Potential Changes to the Voluntary Disclosures Program

written on behalf of Feigenbaum Law

The Voluntary Disclosures Program (VDP) is in the crosshairs as the Canada Revenue Agency, and federal government more broadly, continue to target tax evasion and avoidance by the wealthiest Canadians.

How the Voluntary Disclosures Program operates

In its current framework, the VDP attempts to encourage tax compliance by individuals and other entities that would like to correct any errors or omissions in their past returns. Eligible taxpayers must pay any taxes owing, but may be granted relief from any penalties, prosecution or interest owing, at the discretion of the Minister of National Revenue.

In order to take advantage of the VDP, a taxpayer must make a voluntary disclosure prior to any enforcement action being taken by the CRA. It must be a complete and accurate documentation of the years in question, and the information must be at least one year past due.

Recommendations to change the Voluntary Disclosures Program

A taxpayer’s first submission to the VDP is treated the same way by the CRA, irrespective of the amount and degree of non-compliance revealed therein. Deliberate attempts to subvert the taxation system are not given any greater scrutiny than inadvertent omissions. Second attempts at making a voluntary disclosure are rarely successful.

The Offshore Compliance Advisory Committee was established by the Minister of National Revenue to address rising concerns about non-compliance and provide suggestions to remedy offshore tax evasion. The Committee has taken the position that the Canadian tax system must maintain a perception of being fair to the average taxpayer. To this end, they have recommended a narrowing of the VDP, including reducing available relief from penalties where active efforts were made by sophisticated entitles to avoid taxation.

If the Committee’s recommendations are accepted, applications under the VDP which represent large or complex tax files will be subject to a greater degree of scrutiny. However, the recommendations raise a large number of questions about how the changes to the VDP could increase administrative costs and lead to unfair treatment of certain categories of taxpayers.

Expert legal advice for taxpayers seeking to make a voluntary disclosure

At Feigenbaum Tax Law, we provide knowledgeable legal advice to taxpayers about their Canadian tax returns. If you have questions about your return, or the CRA’s Voluntary Disclosures Program, our skilled tax and accounting professionals can review your documents and provide the guidance you need.

Our cross-border specialists provide both personal and corporate tax advice, and offer unique solutions tailored to your needs.  Contact us online, or call our office toll free at (877) 275-4792.