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The Canada Revenue Agency (“CRA”) has proposed changes to the voluntary disclosures program (“VDP”), with the release of Draft Information Circular IC00-1R6 (the “Draft Circular”) on June 9, 2017, to be effective after December 31, 2017.  A sixty-day consultation period is now underway.

Among the highlights of new measures proposed in the Draft Circular are the following:

• The introduction of a two-track classification of applicants under the VDP: the General Program which will offer penalty and partial interest relief, and the Limited Program under which reduced relief from civil penalties and no interest relief will apply.
• The Limited Program will apply in situations involving “major non-compliance”, including those involving large dollar amounts, a “sophisticated taxpayer”, multiple years of non-compliance, and active efforts to avoid detection through the use of offshore vehicles or other means. As a result, the Limited Program is expected to apply in the majority of cases.
• Disclosures must include estimates of income earned in years for which bank statements are not available. Whether or not estimated income is to be taxed is not explicitly addressed in the Draft Circular.  This is the elephant in the room.
• The application must include a payment of the estimated tax due in order to be considered valid, unless a payment arrangement is made or evidence of inability to pay is provided.
• Corporations will have more limited recourse to the VDP, as applications involving transfer pricing adjustments and corporations with gross revenue in excess of $250 million in at least two of the last five taxation years will not be considered.

While it is as yet uncertain whether any further changes will be made before implementation, it is clear that the window to make a voluntary disclosure under current policies will close in the near term.  In the case of a person who has thus far resisted the notion of making a voluntary disclosure, further inaction could prove to be very costly, especially in light of the recent advent of more aggressive enforcement action by the CRA and the impending sharing of information under automatic exchange of financial information measures.