CRA to Relax VDP Rules

On July 15, 2010, the Globe and Mail published an article regarding a possible relaxing of CRA’s Voluntary Disclosure Program (VDP) guidelines. Currently, in order to qualify for a voluntary disclosure, a taxpayer must give CRA a complete picture of all of the outstanding tax issues that the taxpayer has in any year. However, the Income Tax Act restricts the number of years in which relief is available, under the VDP, to the 10 most recent years. If a tax issue arose in a year prior to the past 10 years, the taxpayer may have been subject to full interest and penalties in those years. This may have caused some taxpayers to not utilize the VDP for fear that they would create a large liability for themselves.

The change CRA is making is purely administrative; it appears that there will be no amendment to the Income Tax Act. Also, it is unclear when that change will be effective, as there is no official announcement from CRA as of yet. As such, it appears that CRA’s primary focus is to bring taxpayers back into the system, so that they can collect future taxes from them. Further, it also appears that CRA believes it is more cost-effective to ensure tax compliance by making it easier for taxpayers to voluntarily disclose errors than to devote more resources to audits and investigations.