Michael Ford (post until Oct. 31/19)
Tax

Taxpayer use of voluntary disclosures on the rise

Newly released data from the Canada Revenue Agency (CRA) shows that more taxpayers are making use of the Voluntary Disclosures Program (VDP) to report previously undisclosed income or incorrect information — and ultimately avoid the risk of prosecution and penalties, says Toronto tax litigation lawyer David J. Rotfleisch.

In late January, the CRA submitted its Annual Report to Parliament for 2014-2015, which detailed, amongst other information, data on the use of the VDP — a tax amnesty program that gives individual taxpayers and corporations the chance to correct inaccurate or incomplete information with the tax agency, or to disclose unreported income.

“The report contains comprehensive information on the performance of the CRA for the previous fiscal year including interesting statistics about the tax amnesty or Voluntary Disclosures Program. It is clear from this report that the Canadian Voluntary Disclosures Program is being utilized more by Canadian taxpayers,” explains Rotfleisch, founding tax lawyer at Rotfleisch & Samulovitch Professional Corporation

In its report, the CRA says that total income from all voluntary disclosures jumped 65 per cent year-on-year to $1.3 billion in 2014/15, as it “continued to promote awareness of the Voluntary Disclosures Program through its website, a promotional video, tweets, tax tips, and stakeholder messaging.”

Total unreported income from offshore disclosures was $780 million, up 157 per cent from 2013/14, with the number of disclosures and the amount of undeclared disclosures making up most of the increase, in part due to continued international efforts to share tax data, says the CRA.

All in all, the CRA says it received 19,134 voluntary disclosures in fiscal year 2014/15, an increase of 21 per cent over the previous year.

Included in the program, says Rotfleisch, are taxpayers who have not met their income tax obligations because they had unreported income, including offshore or Internet-based income such as Uber, eBay sales or airbnb rentals, or they claimed expenses they were not entitled to.

Those who failed to collect or remit payroll source deductions or GST/HST or did not file an information return such as a T1135 or T1134 for offshore assets may also be eligible to make a voluntary disclosure, says Rotfleisch.

Although taxpayers who make a valid voluntary disclosure will have to pay the taxes or charges owing plus interest, they are not subject to civil penalties or prosecution.

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