Offshore Compliance Advisory Committee – Minutes – February 3, 2017

Friday, February 3, 2017

List of Participants

OCAC Members

Colin Campbell

Kimberley Brooks

Committee Members

  • Catherine Brown
  • Larry Chapman
  • Daniel Thornton

CRA Attendees

Deputy Assistant Commissioner, International, Large Business and Investigations Branch
Lisa Anawati

Director, International Tax Division, International and Large Business Directorate
Alexandra MacLean

Senior Technical Advisor, Offshore and Aggressive Tax Planning Directorate
Phil Cherrett  (by phone) 

1. Welcome and opening remarks

The Chair welcomed all members to the meeting. It was mentioned that a portion of the day was reserved for presentations and discussions between the OCAC members and the CRA, and a portion will be reserved for a discussion for between OCAC members only.

2. Minutes of August 3, 2016 meeting

The minutes of the August 3, 2016 meeting were approved by the Committee.

3. Update on the OCAC Report

Some members commented that following the release of the December 2016 OCAC report on the Voluntary Disclosures Program (VDP), they had observed public statements by practitioners advising taxpayers to make voluntary disclosures before the program parameters changed to become more restrictive.

Also, the Committee discussed, and was of the view, that the CRA should clarify when large firms should file taxpayer requested adjustments to correct past errors in filing rather than make a voluntary disclosure through the VDP.

Subsequent to the meeting, the CRA responded by clarifying that the proposal to exclude transfer pricing issues, and corporations with gross revenue in excess of $250 million, from the Voluntary Disclosures Program is not intended to prevent the correction of honest errors. The $250 million threshold is an existing CRA parameter used to identify a large corporation. The proposed VDP policy is intended to ensure that such situations are dealt with by the compliance area that has expertise in these complex files. Taxpayers that wish to correct errors that fall outside the parameters of the VDP, can file an amended tax return.

4. Audit Agreement Policy

The CRA explained that the Standing Committee of Finance Report entitled The Canada Revenue Agency, Tax Avoidance and Tax Evasion: Recommended Actions, included a recommendation for the CRA to review its guidelines to pursue litigation or to seek a settlement with individuals or organizations that have engaged in tax avoidance or tax evasion.

The CRA outlined that it only settles files on a principled basis in accordance with the legislation that it administers. Tax evasion cases involve criminal matters and are handled by the Public Prosecution Service of Canada.

The Chair reviewed the jurisprudence dealing with settlements, which has held that the Minister may only settle a tax dispute on a basis which reflects the application of the law to the facts agreed on, and not on factors such as litigation risk. The OCAC discussed the issue in some depth but did not come to an agreed conclusion, some members being sympathetic to the jurisprudence, others favouring a statutory amendment which would allow a broader basis for settlements. The Chair noted, however, that the terms of reference of the OCAC do not extend to recommendations for amendments to the Income Tax Act.

CRA officials provided an overview of the current internal administrative policy on reaching audit agreements with taxpayers, as set out in Communiqué AD-05-02B, The Audit Agreement and Waiver of a Client's Right to Object.

Members had the opportunity to speak with an official from the Offshore and Aggressive Tax Planning Directorate about the CRA's approach to resolving files involving offshore assets and income.

That was followed by a discussion of CRA's proposal to create an audit settlement approval process to improve governance around the use of audit agreements, which will involve mandatory referrals to a new Audit File Resolution Committee (AFRC) in certain circumstances, such as cases involving significant dollar amounts and/or international transactions.

The Committee supported the proposal overall to improve governance.

5. Closing remarks

The members held a short in camera session. The Chair thanked everyone for their participation and the meeting was adjourned.

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