Taxpayers Make Increasing Use Of CRA Disclosure Scheme

by Mike Godfrey, Tax-News.com, Washington

18 December 2008

The Canada Revenue Agency (CRA) has noted a significant increase in the number of taxpayers using its Voluntary Disclosures Programme (VDP).

The Revenue Agency stated in a fact sheet on the programme published on December 10 that it processed 8,400 disclosures involving more than CAD374m (USD309m) in taxes in 2007-08, compared to 5,097 disclosures involving CAD277m in taxes in 2002-03.

The VDP allows taxpayers to come forward and correct inaccurate or incomplete information, or to disclose information they have not reported during previous dealings with the Revenue Agency, without penalty or prosecution. The goal of the VDP is to provide Canadians with the opportunity to "come clean".

A disclosure can be made for income tax and for goods and services tax/harmonized sales tax purposes, as well as for charges under the Softwood Lumber Products Export Charge Act, 2006, or the Air Travellers Security Charge Act.

However, a valid disclosure must meet four conditions. These conditions require that the disclosure be voluntary, complete, involve the application or potential application of a penalty, and generally include information that is more than one year overdue.

If the CRA accepts the disclosure, the taxpayer will have to pay the taxes or charges owing, plus interest. However, the taxpayer will not be subject to penalty or prosecution for those amounts accepted as a valid disclosure.

Taxpayers are entitled to a second review of their position if they disagree with a VDP decision.

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