Canadian taxpayers applying for offshore amnesty will be forced to name their advisors

Canadian taxpayers who use the Canada Revenue Agency's offshore voluntary disclosures programme (OVDP) will soon have to disclose the identity of any advisors who helped them set up offshore accounts or structures, or otherwise assisted with their non-compliance.

Report on Canada’s Voluntary Disclosures Program

The above recommendation is one of several made in a report of the Offshore Compliance Advisory Committee, set up in April to examine the OVDP.

The VDP allows taxpayers to disclose previous omissions or errors in their dealings with the CRA. If the taxpayer's disclosure satisfies certain conditions, criminal prosecution and civil penalties under the Income Tax Act are generally waived and partial relief for accrued interest on unpaid tax is typically given but all evaded tax must be paid.

However, in "extraordinary circumstances" like the taxpayer's inability to pay, or financial hardship, exceptions may be made. This provision, the report states, will strengthen public confidence in the fairness of the tax system.

"Overly generous" provisions

The report considers the programme to be too generous to non-compliant taxpayers. The report says "[I]t is our view that the CRA [Canada Revenue Agency] should view all of the circumstances surrounding the disclosure and that relief from interest and penalties should be reduced in certain cases" - like cases where sophisticated taxpayers have sought expert advice and used complex offshore structures to evade significant amounts of tax over several years.

Repeat users

Minister of National Revenue Diane Lebouthillier has agreed to limit the 'repeated use by sophisticated taxpayers' of the OVDP and, in any case, a taxpayer normally cannot access relief granted under the VDP if they have previously made a voluntary disclosure.