Make Voluntary Disclosures Before March 2018?
In June 2017, the government proposed radical reductions in the scope of
the voluntary disclosures program (VDP), which provides relief from
penalties and interest for taxpayers who voluntarily come forward to
correct previous errors or omissions in their tax affairs. The final
rules were released on December 15, 2017 by way of a new information
circular (IC 00-1R6, "Voluntary Disclosures Program").
It is perhaps surprising that the program survived at all, given its
unpopularity with the general public and the perceived decrease in value
of the program to the CRA in determining areas requiring more audit
attention. Further, Canada is highly unusual (in comparison with other
countries around the world) because it has a disclosure program that is
not temporary. Applications under the previous (current) VDP, which must
be received by February 28, 2018 and must include the taxpayer's name,
can be advantageous because
The amended program includes the following changes from the current system:
there is currently no requirement to pay the estimated tax owing
at the time of making the application (although it may still be prudent
to do so);
the taxpayer may qualify for additional interest relief (because
the amendments limit such relief under the general program to 50 percent
of applicable interest for the years preceding the most recent three
years of returns, and no interest relief is afforded under the limited
"track" of the program); and
if the taxpayer is a corporation with gross revenue exceeding $250 million, it has access to broader relief.
The government has separated the program into two "tracks," or streams.
When an application is made, the government decides which track the
application fits into. The first track is the general program, which
qualifies a taxpayer for penalty and partial interest relief, along with
protection from criminal prosecution. The second track is the limited
program, which applies to taxpayers that disclose non-compliance where
there is an element of intentional conduct (for example, a sophisticated
taxpayer: see paragraph 20 of the IC): such applications are only
entitled to reduced relief under the VDP. In the initial proposed
amendments to the VDP, the government had planned to prohibit access to
the VDP by corporations with gross revenue in excess of $250 million in
at least two of the last five taxation years. In the final amendments,
such corporations are eligible for relief (albeit reduced relief under
the limited program).
Elimination of the no-names disclosure process. Informal
"preliminary discussions" with a CRA official may be held on an
anonymous basis prior to the VDP application, but these are now
The creation of a "two-track" VDP program (see below), with each track unlocking access to different forms of relief.
A requirement that disclosure be provided for all non-compliance
tax years, even those years that fall outside the 10-year limitation
period for relief.
Mandatory payment of estimated tax at the time of making the application.
The taxpayer must "generally" (paragraph 44 of the IC) disclose
the identity of the (past) adviser who assisted the taxpayer in respect
of the tax matters that form the subject matter of the voluntary
disclosure, presumably to allow the CRA to undertake focused audits.
Clearly, there are risks as well as rewards in applying for the VDP.
Paragraph 12 of the IC states that the CRA may audit or verify
information provided in a VDP application whether it is accepted or not.
The CRA can also cancel VDP relief if there is a misrepresentation; the
misrepresentation can trigger a reassessment for all years to which it
relates, not just those in the VDP application. Further, when a VDP
application is rejected, the information submitted may still be used for
assessment and reassessment; penalties and interest may be levied; and
an investigation and prosecution may be initiated.
Amanda S.A. Doucette
Stevenson Hood Thornton Beaubier LLP, Saskatoon