes, penalties, interest, or legal trouble – far outweigh any short-term benefit of underreporting.

If you’re an online seller facing CRA scrutiny – whether it’s a simple question or a full-blown audit – contact our tax law office for a confidential consultation.