Through the Canada Revenue Agency's (CRA) voluntary
disclosure program (VDP), taxpayers can avoid penalties and
prosecution and may also be entitled to partial interest relief in
respect of past non-compliance with tax obligations. While the VDP
is not new, a number of recent developments may increase the
chances of the CRA detecting the noncompliance or taking other
actions that could foreclose the possibility of making a valid
These developments include:
1. A new initiative to share information about border
crossings. On June 30, 2014, Canada and the U.S. commenced
a new joint initiative to share information about when individuals
cross the Canada-U.S. border. Amongst other things, the CRA could
use the information to target (a) non-resident employees and
service providers who do not comply with their Canadian tax filing
obligations, and (b) persons who do not comply with their
obligations to withhold and remit tax on payments to such employees
and services providers.
2. The Offshore Tax Information Program
("OTIP"). Launched in January 2014, OTIP allows
the CRA to make financial awards to individuals who provide
information related to international tax non-compliance that leads
to the collection of at least $100,000 of federal taxes.
3. The continued negotiation with foreign countries of
Tax Information Exchange Agreements and Tax Treaties with
exchange-of-information provisions. These agreements
permit, and in some cases require, the sharing of information
between Canada and foreign jurisdictions for purposes of verifying
tax compliance. In this connection, the Canada-United States
Enhanced Tax Information Exchange Agreement was brought into
law in Canada as of June 27, 2014 and, among other things, requires
the U.S. to provide the CRA with information on Canadian residents
who hold accounts at U.S. financial institutions. With the OECD (of
which Canada is a member) developing a global standard for the
automatic exchange of financial account information, these sorts of
agreements are expected to become more common.
4. Reporting requirements for electronic transfers of
funds. Starting in 2015, certain entities (generally
financial intermediaries) will be required to report to the
Minister of National Revenue certain electronic transfers of funds
of $10,000 or more into or out of Canada.
5. Changes to information requirement rules.
With judicial authorization, the CRA is permitted to require third
parties to provide information or documents for the purposes of
verifying tax compliance of unnamed persons. With the intention of
obtaining the information and documents more quickly, these rules
were changed in 2013 to require the CRA to provide notice to the
third parties of the judicial application and eliminate the ability
of the third parties to seek a subsequent review of the
These developments add to, and do not replace, existing
mechanisms at the CRA's disposal to uncover non-compliance,
such as audits. The CRA also continues to encourage
"whistleblowing" through its Informant Leads Program.
These developments are relevant in considering whether and when
to make a voluntary disclosure because in order to be accepted
under the VDP, the disclosure must be voluntary. Where the CRA
uncovers the non-compliance or undertakes an enforcement action
that might lead to uncovering the noncompliance, the
opportunity to access the voluntary disclosure program is generally
foreclosed because the CRA would likely not view the disclosure as
Part II of this article will appear in the next Client Update
Newsletter and will discuss other conditions for making a valid
disclosure and how to participate in the VDP.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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