Canada: Canadian voluntary disclosure programme rises in popularity
In January 2016, the Canada Revenue Agency (CRA) released new statistics relating to Canada's voluntary disclosure programme (VDP).
The VDP effectively gives taxpayers the opportunity to correct past Canadian tax reporting and/or payment deficiencies. Taxpayers who make a valid disclosure will have to pay the taxes and interest; however, they will be relieved from further penalties or prosecution. In certain circumstances, the CRA will have the discretion to waive or reduce interest.
The number of voluntary disclosures being made continues to grow, with more than 19,000 disclosures made under the VDP in the 2014-2015 fiscal year (representing a 21% increase in disclosures over the 2013-2014 fiscal year). The CRA reports that the total unreported income from all voluntary disclosures was more than $1.3 billion, representing a 65% year-over-year increase.
The growing importance of the CRA's offshore tax enforcement efforts is evidenced by the amount of unreported income from offshore voluntary disclosures of $780 million, an increase of 157% from the previous year. The increasing number of disclosures and the amount of undeclared disclosures are likely attributable, at least in part, to the CRA's efforts to fight international tax evasion.
One such initiative is the Offshore Tax Informant Programme (OTIP), which is a 'whistleblower programme' that the CRA launched in 2014. The OTIP allows the CRA to provide financial awards for credible tax leads. To be eligible for an award, the information provided must lead to the collection of more than $100,000 of additional federal tax once all rights of objection and appeal have been exhausted. Informants may then receive between 5% and 15% of the federal tax collected. The OTIP has generated momentum, receiving close to 2,000 calls and more than 200 written submissions in its first year of operation, with 110 cases actively being investigated by the CRA.
As a result of the CRA's crackdown on offshore non-compliance coupled with international efforts to share more tax data between countries, taxpayers with Canadian tax deficiencies should consider whether it would be prudent to disclose under the VDP. It should be kept in mind that, to qualify under the VDP, a voluntary disclosure must be initiated before the CRA has contacted the taxpayer with respect to the relevant issue.
Blake, Cassels & Graydon
Tel: +1 604 631 3336 and +1 604 631 3305