Canadians missed $111.2 billion in federal taxes over four years, CRA study finds

Canadian citizens and corporations missed an estimated $111.2 billion in taxes between 2014 and 2018, according to a new analysis of the country’s tax gap conducted by the Canada Revenue Agency.

After years of measuring Canada’s tax gap – namely the uncollected money that never turns into public offerings – the CRA released its first global report on Tuesday, offering a full account of the scope and the source of unpaid federal taxes by corporations and individuals.

The report found that Canadian individuals failed to pay between $41.9 and $52.8 billion in personal income taxes between 2014 and 2018, while corporations failed to pay between $23.1 and $52.8 billion. $36.6 billion over the same period.

These amounts represented about 9% of Ottawa’s total tax revenue, although the CRA says it is focused on reducing that figure.

“We are seeing significant reductions in the tax gap through our compliance efforts,” said Kelly Taylor, CRA’s Executive Director.

Tax non-compliance is the result of many factors, including hidden income, bankruptcies, excessive deductions or ignorance of tax obligations. While the government can reduce its tax gap, several of these factors — including corporations filing for bankruptcy and not paying their owed taxes — make it difficult to achieve a zero percent tax gap.

Since 2016, when Panama Papers investigations uncovered hundreds of cases of tax evasion through offshore accounts held by Canadian individuals and businesses, the federal government has come under pressure to crack down on tax evaders. taxes and increase transparency around its collection efforts.

In Tuesday’s report, the CRA said its enforcement policies — including business audits and penalties — have helped narrow the total tax gap over the past eight years.

In 2018, for example, the CRA estimated the overall federal tax gap to be between $35.1 billion and $40.4 billion before accounting for CRA enforcement actions. After execution, the CRA estimates the tax gap to be between $18.1 billion and $23.4 billion.

The total amount of unpaid funds increased between 2014 and 2018, although the report attributes this growth to an increase in the overall tax base over the same period.

The corporate income tax shortfall increased from $4.2 billion to $6.7 billion in fiscal year 2014-15 to $5.1 billion to $8.3 billion in 2018-19.

The CRA also estimated that between $6.4 billion and $17.2 billion in missing personal income tax was the result of hidden offshore investment income.

Data on offshore companies and trusts is “scarce,” making it difficult to distinguish between legitimate uses of international assets and tax evasion, Taylor said.

“We know there is a lack of openness or truth in reporting offshore investment income.”

As recently as last year, the CRA said it had recovered the missing money in 35 of the hundreds of Canadian cases linked to Panama that it had analysed.

“Foreign leaks, such as the Panama and Paradise Papers, as well as formal information-sharing agreements, including electronic funds transfers and common reporting standards, have increased the amount of data on these offshore entities. and helped the CRA investigate potential international tax cases. non-compliance,” the study says.

Since the Liberal government promised to crack down on tax cheats after taking office in 2015, the CRA has released several reports measuring the tax gap in Canada.

It released its first estimate of tax avoidance in 2016, finding that the government lost $4.9 billion in potential taxes due to non-compliance with GST and HST payments.

“Understanding how and why taxpayers do not comply is essential to help preserve the integrity of the tax system and protect Canada’s tax base,” said National Revenue Minister Diane Lebouthillier in a statement accompanying the report.

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