Canada

New proposals for GST/HST voluntary disclosures

TAX ALERT  | 

On June 9, 2017, the Canada Revenue Agency (CRA) requested public feedback on proposed changes to the Voluntary Disclosure Program (VDP). The updates are provided in Draft Information Circular IC00-1R6 (for income and payroll taxes) and Draft GST/HST Memorandum 16.5 (pertaining to GST/HST, excise tax, and other taxes). Click here to access information on the existing guidelines, the changes and how to provide comments.

With these changes, the CRA seeks to address a prevailing belief about the VDP: That in offering relief to both an inattentive taxpayer and one who wilfully circumvents tax requirements conveys an unfair advantage to the latter. The proposals emanate from recommendations made by the Offshore Compliance Advisory Committee (OCAC), a body convened in April 2016 to advise the CRA on offshore compliance.

Changes to GST/HST, excise tax, and other taxes

The CRA intends to separate the VDP so that disclosures pertaining to excise tax and GST/HST, as well as other taxes, will be brought into line with their applicable legislation. The level of relief currently available will also diminish.

Here are the main changes:

VDP submissions will now be accepted into a three-track classification, which mirrors the two-track system for the income tax related VDP.

Track 1 will handle GST/HST wash transactions, wherein a supplier fails to remit tax because they have not correctly charged and collected GST/HST from a registered customer who would have been entitled to claim a full input tax credit. Successful submissions receive full relief from all interest and penalties.

Track 2 will be reserved for non-compliance and errors, other than significant non-compliance. Examples: Wash transactions that failed to qualify for the first track, failure to file information returns and reasonable errors. Successful submissions would gain 50 percent relief from interest and complete relief from penalties.

Track 3 will concern itself with major non-compliance. These may include:

  • Willful default
  • Failure to remit charged or collected GST/HST
  • Attempts to avoid detection
  • Significant dollar amounts
  • Numerous non-compliant years
  • Sophisticated taxpayers
  • Disclosures made once the CRA announces it will focus on those particular disclosures
  • Activities that demonstrate registrant culpability.

Successful submissions will avoid a gross negligence penalty. All other applicable penalties and interest will be levied in full.

Taxpayers must now pay the estimated tax with their submission

All previously inaccurate, incomplete or unreported information must also accompany the submission for a specified period of time. For Track 1 submissions, this is equal to four years prior to application filing. For Track 2, the period expands to six years. For Track 3, all relevant years before the date of filing must be included.

These proposed guidelines will take effect after December 31, 2017.

 


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