Voluntary Disclosure Applications: Canadian Tax Lawyer's Guide

• Published date: 20 August 2021
• Subject Matter: Tax, Income Tax, Tax Authorities
• Law Firm: Rotfleisch & Samulovitch P.C.
• Author: Mr David Rotfleisch

Introduction: The CRA's Voluntary Disclosures Program

The Voluntary Disclosures Program (VDP), also known as tax amnesty, is a program offered by the Canada Revenue Agency (CRA) that encourages a taxpayer to voluntarily come forward and disclose any inaccurate or unreported information concerning tax filings. A taxpayer who makes a successful application under the Voluntary Disclosures Program may receive a waiver for penalties and reduced interest on any outstanding tax debt. Whether a disclosure is successful or not depends on a number of strict criteria that the CRA uses to evaluate a disclosure, including whether that disclosure was truly voluntary.

On March 11, 2021, the Federal Court released its decision in 4053893 Canada Inc. v Canada (National Revenue), 2021 FC 218 ("4053893 Canada Inc."), concerning an application for judicial review of a CRA denial of relief under a voluntary-disclosure application. As a consequence of the ruling, 4053893 Canada Inc. (the "Corporation") was conclusively denied interest and penalty relief for years of unfiled tax returns. 4053893 Canada Inc. highlights many of the issues that taxpayers face in making successful voluntary-disclosure applications, =the importance in using an experienced Canadian tax lawyer in submitting a tax amnesty application, and in being proactive to resolve any tax filing issues before the CRA begins a tax investigation. If you are concerned about whether you should pursue a voluntary-disclosure application, or if the CRA has taken enforcement action against you for a tax debt, then you should speak with an expert Canadian tax lawyer as soon as possible to evaluate your options.

Facts of the Case and The Voluntariness Rule

Mr. Harris was sole director and employee of the Corporation. Both Mr. Harris and the Corporation were long truant on filing income tax returns; Mr. Harris had failed to file tax returns for 11 years, while the Corporation had failed to file tax returns for 13 years. In 2016, Mr. Harris received a letter requesting that he file his missing income tax return. Shortly thereafter, Mr. Harris spoke with a CRA agent over the phone concerning the notice to file his tax returns. During that phone call, Mr. Harris informed the agent that the Corporation was still active and that he was seeking professional Canadian income tax representation to have its income tax filings prepared. The CRA agent informed Mr. Harris that his responsibility to file income tax returns extended to the Corporation as well. Mr. Harris subsequently filed a...