The Canada Revenue Agency (CRA), provincial tax authorities, and other tax authorities around the world are under increasing pressure to generate revenue, causing a rise in tax audit activities. This pressure on the CRA and tax authorities in general has resulted in more information demands, larger adjustments, and increased potential for penalties and interest. The CRA announced that they will adopt a new risk assessment approach to select tax returns for audit, focusing on taxpayers they think will most likely fail to comply with legislation.
Since 2007, the CRA has employed a Voluntary Disclosure Program (VDP) for taxpayers to come forward out of their own accord to amend or correct their previous tax filing or reveal information to the CRA not previously provided in their tax return. If the CRA accepts a disclosure as having met the conditions set out for the VDP, it will be considered a valid disclosure and the taxpayer will not be charged penalties or prosecuted with respect to the accepted disclosure. The taxpayer would still have to make the necessary payments plus any applicable interest charges. Each request will be reviewed and decided on its own merit. If relief is denied or partly granted, the CRA will provide the taxpayer with an explanation of the reasons and factors for the decision.