Canada: Canadian committee report recommends tighter Canadian voluntary disclosure programme

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Canada: Canadian committee report recommends tighter Canadian voluntary disclosure programme

lee.jpg

Peter Lee

The Canadian Minister of National Revenue announced the formation of a committee of third-party experts in April 2016, the Offshore Compliance Advisory Committee (the committee), to advise it on administrative strategies to deal with tax non-compliance.

The committee's first report, which was issued in December 2016, looked into Canada's voluntary disclosure programme (VDP) and recommended a reduction in the relief available under that scheme – particularly for taxpayers who use sophisticated offshore structures in their tax planning.

The release of the report coincides with an increasing focus by the Canada Revenue Agency (CRA) on improving offshore tax compliance. In particular, the Canadian federal government announced in 2016 that it would commit an additional C$444 million ($339 million) over five years to improve tax compliance. This initiative includes implementing a review of all international electronic funds transfers (EFTs) over C$10,000 between Canada and four foreign jurisdictions for each year of the programme. According to the CRA, 3,000 EFTs totalling C$860 million between Canada and the Isle of Man were reviewed under this initiative over a 12-month period, resulting in approximately 350 individuals and 400 entities being contacted and 60 audits launched.

Under Canada's VDP, if a taxpayer's voluntary disclosure satisfies specified conditions, criminal prosecution and civil penalties are generally waived, and partial relief for accrued interest on unpaid tax may be given. However, all unpaid tax must be paid. In its report, the committee echoed the recommendation of an OECD report on VDPs that said a VDP be designed to make taxpayers who voluntarily disclose their non-compliance pay (1) more than they would have paid if they had not allowed their compliance to lapse (by imposing penalties and interest on unpaid tax), but (2) less than taxpayers who do not voluntarily disclose their non-compliance.

As noted, the committee recommended that the available relief be curtailed, including where:

  • There has been deliberate or wilful default or carelessness amounting to gross negligence;

  • The taxpayer made active efforts to avoid detection through the use of offshore vehicles or other means;

  • Large dollar amounts of tax were avoided;

  • The taxpayer has a record of multiple years of non-compliance;

  • The taxpayer has made repeated use of the VDP;

  • The taxpayer is sophisticated; or

  • The taxpayer's disclosure was motivated by statements by the tax authorities of an intended focus of compliance or by broad-based compliance campaigns.

The committee also recommended that any individual making a voluntary disclosure should be required to disclose the identity of advisers who assisted with non-compliance by, for example, assisting in the establishment of offshore accounts or structures. The report noted that these advisers may be liable to third-party penalties or may be charged with an offence under applicable tax legislation. The report also voiced a concern that certain VDPs may not be undergoing a suitable level of review by tax authorities and recommended that in appropriate cases (for instance, involving aggressive tax planning) the disclosures be reviewed by more senior or more specialised personnel than was previously the case.

The committee's report is part of a shifting tax landscape in Canada and elsewhere, which has seen tax authorities focusing increased attention on identifying and preventing perceived domestic and offshore aggressive tax planning.

Peter Lee (peter.lee@blakes.com), Toronto

Blake, Cassels & Graydon

Tel: +1 416 863 2901

Website: www.blakes.com

more across site & shared bottom lb ros

More from across our site

India also brokered its first-ever multilateral APA last year, the Central Board of Taxes announced
A global tax framework may not materialise anytime soon, but a common set of principles is becoming increasingly necessary, Rudolf Winkenius also tells ITR
Kingsley Napley’s claimants are arguing that taxing the provision of education breaches the European Convention on Human Rights
While pillar two can progress without the US, it won’t reach the same heights without American involvement, argues Renáta Bláhová, founding partner of BMB Partners Taxand
There are unanswered questions as to how foreign investors could reclaim money via tax credits, advisers suggested
Amid an ever-changing tax environment, India’s advisory market is bustling with competition ahead of the 2025 World Tax rankings and ITR Awards
The deal comes after PwC had accused Paul McNab of using confidential information; in other news, McDermott hired a new London tax head from a US rival
Looking at transfer pricing simplification is “obviously helpful”, but it should be done in line with current standards, a senior government figure reportedly said
The UK Government’s plans to close the tax gap via increased HM Revenue and Customs investment have failed to impress local tax advisers
Under the merged scheme for R&D tax relief introduced last year, rules on contracted out R&D have changed. James Dudbridge argues for a proactive approach when reviewing companies’ commercial arrangements
Gift this article