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Proposed changes to the Canada Revenue Agency’s Voluntary Disclosures Program should go further

“We have been pressing the government to fix the flaws in the Voluntary Disclosures Program that led to the offer of a sweet deal to wealthy individuals using the KPMG Isle of Man offshore tax scheme, even though the government was taking KPMG to court to get the names of those clients" — Dennis Howlett, executive director of Canadians for Tax Fairness

Ottawa (26 June 2017) — Canadians for Tax Fairness described the changes proposed by the Canada Revenue Agency (CRA) to the Voluntary Disclosures Program as being an improvement, but no where close to what is needed to reduce tax evasion.

The Voluntary Disclosures Program gives taxpayers who made mistakes or hid income on their taxes the opportunity to voluntarily come forward to the CRA and have penalties reduced. However, the program has been overly generous in cases such as the deal offered to clients of the KPMG Isle of Man tax scheme. The Voluntary Disclosures Program has also failed to differentiate between those who simply made errors in their tax return and wealthy individuals who wilfully evaded taxes using offshore tax havens.

"We have been pressing the government to fix the flaws in the Voluntary Disclosures Program that led to the offer of a sweet deal to wealthy individuals using the KPMG Isle of Man offshore tax scheme, 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.

He added, “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 (OCAC), which the CRA established in response to a recommendation of the House of Commons Finance Committee.”

Using a tax haven should be treated more severely than innocent mistakes

The Advisory Committee recommended 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, the proposed changes fail to restrict access to voluntary disclosure in cases where leaks about 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,” said Howlett.

Under the program, any use of a tax haven scheme should mean less relief than for other forms of non-compliance.

People can have a say in consultations on proposed changes 

On June 9, the CRA launched a 60-day online consultation with Canadians on their proposed changes to the Voluntary Disclosures Program. 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,” said Howlett, “It is very important for the government to get this right.”