CRA’s Voluntary Disclosure Program Needs an Overhaul

Our tax system is referred to as a “self-assessment” system, meaning that it relies upon taxpayers to self-assess their taxes.

This approach is far more efficient from an administrative perspective than the alternative, and results in a much lower administrative cost per dollar of tax collected. However when some taxpayers inevitably find that they have not complied in the past, the cost of penalties and interest on unreported (or under-reported) income can become a huge barrier to becoming compliant.

In order to encourage taxpayers to come forward and correct historical tax filings, the Canada Revenue Agency (“CRA”) created the Voluntary Disclosures Program (“VDP”). Taxpayers who come forward of their own volition (i.e. on their own – before their taxes are audited by CRA), are theoretically forgiven penalties on under-reported income by virtue of the VDP.

The problem is that the program is administered in such a way that VDP officials work tirelessly to find ways to characterize the disclosures themselves as insufficient – thereby denying the protection of the VDP program.

After one too many experiences with the officious behavior of VDP employees, I took it upon my self to write our MP, and enclosed a copy of the letter from the official.