To register for the Voluntary Disclosure Program or the VDP, a legitimate Canadian tax payer must apply for a voluntary opening program containing all the necessary information, as well as all necessary tax returns, and pay all estimated taxes due. In some cases, payment agreements may be negotiated with the Canadian tax authorities. The Offshore Compliance Advisory Committee has recommended, in certain circumstances, less discharge. They stated that the credit rating agency should consider all the circumstances associated with the imposition of the VdP and that, in some cases, the interest and penalty exemption should be reduced. For example, sophisticated taxpayers sought specialized advice and used complex offshore structures to evade large amounts of tax over several years. They also question whether subjects who have applied for a fully voluntary tax amnesty should be treated in the same way as subjects whose disclosure is made by credit rating agencies, such as audit activities, large-scale tax compliance programs or by obtaining prior confidential information from the rating agency as a result of data leakage. This last point is clearly a response to the Panama Papers tax leak. The Voluntary Disclosures Voluntary Program (VDP) is a Canada Revenue Agency (CRA) program that allows Canadian taxpayers to come forward and correct their tax errors, provided certain requirements are met. Currently, four conditions must be met for the voluntary disclosure of a subject to be accepted.
First, there can be no enforcement action against the taxpayer with respect to the disclosed issues. Second, disclosure must be complete. Third, disclosure must involve the application of a sanction or the possible application of a sanction. Fourth, disclosure must contain information that has been in arre with it for at least one year. If these requirements are met and the taxpayer`s voluntary disclosure is accepted, the credit rating agency will provide full relief from penalties, partial interest reduction and will not lay criminal charges against the taxpayer. According to our senior Canadian tax advisors, these recommendations, if implemented, would clearly reduce the benefits of the Voluntary Disclosure Program (JDP) significantly and deter some taxpayers from applying for a tax amnesty. The use of subjective criteria, such as “sophisticated taxpayers,” would make the voluntary disclosure program even more uncertain. The Canada Revenue Agency also provides a concrete example of a taxpayer transferring unreported income generated in Canada since 2010 to an offshore bank account.