Duhaime's Law Dictionary


Voluntary Disclosure Definition:

A tax amnesty program whereby a delinquent taxpayer discloses information not previously reported to a tax agency, and by doing so voluntarily, avoids liability to penalty or prosecution normally associated with prior non-disclosure.

A term used in statute to describe a tax amnesty program.

The Canadian tax agency, Canada Revenue Agency, has a voluntary disclosure program and describes it as allowing the otherwise delinquent taxpayer:

"... taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA, without penalty or prosecution."

The statutory basis for the program is at §202(.1) of the Income Tax Act:

"The Minister may, on or before the day that is ten calendar years after the end of a taxation year of a taxpayer (or in the case of a partnership, a fiscal period of the partnership) or on application by the taxpayer or partnership on or before that day, waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by the taxpayer or partnership in respect of that taxation year or fiscal period, and ... any assessment of the interest and penalties payable by the taxpayer or partnership shall be made that is necessary to take into account the cancellation of the penalty or interest."

According to the Canadian government, voluntary disclosure and the amnesty it provides, "promotes compliance" with tax laws and that it "is not intended to serve as a vehicle for taxpayers to intentionally avoid their legal obligations under the acts administered by the CRA"

But while of assistance to those who commit honest errors in under-reporting taxable income, voluntary disclosure loudly invites manipulation of the tax system by serving as a shield against tax evasion prosecution to those who may have otherwise sought to evade the payment of their full taxes.

Further, voluntary disclosure gives tax payers an opportunity to bargain with Canada Revenue Agency officials. The CRA saves the cost of prosecution and in return, may agree to hold the tax-payer to less tax than would of been required if the tax-payer had of complied with the tax laws in the first place.

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