Peter Wiesner CPA, CA
Voluntary Disclosures Program -Potential Changes Coming Jan 1, 2018
The Voluntary Disclosures Program is under going some significant changes. This program when it came out used to be fairly easy to apply for as the purpose was to bring in more tax payers into the base and integrate them away from the sins of the past into productive lawful taxpayers. Well this has changed over the years and is now becoming more and more cumbersome.
The proposals have two streams as of January 1, 2018
General Program (GP)
The GP is similar to the current Voluntary Disclosure Program (VDP). Penalties will be waived, subject to the usual ten year limit, criminal prosecution will not be considered and interest relief will be considered for years preceding the most recent three years, with 50% of interest generally being waived. Interest for the most recent three years will not be waived.
Limited Program (LP)
The LP program will apply for disclosures of major non-compliance and will provide reduced relief. Examples of situations where the LP would apply include:
active efforts to avoid detection, through the use of offshore vehicles or other means;large amounts;-multiple years of non-compliance;-sophisticated taxpayers;-disclosure after CRA communications such as official statements regarding its intended compliance focus, or following CRA campaigns or correspondence; and -other circumstances where a high degree of taxpayer culpability contributed to the non-compliance.
The following situations will no longer be eligible for VDP:
income from proceeds of crime;disclosures from corporations with gross revenue in excess of $250 million in at least two of its last fiver years;disclosures related to transfer pricing adjustments or penalties anddisclosures dependent on agreements made at the discretion of the competent authority, such as S-corporation agreements under Article XXIZ (5) of the Treaty with the United States,However, the above would not prevent the application for taxpayer relief.
Besides the first item above, why would the government want to restrict the use of this program when most of the disclosures add revenues that they would likely never find if the persons didn’t come forward? These are not productive changes to a program that used to be easy to work with and added to the taxpaying base.
Thus, any one considering a voluntary disclosure should do so prior to January 1, 2018 with the new rules being considered. Also, another nasty items to consider in 2018 are that you only get 90 days to file the documents and the payment of taxes that are owing from the disclosure are due with your application, unless security can be arranged under the new proposals (wow).
Payment -From CRA Proposals to Start Jan 1, 2018
The taxpayer must include payment of the estimated tax owing with their VDP application. When the taxpayer does not have the ability to make payment of the estimated tax owing, a payment arrangement supported by adequate security may be considered in extraordinary circumstances with approval from CRA Collections officials. In these circumstances, the taxpayer must make full disclosure and provide evidence of income, expenses, assets, and liabilities supporting the inability to make payment in full.
Based on past experience with collections, this will be very difficult to obtain and is another hurdle in allowing people to come forward and get on the right track. These proposals are counter productive.
Copyright @ 2017