Monday, November 10th, 2025 | 118 Reads
2025 Update for Taxpayers and Representatives
Businesses and taxpayers across Canada need to take note. The federal government is moving ahead with proposals that would significantly strengthen the Canada Revenue Agency’s (CRA) audit powers.
While these changes are still in draft form, the tone is very clear. The CRA wants more tools to obtain information, enforce compliance, and penalize delays.
Back in 2022, legislation granted the CRA the ability to require taxpayers to participate in interviews or submit answers in writing under oath. However, these powers weren’t implemented right away.
But now, with the 2025 Budget expected this November, the government has released proposed amendments that would give the CRA more authority.
So What’s Changing for Taxpayers?
The Department of Finance released draft legislative proposals on August 15, 2025. Among other tax changes, the proposals include three key changes that affect audit powers directly.
Oral Interviews and Affidavit Responses
The CRA would gain the ability to require taxpayers to answer questions orally in interviews under oath or by affirmation.
Alternatively, the CRA could request answers in writing, but in affidavit format. This shifts the process from informal discussions toward more formal, compelled testimony.
For tax representatives this means preparing clients for sworn interviews may become a routine part of audit defence. Failing to prepare adequately could have serious legal implications.
Notices of Non-Compliance and Daily Penalties
Under the proposals, the CRA would be able to issue formal “Notices of Non-Compliance” to taxpayers who do not comply with audit information requests. These notices could trigger a daily fine of $50 per day, up to a maximum of $25,000.
The CRA could also use these notices to pause the reassessment timeline and prevent taxpayers from waiting out the clock.
For taxpayers who are slow to respond or who question the CRA’s requests, this development raises the stakes considerably.
Compliance Orders with Financial Penalties
Currently, the CRA can seek court ordered compliance but the penalty is largely symbolic as a finding of contempt of court. That may soon change.
The new rules propose financial penalties for failing to comply with a court order, including up to 10% of the amount the CRA is trying to verify.
For example if the CRA seeks records relating to $1 million in undeclared income, the resulting penalty could reach $100,000.
There is also no legislative cap on how high these penalties could go.
What’s Next?
While the 2025 Federal Budget was released on November 4, the audit power enhancements remain draft legislative proposals only and they still require passage through Parliament and Royal Assent before they become binding law.
However, given the direction of recent tax reforms, it would be wise to assume the CRA’s audit toolkit will be getting sharper and not softer on taxpayers.
What You Should Do Now
If you represent taxpayers, or you are a business owner, it’s the time to prepare for a more aggressive auditing coming down the pipe.
Here are some first-steps you can take to ensure you’re compliant:
- Review how your organization stores and retrieves tax records.
- Understand your rights and obligations during an audit.
- Ensure that legal counsel is prepared to handle affidavit or interview demands.
- If your clients push back on CRA requests, simply explain the potential consequences clearly.
While there are still legal channels available to dispute or appeal CRA actions, the default audit environment is moving toward higher pressure and faster timelines.
If you haven’t reviewed your CRA readiness in a few years, now is the time to talk to a professional accountant because waiting could come with a hefty price tag and entangle you in a CRA audit that could have been avoided.
