Practice National Taxation

Crackdown: Part II

Second of a five-part series on Canada Revenue Agency proposed changes to Voluntary Disclosures Program

Author: Jeff Buckstein

OTTAWA – The Canada Revenue Agency has proposed changes to its Voluntary Disclosures Program (VDP) that would narrow eligibility and impose additional conditions on taxpayers applying to use it. 

Some experts don’t like the proposal to exclude from consideration for VDP relief applications that involve transfer pricing, as well as the exclusion of applications from corporations with gross revenue in excess of $250 million. 

Hugh Neilson, FCPA, FCA, is the director of taxation services for KRP Group, an accounting firm in Edmonton. He is also a member of the Video Tax News Board of Editors. Neilson notes that transfer pricing is a complex subject, and as a result firms of all sizes could be susceptible to honest errors and the need to make transfer pricing adjustments. 

Neilson also questions why larger corporations with more than $250 million in revenue are being singled out for exclusion. “In what way is their situation any more culpable out of the gate than anybody else’s?” he asks. 

Canadian Accountant blogger David Rotfleisch, the owner and senior lawyer with Rotfleisch & Samulovitch Professional Corporation in Toronto, poses similar questions. 

“Where is the equity in not letting a large company benefit from this program if they made a genuine mistake? The majority of large companies are law abiding. They’re doing their best to comply with tax rules. [But] they make mistakes,” he says. 

Rotfleisch notes how, for instance, CRA’s T1134 return form — providing information about controlled and non-controlled foreign affiliates “is horrendously complicated if you’ve got a complex multi-jurisdictional structure. You’ve got to report your subs, and subs of subs. It really is a nightmare,” he says. 

“[So] why should a firm with more than $250 million in annual revenue not have the benefit of the voluntary disclosure program on a horrendously complex CRA form that is easier to get wrong than right?” Rotfleisch asks. 

The proposal to exclude transfer pricing issues, and corporations with gross revenue in excess of $250 million from the VDP is not intended to prevent the correction of honest errors, explains CRA media spokesperson David Walters. 

“The $250 million threshold is an existing CRA parameter used to identify a large corporation. The proposal is intended to ensure that such situations are dealt with by the compliance area that has expertise in these complex files. Taxpayers that wish to correct errors that fall outside the parameters of the VDP can file an amended tax return,” he adds.

Jeff Buckstein, CPA, CGA, is an Ottawa-based business journalist.

Tomorrow, part three of "Crackdown: Canada Revenue Agency proposes change to Voluntary Disclosures Program."


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