The data shows that CRA is hunting more tax revenue. CRA audits are not neutral reviews – they are structured to challenge tax positions and extract revenue. Increasingly, CRA operates under a “review to contest” approach, focussing on reassessment rather than verification. Yet, leaders and tax teams often fail to recognize that a CRA audit is not just a process - it's a conflict unfolding in real-time. By the time most businesses recognize an in-audit conflict - often triggered by a CRA auditor's proposal letter - the CRA has already built its case, shaped the narrative, and structured the evidence to its advantage.
An in-audit conflict occurs when a CRA audit shifts from a routine review to an adversarial process, where CRA builds its case before the business recognizes the dispute. Unlike post-assessment objections or litigation, in-audit conflict happens within the audit itself, shaping the outcome long before a reassessment is issued.
The failure to identify and address an in-audit conflict early carries significant risk. A sophisticated in-audit conflict strategy shifts teams from a compliance mindset to strategic conflict navigation, reducing procedural missteps, disclosure risks, and weakened positioning. Proactive monitoring and early intervention are critical.
In contrast, failing to recognize and strategically manage the in-audit conflict as it unfolds in real-time amplifies risks across the following dimensions.
• Information Disclosure Risks – Without a strategic response, businesses risk unintentionally strengthening CRA’s case or exposing new vulnerabilities.
• Lack of Alignment Across Teams – Uncoordinated or unsophisticated responses undermine credibility and weaken the company’s position.
• CRA Defines the Narrative – When businesses fail to recognize escalation, CRA frames the dispute on its terms, justifying reassessment with little resistance.
• Lost Procedural Protections – Delayed engagement weakens legal positioning and gives CRA a greater advantage in the short and long term.
By the time CRA issues a proposal letter or reassessment, control over the dispute has shifted; the company's opportunity to mitigate risk is reduced – and, in some cases, eliminated.
Data shows more audits and tax disputes. It also supports tailwinds support that “review to contest audits" are increasing too. Consider the following trends:
For deeper insight into how to overcome CRA and systemic delay, and take control, see our detailed analysis: CRA Objection: Strategic Disengagement.
Through our work representing businesses on high-stakes tax disputes at all stages, we’ve identified a predictable escalation pattern. CRA auditors start many audits with - or quietly shift towards - a “review to contest” approach. And we know these audits, unmanaged, do not remain static; they escalate throughout the audit itself – increasing financial, procedural, and strategic risk – often before leaders and tax teams recognize it.
The CRA In-Audit Escalation Framework assumes that without a structured response, a company facing a CRA audit is more likely to default to excessive compliance, passive engagement, or uncoordinated responses – all of which escalate the company's risk and weaken its position.
Our framework aims to help business leaders and tax teams
*This article solely focuses on in-audit conflict management, where early strategic engagement shapes the dispute before reassessment. We write extensively on the objection and Tax Court appeal stages. If interested, please explore our website and other articles, including CRA’s Objection Process: Full Engagement vs. Strategic Disengagement.
Identifying the point at which a CRA audit subtly shifts from fact-finding to case-building for reassessment is challenging.
A key challenge in tax audits is that internal teams (in-house accountants, tax professionals) and external advisors may not have extensive experience navigating complex tax disputes and their strategic dynamics. In fact, experience with other routine audits may create a false sense of predictability, leading teams to underestimate risk or fail to recognize early conflict escalation. Research suggests cognitive biases impair judgment in similar situations.
Tax disputes are business risks, not just compliance issues. When an audit takes an unexpected turn that leads to a suboptimal result, the company’s leaders - not the tax team managing it - usually bear the personal and business consequences.
Leaders need direct situational awareness to make high-quality decisions and adapt effectively in real-time. When the tax team waits until the CRA auditor issues a proposal letter or reassessment, the business reacts to the CRA’s agenda, not controlling its own.
By Level 2, leaders should engage tax dispute counsel behind the scenes to receive advice and prevent the CRA from shaping the dispute uncontested. By Level 3, we recommend direct intervention by tax dispute counsel, as the lack of a complete tax dispute strategy and positioning allows CRA’s framing to dictate the reassessment outcome.
Leadership and tax teams must collaborate to ensure they recognize escalation signals and risks throughout the audit.
The data confirms that CRA is aggressively pursuing additional tax revenue, and experience shows a CRA audit is not just a process – it is a conflict unfolding in real-time.
CRA auditors will quietly and methodically gather information, shaping the dispute before businesses recognize escalation. Many leaders assume their tax teams have control – until they receive the CRA’s proposal letter or reassessments. By then, the company has lost the opportunity to shape the dispute, manage risk, and control the narrative. CRA has framed the case in its favour.
Proactive leaders build their capabilities and ensure key team members develop the skills, tools, and relationships to handle CRA audits effectively. When an audit arises, leaders stay engaged, help the tax team recognize early shifts in CRA’s approach, and ensure alignment throughout the audit.
Leaders who take this approach position their companies to control the dispute, rather than letting CRA dictate the terms.