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Changes Coming to the CRA Voluntary Disclosure Program

The Canada Revenue Agency (CRA) is making changes to the Voluntary Disclosure Program (VDP). The changes are designed to tighten the program to ensure that “those who break the law face the consequences of their actions,” in the words of the federal government.

In general, this means that the updated plan will likely make it more difficult for those who purposely do not comply with tax law, as well as those who have profited from crime, to benefit from the Voluntary Disclosure Program

The proposed changes to the CRA Voluntary Disclosures Program include:

  • Narrowing the criteria of who is eligible
  • Ensuring severe non-compliance cases are not able to benefit from penalty and interest relief in the same manner
  • Making sure disclosures that include proceeds of crime are excluded
  • Requiring payment of the estimated taxes owing as a condition to qualify for the program

It appears that the CRA will place applicants into one of two classifications when they apply for disclosure: the standard program or a more limited program that would grand less relief.

Currently, the CRA is conducting an online consultation program regarding these changes. If you would like to provide input, you can do so at the CRA website. The CRA will officially announce the changes to the VDP in the fall of 2017.

What is the CRA Voluntary Disclosure Program?

The VDP is designed to give people a “second chance” to correct their prior year tax returns or to file a return that has not been filed. The purpose of the program is to ensure that income taxes are correct and to allow people to avoid penalties or fines while still ensuring that the CRA is paid the tax debt it is owed.

Currently, the CRA allows nearly anyone who discloses prior year tax information through the program to pay only what is owed, plus interest, and avoid paying a variety of penalties. However, once the proposed Voluntary Disclosure Program changes come into affect, the situation will be quite different.

What the Proposed CRA Voluntary Disclosure Program Changes Could Mean for Taxpayers

On the surface, it may seem like these changes are minor. However, they make the VDP much more complicated and could cause problems for some taxpayers. Right now, the CRA VDP is quite straightforward (or as straightforward as a CRA program can possibly be) but, once the changes are made, the program will become less predictable. Going forward, when you make an application, you won’t know whether or not you will be considered a standard disclosure or if you will be placed into a more limited category where you will see less relief. This kind of uncertainly makes the decision to use the program much more difficult.

It is also important that anyone who is considering making a disclosure understand that, once these changes are officially announced, they could become effective immediately. Therefore, it might be in your best interest to disclosure prior year tax information sooner rather than later. If you have questions about making a disclosure, our CRA tax experts can help you. Please contact us today.