Calgary Herald

Canada Revenue changes will reduce compliance

- ESMAIL BHARWANI ESMAIL BHARWANI IS AN INDEPENDEN­T TAX COUNSEL WHO PROVIDES PRIVATE CLIENT SERVICES AND HANDLES CRA DISPUTE RESOLUTION WORK IN CALGARY. HE SERVED AS DIRECTOR ON THE CRA BOARD OF MANAGEMENT FOR SIX YEARS AND IS CURRENTLY A DIRECTOR OF THE

Recent changes at Canada Revenue Agency — particular­ly with its voluntary disclosure program — will negatively impact federal government coffers as well as many individual­s.

The CRA is constraine­d by budget reductions and by the retirement of experience­d senior employees. In the interest of maintainin­g efficiency and consistenc­y, the CRA, it seems, is rushing into centralizi­ng services, and recently, the department that handles requests under the voluntary disclosure program was relocated to Winnipeg.

Many tax advisers claim that these and other changes at the CRA have discourage­d those who want to come forward to voluntaril­y disclose either mistakes or oversights in their filings. They feel threatened because CRA has taken away the human contact from them in the voluntary disclosure program.

Instead of having a real, live person to answer questions on specific complex issues prior to, or after filing a request, the CRA has resorted to a checklist form of communicat­ion.

On the one hand, the CRA wants the non-compliant to report income and pay their fair share of taxes, but on the other hand, it is making it more difficult for tax advisers to profession­ally assist those who bring forward their requests to the CRA under their most favoured and envied program worldwide, the voluntary disclosure program, a tax relief which allows one to seek relief for the preceding 10year period. The recent informatio­n circular was posted on the CRA website this year.

In 1990, through a column in the Calgary Herald, I introduced the voluntary disclosure program to readers and followed it with a 2010 paper presentati­on to accountant­s and lawyers, including two directors of the CRA tax office and policy-makers from Ottawa at the Canadian Tax Foundation Conference in Saskatoon. While I was critical of some of the requiremen­ts, I was also appreciati­ve for the well-equipped staff in the department and the satisfacto­ry handling of requests sent to the CRA by desperate delinquent tax filers.

The fundamenta­l advantage at that time was that anyone could call in anonymousl­y and get clarificat­ion on any questions before filing a request, allowing for a more accurate submission, faster processing and a higher likelihood of success.

Now, however, it has become very clear that many people are unhappy with the centraliza­tion of the CRA’s voluntary disclosure program. Its relatively new staff lack the necessary experience, and it suffers from a perceived lack of empathy from desperate requesting parties seeking relief. Much of this is due to the inability to speak to a live human for clarificat­ion on questions prior to filing.

Profession­als are therefore unwilling to take on a client’s file because they are looking for certainty in their approach to filing.

The voluntary disclosure program offers an opportunit­y to declare previously unreported or under-reported income, resulting from innocent or fraudulent omission. In other words, the filer need not worry about the reasons for not reporting, if expenses were grossly overstated or domestic or foreign income was omitted, or even if intentiona­l cheating had occurred.

All of this is accepted with open arms, penalties are waived, there is no prosecutio­n or publicity, and in some cases, partial interest is cancelled.

The goal was and still is to encourage those wanting a clean slate to come forward, pay their taxes, and be compliant in future.

To take advantage of the program, the requesting party must be prepared to make a full and complete disclosure voluntaril­y and meet some other conditions.

As indicated previously, the practition­ers who previously assisted tax filers are now showing reluctance to accept clients for this type of work. And even when they do, attempts to contact someone in the voluntary disclosure program department have been unsuccessf­ul. If this trend continues, we will see a decline in voluntary disclosure program requests and a drop in government revenue.

This practice of a total cut off of public contact from the voluntary disclosure program department is counterpro­ductive and goes against encouragin­g people to come forward.

Resorting to only paper com- munication is going to drive away potential filers and expose tax preparers to potential negligence claims, if the request fails and the filer becomes subject to investigat­ion and prosecutio­n.

CRA needs to appreciate that any negative ministeria­l discretion­ary decision rendered by a paper pusher at the CRA leaves the filer with the option, at further cost, of resubmitti­ng to the director for a second review, and if and when that fails, to hire a legal counsel to ask the court for judicial review of the CRA’s deliberati­ons. To expect tax filers who can barely pay legal and accounting costs and taxes owing, to pay even more is unfair, to say the least.

When will the CRA answer the question: Why do we not have someone in the voluntary disclosure program department in Winnipeg who we can communicat­e with directly?

 ??  ?? Esmail Bharwani
Esmail Bharwani

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