What You Need to Know About the Voluntary Disclosure Program
One of the Canada Revenue Agency’s (CRA) most frequently-used programs is the Voluntary Disclosure Program (VDP). Since this program is so popular and well-known, people naturally have a lot of questions about it. Here are some answers to common questions in our Voluntary Disclosure Program FAQ.
What is the CRA Voluntary Disclosure Program?
The VDP is a program that is designed to give people a second chance to come clean about prior year tax returns. If you have made errors on a previous return, left out information, or if you did not file returns that should have been filed, you can apply for the program and disclose the information that was missed. If you disclose information through the program, the CRA will eliminate penalties or prosecution that may have applied in your situation. You will just be responsible for paying the tax debt that you owe, as well as any interest charges.
Who is Eligible for the Voluntary Disclosure Program?
Any taxpayer can apply for the program. The VDP may be right for you if:
- You make your disclosure voluntarily (meaning that you disclose the information before the CRA comes to you about your taxes),
- The information you disclose is more than a year overdue,
- You include all relevant information in your disclosure, and
- A penalty would apply in your situation.
Once you apply, the CRA will review your situation and determine if you are eligible for relief of penalties.
How do I Apply for the Voluntary Disclosure Program?
You can apply for the Voluntary Disclosure Program by completing the Voluntary Disclosures Program (VDP) Taxpayer Agreement and submitting it online, through the mail, or via fax.
After you apply, the CRA will review your application, ensure that it is complete, and determine if you will be granted relief. If the CRA does not grant relief, you may request a second review.
Is the Voluntary Disclosure Program Changing?
Yes. In a report released in December 2016, the Offshore Compliance Advisory Committee called for changes to the program, specifically changes to target those who were non-compliant for many years or who used offshore accounts.
In June 2017, the Minister of National Revenue, Diane Lebouthillier, announced proposed changes to the Voluntary Disclosure Program. The CRA also announced 60 days of open online consultations on the Voluntary Disclosure Program changes.
When is the Voluntary Disclosure Program Changing?
Following the online consultation period, the CRA will officially announce the changes to the Voluntary Disclosure Program in fall 2017. The changes will likely officially come into effect very shortly afterwards, if not immediately.
What Changes are Happening to the Voluntary Disclosure Program?
The CRA announced several proposed changes to the program in June. These changes include:
- Narrowing the criteria of who is eligible for the program,
- Ensuring that severe cases of non-compliance do not receive the same level of penalty and interest relief,
- Ensuring requests that disclose proceeds of crime are excluded from relief, and
- Requiring payment of the estimated taxes owing as a condition to qualify for the program.
These changes are being made as part of an effort to “crack down” on “tax cheats” and “ensure that those who break the law face the consequences of their actions.”
What do the VDP Changes Mean?
In short, it means that applying for the VDP will become more complicated and that those who apply will have less certainty about whether or not they will be granted full relief following their disclosure. Currently, the process is relatively straightforward. If a person discloses all relevant information, and if the information provided is eligible for relief of penalties, then the CRA will likely decide to offer relief. In most cases, the CRA simply wants the money that is owed to it. It doesn’t want to spend time and money chasing people who owe tax debt. Therefore, if someone comes forward willingly, the CRA will most likely drop the possible penalties in exchange for receiving the tax debt and interest charges owed to it.
However, under the proposed changes, not everyone who applies will receive the same level of relief. The CRA states that this is being done because some people should not benefit from the same level of relief due to their actions. However, by implementing these changes, the reality could be that fewer people come forward with disclosures and that the CRA will need to spend more time and money trying to collect tax debt.