Bill C-31: A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025

Tabled in the House of Commons, May 28, 2026

Explanatory Note

Section 4.2 of the Department of Justice Act requires the Minister of Justice to prepare a Charter Statement for every government bill to help inform public and Parliamentary debate on government bills. One of the Minister of Justice’s most important responsibilities is to examine legislation for inconsistency with the Canadian Charter of Rights and Freedoms [“the Charter”]. By tabling a Charter Statement, the Minister is sharing some of the key considerations that informed the review of a bill for inconsistency with the Charter. A Charter Statement identifies Charter rights and freedoms that may potentially be engaged by a bill and provides a brief explanation of the nature of any engagement, in light of the measures being proposed.

A Charter Statement also identifies potential justifications for any limits a bill may impose on Charter rights and freedoms. Section 1 of the Charter provides that rights and freedoms may be subject to reasonable limits if those limits are prescribed by law and demonstrably justified in a free and democratic society. This means that Parliament may enact laws that limit Charter rights and freedoms. The Charter will be violated only where a limit is not demonstrably justifiable in a free and democratic society.

A Charter Statement is intended to provide legal information to the public and Parliament on a bill’s potential effects on rights and freedoms that are neither trivial nor too speculative. It is not intended to be a comprehensive overview of all conceivable Charter considerations. Additional considerations relevant to the constitutionality of a bill may also arise during Parliamentary study and amendment of a bill. A Charter Statement is not a legal opinion on the constitutionality of a bill.

Charter Considerations

The Minister of Justice has examined Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025, for any inconsistency with the Charter pursuant to his obligation under section 4.1 of the Department of Justice Act. This review involved consideration of the objectives and features of the bill.
What follows is a non-exhaustive discussion of the ways in which Bill C-31 potentially engages the rights and freedoms guaranteed by the Charter. It is presented to assist in informing the public and Parliamentary debate on the bill. It does not include an exhaustive description of the entire bill but rather focuses on those elements relevant for the purposes of a Charter Statement.
The main Charter-protected rights and freedoms potentially engaged by the proposed measures include:

• Freedom of expression (section 2(b))
  Section 2(b) of the Charter provides that everyone has freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication. This includes protection against compelled expression.
• Life, Liberty and Security of the Person (section 7)
  Section 7 of the Charter protects against the deprivation of an individual’s life, liberty and security of the person unless done in accordance with the principles of fundamental justice. These principles require that laws which engage these rights must not be arbitrary, overbroad, grossly disproportionate or vague. An arbitrary law is one that impacts section 7 rights in a way that is not rationally connected to the law’s purpose. An overbroad law is one that impacts section 7 rights in a way that, while generally rational, goes too far by capturing some conduct that bears no relation to the law’s purpose. A grossly disproportionate law is one whose effects on section 7 rights are so severe as to be “completely out of sync” with the law’s purpose. A vague law is one that is so lacking in precision that it does not provide sufficient guidance for judicial debate as to the scope of prohibited conduct. 
• Right against unreasonable searches and seizures (section 8)
  Section 8 of the Charter protects against “unreasonable” searches and seizures. The purpose of section 8 is to protect individuals against unreasonable intrusion into a reasonable expectation of privacy. A search or seizure that intrudes upon a reasonable expectation of privacy will be reasonable if it is authorized by a law, the law itself is reasonable (in the sense of striking an appropriate balance between privacy interests and the state interest being pursued), and it is carried out in a reasonable manner. The assessment of the reasonableness of the law is a flexible one that takes into account the nature and purpose of the legislative scheme, and the nature of the affected privacy interests.
  
• Rights that apply to any person charged with an offence (section 11)
  Section 11 of the Charter guarantees certain rights to persons who have been charged with an offence. Persons are “charged with an offence” within the meaning of section 11 if they are subject to proceedings that are criminal by nature, or that can result in “true penal consequences”. True penal consequences include imprisonment and fines with a punitive purpose or effect, as may be the case where the fine or penalty is out of proportion to the amount required to achieve regulatory purposes.

Part 1 – Amendments to the Income Tax Act and Other Legislation

Anti-Avoidance

Part 1 would make a number of amendments to the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, the Underused Housing Tax Act and the Select Luxury Items Tax Act. Among these amendments are provisions that would strengthen the existing tax debt anti-avoidance rule in each of these Acts by making it apply to situations where property has been transferred from a tax debtor to a person and, as part of the same transaction or series, property has been received by a non-arm's length person. The existing power to impose administrative monetary penalties for tax debt avoidance planning in each of these Acts would also be expanded to apply to these additional situations. Given the possibility of substantial monetary penalties to be imposed under the amendments, the new provisions could be perceived as impacting section 11 rights.

The following considerations support the consistency of the provisions with the Charter. The penalty already exists for certain tax debt avoidance transactions. These amendments would expand the application of the penalty to previously uncaptured tax debt avoidance transactions. The process leading to the imposition of a monetary penalty would be administrative in nature. The purpose of imposing a penalty would be to promote conduct that complies with the purposes of the relevant portions of the Act. The administrative monetary penalties would be subject to legislated maximum amounts. The proposed penalty provisions would closely reflect existing administrative monetary penalty provisions in tax statutes. In this context, the imposition of a penalty would not give rise to “true penal consequences” for the purpose of section 11 of the Charter.

Rules with respect to information-gathering by Canada Revenue Agency officials

The Minister of National Revenue has broad powers to audit taxpayers’ returns, to inspect relevant records and to compel information that may be relevant to the determination of tax liability. These broad powers are necessary to ensure that Canada’s system of tax collection, which relies primarily on taxpayer self-assessment and self-reporting, works properly. Amendments in Part 1 would reenact and update the main information-gathering powers including the inspection power in section 231.1 of the Income Tax Act (ITA), the power to require documents and information under section 231.2 of the ITA, the power to require foreign information and documents in s. 231.6 of the ITA and the compliance order provisions in section 231.7 of the ITA.

Part 1 would reenact the opening words of section 231.1 to clarify that the inspection powers in that section may be used for the purpose of collecting an amount payable under the Act or for the administration or enforcement of a listed international agreement or tax treaty with another country. It would also add a new power to this section, authorizing an auditor to require a taxpayer or any other person to provide any information or document.

Proposed amendments to sections 231.2 and 231.6 would similarly clarify that the requirements powers in these sections may be used for a purpose related to the administration or enforcement of a listed international agreement or a tax treaty. Analogous amendments would be made in Part 3 to relevant sections of the Excise Tax Act and the Excise Act, 2001.

Section 231.7 of the ITA allows the Minister to apply to a judge for a compliance order, compelling a person to provide documents, information or assistance that was previously requested under section 231.1 or 231.2 of the ITA. Part 1 would reenact this provision with amendments to make the compliance order available in relation to requirements to provide foreign-based information and documents under section 231.6 of the ITA.

Part 1 would also create monetary penalties to encourage compliance with obligations to provide information, documents and assistance in accordance with the information-gathering powers.

Section 231.7 would be amended to impose a penalty when the Minister obtains a compliance order against a taxpayer. The penalty would be equal to 10 per cent of the aggregate tax payable by the taxpayer in respect of the taxation year or years to which the compliance order relates. The penalty would only be applied if the tax owing in respect of one of the taxation years to which the compliance order relates exceeds $50,000. The penalty would not be applicable if one of the reasons for the non-compliance with the requirement to provide information or documents, or to answer questions, was the reasonable belief that the information, documents or answers were protected by solicitor-client privilege. The Minister would also be able to waive or cancel all or part of the penalty if the Minister determines that the penalty would be disproportionate or unfair having regard to all the circumstances.

In addition to the penalty under section 231.7, Part 1 would enact a new authority for the Minister to issue a notice of non-compliance to a person that has not complied with a requirement or notice to provide assistance or information issued under section 231.1, 231.2 or 231.6. The issuance of a notice of non-compliance would be reviewable by the Minister on request of the person. After reconsideration, the notice of non-compliance would be vacated if the Minister determines that it was unreasonable to issue the notice of non-compliance or that the person had reasonably complied, at the time the notice of non-compliance was issued, with the initial requirement or notice. There would be a further statutory right of review by a judge of the Federal Court. Part 1 would impose a penalty on a person that has been issued a notice of non-compliance of $50 for each day that the notice is outstanding, to a maximum of $25,000. This penalty would not apply if a notice of non-compliance is ultimately vacated by the Minister or a court. It would also not apply if one of the reasons for the person not complying with the requirement was the reasonable belief that the information, documents or answers were protected by solicitor-client privilege.

Because the audit powers have the potential to interfere with privacy interests, they engage section 8 of the Charter. The following considerations support the consistency of these powers with section 8. As is currently the case, the amended inspection and requirement powers would not be available to further a penal investigation. Rather, they would be available for the administrative purpose of verifying and assessing tax liability, circumstances in which privacy expectations are diminished. As such, the proposed powers are similar to inspection powers that have been upheld in the administrative and taxation contexts. Further, in light of the Supreme Court of Canada decisions in Canada (Attorney General) v. Chambre des notaires du Québec and Canada (National Revenue) v. Thompson (2016), the audit powers would not be applicable to lawyers and notaries in their capacity as legal advisers.

Because the proposed penalty provisions could give rise to the possibility of substantial monetary penalties, they could be perceived as creating “true penal consequences” that would trigger the guarantees under section 11 of the Charter for persons charged with an offence. The following considerations support the consistency of the provisions with section 11 of the Charter. The process leading to the imposition of the monetary penalties would be administrative in nature. The purpose of both penalty schemes is to encourage compliance with lawful requirements to provide information, documents or to answer questions. The amounts of the penalties reflect this administrative purpose. In the case of the proposed penalty associated with the issuance of a compliance order under section 231.7, using tax payable in the relevant tax year as the basis for calculating the penalty helps to ensure the penalty corresponds with the taxpayer’s income. As such, the penalty serves as an effective financial incentive and ensures that the penalty is not simply a cost of doing business for the taxpayer. Finally, where the Minister determines that the penalty would be disproportionate or unfair, the Minister would be required to waive or cancel all or part of the penalty that the Minister considers appropriate in the circumstances. This discretion would have to exercised in accordance with the Charter. Properly interpreted and applied, the proposed penalty regime would not give rise to “true penal consequences” for the purpose of section 11 of the Charter.

Disclosure of Taxpayer Information

The proposed amendments to subsection 241(4), in particular, subparagraphs 241(4)(d)(vii.1) and (vii.5), and paragraph 241(4)(u)) of the Income Tax Act,adjust existing rules governing the disclosure of taxpayer information.

Subparagraphs 241(4)(d)(vii.1) and (vii.5) would be amended to permit CRA officials to disclose taxpayer information, to officials responsible for the Canada Education Savings Act and the Canada Disability Savings Act, respectively, for the evaluation and development of policy under those Acts, in addition to the existing authority to disclose such information for the administration and enforcement of those Acts and designated provincial programs. “Taxpayer information” is defined in subsection 241(10) and includes information of any kind, in any form, relating to an identifiable taxpayer and obtained or prepared for the purposes of the Income Tax Act, in limited, specified circumstances.

Paragraph 241(4)(u) would be amended to expand the category of corporations in respect of which CRA officials may disclose information on shareholdings and corporate ownership structures to an official of the Department of Industry. Instead of being limited to private corporations, the provision now applies to any corporation whose securities are not listed on a designated stock exchange, aligning the Income Tax Act information sharing rule with the entities subject to beneficial ownership reporting requirements in section 21.21 of the Canada Business Corporations Act, including non-listed subsidiaries of public corporations. The information that may be disclosed consists of the names, jurisdictions of residence and business numbers of related or associated corporations, the nature of those relationships, and detailed information on the number and classes of shares and percentage ownership held by particular corporations and significant shareholders. This information may only be shared for the purpose of verifying and validating beneficial ownership data filed under the Canada Business Corporations Act.

The amendments, and reenactment of the information sharing provisions, may engage section 8 of the Charter because they would allow for the disclosure of taxpayer information, including personal identifiers, income information and corporate ownership data, between CRA officials for program, policy, and corporate transparency purposes which may be information in which there is a reasonable expectation of privacy.  The following considerations support the consistency of the amendments with section 8.

The information is collected and used in a regulatory and administrative tax context where the reasonable expectation of privacy is generally reduced; the disclosures remain narrowly circumscribed by subsection 241(4), are directed to important public objectives (benefits administration, policy development, tax verification, and beneficial ownership transparency), and are not available for the purpose of pursuing penal investigations. The information sharing authorities are closely aligned with the purposes for which the information is already collected and operate similarly to information sharing and inspection schemes that have generally been upheld as reasonable under section 8 in regulatory and administrative contexts.

Crypto-Asset Reporting Framework

Part 1 would amend the Income Tax Act and the Income Tax Regulations to implement the Crypto-Asset Reporting Framework (CARF) which creates new tax reporting obligations for platforms in respect of crypto-asset transactions undertaken by its users. It would also amend the Common Reporting Standard (CRS) regime in the Income Tax Act and the Income Tax Regulations to extend its scope to new digital financial products not covered by the CARF and amend the Digital Platform Operators (DPO) reporting rules to ensure alignment with the CARF and CRS.

The proposed amendments would impose a new annual reporting requirement on crypto-asset service providers, as well as other related administrative requirements (such as due diligence procedures and record-keeping requirements), and penalties for non-compliance. The reporting requirements include information with respect to crypto-asset users such as identifying information as well as tax information numbers (TIN). The crypto-asset service providers that would be subject to the reporting requirements include entities and individuals that are resident in Canada or that carry on business in Canada, and that provide business services carrying out exchange transactions in crypto-assets for or on behalf of customers (such as crypto exchanges, crypto-asset brokers and dealers, and operators of crypto-asset automated teller machines). A separate penalty may apply to crypto-asset users, including individuals who are resident in Canada, for failing to provide their tax information numbers (TIN) to such providers.

Powers to Collect, Disclose and Use Information

Since these provisions would govern the collection of information that could attract a reasonable expectation of privacy, they have the potential to engage section 8 of the Charter.

The following considerations support the consistency of these provisions with section 8 of the Charter. The proposed amendments are administrative in nature and would apply in a context where privacy expectations are generally reduced. The purpose of the reporting requirements is to increase transparency of crypto-asset exchange transactions through the reciprocal exchange of information with participating foreign tax jurisdictions and to support the proper administration and enforcement of the Income Tax Act by allowing the Canada Revenue Agency to obtain information required to accurately assess tax liability. The proposed amendments safeguard privacy interests by limiting the scope of who must report and the information that is required to be reported to that which is required for the purposes of implementing the CARF.

Information collected under the proposed provisions would be confidential. Its use and disclosure would be permitted only in specified circumstances, including for the purposes of the automatic exchange of financial account information with the competent authorities of other jurisdictions that are parties to the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information, in order to improve international tax compliance, enhance transparency, and combat tax evasion and avoidance. Any such exchanges would be subject to strict safeguards, including restrictions limiting use to tax purposes, controlled access to the information, and protections against unauthorized disclosure.

Division 8 – Bankruptcy and Insolvency Act

Division 8 includes several amendments to the Bankruptcy and Insolvency Act aimed at better protecting consumer debtors and strengthening the enforcement framework.

Civil Remedies

Division 8 would authorize the Superintendent of Bankruptcy to begin civil court proceedings against persons who engage in reviewable conduct, such as making false and misleading representations to the public relating to bankruptcy or insolvency. On application by the Superintendent, the court would have the ability to order remedies, including requiring anyone found to have engaged in reviewable conduct to publish a notice bringing the court’s determination to the attention of people affected by the conduct. Such orders have the potential to engage the right to freedom of expression under section 2(b) of the Charter, since courts would have the ability to order persons to disseminate certain information.

The following considerations support the consistency of the remedy provisions with the Charter. Courts would retain discretion as to whether an order should be made, what its scope should be, and the remedy that would be most appropriate. In making such a determination, courts would have the ability to consider both freedom of expression and the objective of protecting consumers, among other considerations.

Offences and Punishment

Division 8 would amend, by re-enacting, two existing provisions of the Bankruptcy and Insolvency Act that establish criminal offences. The first offence prohibits unlicensed persons from acting as or representing themselves to be licensed insolvency trustees. The second offence prohibits anyone from soliciting or canvassing others to make an assignment or proposal under the Bankruptcy and Insolvency Act or to file for bankruptcy. For both offences, the maximum penalty for individuals would increase to a fine of $100,000 or one year of imprisonment or both. The maximum penalty for corporations would increase to a fine of $1 million. Because the offences could lead to a term of imprisonment, they engage the right to liberty under section 7 of the Charter.

The following considerations support the consistency of the amended offences with section 7. The Minister has not identified any potential inconsistencies with the principles of fundamental justice. The offences are tailored to the legislative objective of protecting consumers from unauthorized practice and misleading representations relating to bankruptcy or insolvency. In addition, the proposed amendments would preserve judicial discretion to impose a fit and appropriate sentence in each case.

Because the offences prohibit certain forms of communication, such as inviting others to file for bankruptcy, they have the potential to engage the right to freedom of expression under section 2(b) of the Charter. Section 2(b) generally extends to advertising and other forms of commercial expression by corporations and individuals.

The following considerations support the consistency of the offences with section 2(b) of the Charter. The offences impose restrictions on communicating with consumers in a highly regulated industry where consumers are vulnerable to exploitative practices, with the goal of protecting consumers and maintaining the integrity of the insolvency system. This type of commercial expression has a lower value compared to other forms of protected expression, because it generally lies further from the core of the right, which includes the search for political, artistic and scientific truth, the protection of individual autonomy and self-development, and the promotion of public participation in the democratic process. The fact that the expression is commercial in nature is a relevant factor in determining whether any limits on that expression are justifiable under the Charter. 

Division 16 – Defence Investment Agency Act and Defence Production Act

Division 16 would amend, by re-enacting, subsection 45(2) of the Defence Production Act. This provision makes it an offence to contravene any provision of the Defence Production Act other than sections 27 or 37, or any provision of the regulations. Since this offence is punishable by imprisonment, it engages the right to liberty and must be consistent with the principles of fundamental justice in order to be consistent with section 7 of the Charter.

The following considerations support the consistency of this provision with the Charter. The Minister has not identified any potential inconsistencies with the principles of fundamental justice. The offence gives practical effect to the provisions of the Act and the regulations, by helping to ensure compliance with them.