Photo of Dan MisutkaBy Dan MisutkaNovember 10 2017
Tax Law

CRA Tightens the Voluntary Disclosure Program as of January 1, 2018

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Canadians focussed upon the proposed changes to the taxation of private corporations might have forgotten that Canada Revenue Agency is also tightening up the Voluntary Disclosure program, effective January 1, 2018.

Under the new program, qualifying Voluntary Disclosure applications will now be slotted into a new General Program or a more Limited Program. The new Limited Program will more closely reflect the program as it exists now, until the end of 2017. To qualify, taxpayers will still need to demonstrate that the disclosure is voluntary, complete, involves the application of a penalty and relates to matters that are more than one year past due. The new program will impose an additional requirement that taxpayers include a payment for the tax liability that is the subject of the disclosure.

Under the new Limited Program qualifying applications will not result in the waiver of all applicable penalties, only gross negligence penalties that are assessable in the circumstances. There will be no waivers of interest. CRA will still agree to refrain from criminal prosecution under both the General and Limited Program.

However, the Limited Program will apply to any major non-compliance. This is an undefined term that will be left to the discretion of the CRA official reviewing the application. Furthermore, all disclosures that involve efforts to avoid detection through use of offshore vehicles, or by other means, will be completely excluded from both programs. Other types of disclosures will also be entirely excluded from the Program, including disclosures that relate to large dollar amounts (also undefined), disclosures involving multiple years of non-compliance, disclosures from sophisticated taxpayers, and disclosures that are made in response to CRA having made an announcement regarding an intended focus area of non-compliance.

All of these changes seem to be premised on the government’s intention to ensure that the Voluntary Disclosure Program does not reward taxpayer non-compliance. Certainly, this is a very questionable premise for the changes.   

Going forward there will now be significant uncertainty as to whether or not a wide range of disclosures will qualify under the new Program. Therefore, anyone thinking of making a voluntary disclosure application would be well advised to do so before the end of 2017. 

Invitation for Discussion: 

If you would like to discuss this blog in greater detail, or any other business law matter, please do not hesitate to contact one of the lawyers in the Tax Law group at Shea Nerland LLP. 

Disclaimer: 

Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.

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