OTTAWA – Proposed changes to the Canada Revenue Agency’s Voluntary Disclosures Program are welcome but they don't go far enough.
The Voluntary Disclosures Program (VDP) gives taxpayers who made mistakes or hid income on their taxes the opportunity to voluntarily come forward to the Canada Revenue Agency (CRA) and have penalties reduced. However, the program has been overly generous in some cases, such as the deal offered to clients of the KPMG Isle of Man tax scheme and has not differentiated between those who made simply made errors in their tax return and wealthy individuals who wilfully evaded taxes using offshore tax havens.
The CRA is proposing changes to address some of those inequities. “We have been pressing the government to fix the flaws in the Voluntary Disclosures Program that were exposed by the KPMG Isle of Man offshore tax scheme scandal that offered a sweet deal to wealthy individuals who voluntarily settled even though the government was taking KPMG to court to get the names of those clients, “ said Dennis Howlett, Executive Director of Canadians for Tax Fairness.
“The changes the government has proposed for consultation are a good first step but do not go far enough on a few fronts and fail to include a number of important recommendations that are key to fairness by the Offshore Compliance Advisory Committee, which the CRA established in response to a recommendation of the House of Commons Finance Committee.”
The Advisory Committee recommended that that the disclosure of the identity of tax advisers should be required. But the government proposes that "Where a taxpayer received assistance from an advisor in respect of the subject matter of the VDP application, the name of that advisor should generally be included in the application."
Additionally, it fails to restrict access to voluntary disclosure in cases where leaks from tax havens are likely to provide the government with lists of Canadian account holders. “It should be too late for wealthy individuals to take advantage of the Voluntary Disclosures program if they are already likely to be exposed,” Howlett says.
Any use of a tax haven scheme should mean less relief under the program than other forms of non-compliance.
On June 9, the CRA launched a 60-day online consultation with Canadians on their proposed changes to the VDP. Canadians for Tax Fairness is encouraging Canadians to engage in the consultation period to actively push the government to incorporate all of the input from the OCAC as well as ensure clear penalties for tax haven use.
“The majority of Canadians feel that there are two tax systems, one for the rich and one for the rest of us,” says Dennis Howlett, “It is very important for the government to get this right.”
Canadians for Tax Fairness is a national citizens’ group that advocates for a modern, effective and fair tax system.
For more information: Dennis Howlett Canadians for Tax Fairness 613-863-3670 Read more about this issue on the Tax Fairness website.