CRA to tighten voluntary disclosure program

By ThinkPol Staff

Canada’s tax agency will tighten the controversial program that allowed wealthy tax evaders to turn themselves in without fear of prosecution or civil penalties.

The Canada Revenue Agency’s (CRA) Voluntary Disclosures Program (VDP) was set up in 2001 as a way for taxpayers to correct errors in their tax affairs, but has been in recent years used by wealthy individuals and corporations as a way to avoid the consequences of tax evasion[1]

Beginning March 1, 2018, a limited program will apply to taxpayers who have intentionally avoided their tax obligations. To determine if taxpayers have intentionally avoided their tax obligations, the Honourable Diane Lebouthillier, Minister of National Revenue, announced today.

To determine if taxpayers have intentionally avoided their tax obligations, the CRA will consider a number of factors, including, but not limited to: whether efforts were made to avoid detection through the use of offshore vehicles or other means, the total dollar amounts involved, the number of years of non-compliance, as well as the sophistication of the taxpayer, the minister announced.

Corporations with gross revenue in excess of $250 million who will apply to the VDP will be considered under the limited program, according to the CRA.

In the past, even the payment of the estimated taxes owing wasn’t a condition to qualify for the program. That will chance.

More importantly, CRA will cancel relief if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation.

Taxpayers and their representative will not be able to make disclosures on a no-names basis anonymously either.

CRA expects the new VDP is expected to remain in place for at least two years, after which additional tightening may be proposed based on results and feedback.

“The Government of Canada is committed to cracking down on tax evasion and aggressive tax avoidance to ensure a system that is responsive and fair for all Canadians,” Lebouthillier said. “The changes to the Voluntary Disclosures Program are part of these efforts, which will allow the Agency to crack down even further on those who are intentionally breaking the law. Because of our investments, the Agency will have the resources, the staff and the tools to gather information. In this light, the CRA will re-examine the VDP in the coming years, with the goal of further restricting the relief it offers.”

In fiscal 2016-2017, the VDP received over 18,500 disclosures representing an estimated $1.6 billion in previously unreported income.

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