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Canada To Amend Voluntary Disclosure Program

by Mike Godfrey,, Washington

12 June 2017

The Canadian Government has announced a consultation on proposed changes to the Voluntary Disclosures Program (VDP) that will narrow the eligibility criteria and make the regime less generous.

The VDP provides taxpayers with an opportunity to voluntarily come forward and correct previous omissions in their dealings with the Canada Revenue Agency (CRA). If the disclosure satisfies the CRA's conditions, the taxpayer will typically face a lower interest charge on the unpaid tax, and will not be liable for criminal prosecution or civil penalties. All evaded tax must be paid.

The Government's proposed changes narrow the eligibility for VDP and impose additional conditions on applicants. The Government said the VDP will no longer be a "one-size-fits-all" program, and that major cases of non-compliance that are disclosed will not receive the same level of relief as they would under the current program.

In addition, under the changes, the Government would require the payment of the estimated taxes owing as a condition for qualifying for the program, and change the way the amount of interest relief available is calculated. The Government will exclude from the program applications that involve transfer pricing, applications from corporations with gross revenue in excess of CAD250m (USD185.95m), and applications that disclose income from the proceeds of crime. VDP relief will be cancelled if it is subsequently discovered that a taxpayer's VDP application was not complete due to a misrepresentation attributable to wilful default.

The changes have been introduced in response to a report by the Offshore Compliance Advisory Committee. In December 2016, the Committee recommended that the CRA should provide less generous VDP relief where "sophisticated taxpayers have sought expert advice and used complex offshore structures to evade significant amounts of tax over several years." It also questioned whether taxpayers that have made a voluntary disclosure should receive the same treatment as those whose disclosure is prompted by CRA activity, and argued that offshore and onshore (domestic) non-compliance should be treated similarly.

The consultation was launched on June 9, 2017, and will be open for 60 days. The Revenue Minister is expected to make a formal announcement on any reforms during the fall.

TAGS: compliance | Offshore | tax | tax compliance | tax incentives | interest | revenue guidance | tax authority | offshore | Canada | penalties | Compliance | Tax | Tax Evasion

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