The federal government loses an average of $ 22 billion a year in unpaid taxes, according to a new report from the Canadian Revenue Agency, which analyzes tax collection from 2014 to 2018.
In its first report on Canada’s “total tax gap,” released Tuesday, the CRA estimated the net tax gap for those five years or the amount of money owed to the government that it did not actually collect to as much as $ 111.2 billion.
Although the amount of uncollected tax tended upward during this time, with estimates ranging to $ 23.4 billion in 2018 and $ 23.5 billion in 2017, the ratio remains stable each year at nine percent of total federal tax. income.
The difference in personal income tax is between $ 8.4 billion and $ 10.6 billion a year, the report said, representing between five and eight percent of total personal income tax revenue.
This amount included unpaid taxes, hidden offshore income and non-compliance with the rules related to the informal economy, an analysis that excludes illegal activities.
However, the CRA considers that the personal income tax system is largely ‘tax-insured’, which means that it expects a low risk of non-compliance.
Meanwhile, the difference in corporate tax revenues is estimated at between 4.6 and 7.3 billion dollars a year, which represents between 10 and 17 percent of expected revenues in this category.
Non-compliance with large corporations is the most important factor, the report said, while small and medium-sized enterprises are less noticeable.
The report also found that between eight and 10 percent of the expected revenue from harmonized sales taxes remains unpaid each year, averaging about $ 3.9 billion.
And smaller amounts between $ 400 million and $ 500 million a year remain unpaid under the excise tax system, largely due to the illegal production of cigarettes, although non-compliance with excise licenses and registrants is “very low.”
The CRA says compliance and collection efforts over the five years covered by the report have recovered an additional $ 72.4 billion that would not otherwise have been paid.
The report says the agency uses a “specialized compliance approach” to sort out business audits and takes a “balanced approach” to non-compliance by providing options such as payment agreements and tax relief provisions before taking legal action.
The size of the tax gap is affected by the overall size of the economy, the agency says, and levels of bankruptcy, which can vary depending on the health of the economy.
Although deliberate tax evasion, non-reporting of income and excessive taking of tax credits are the cause of some of the uncollected money, the agency added, unintentional mistakes and ignorance are also at play.
The federal NDP has responded to CRA statistics by urging liberals to do better in the fight against tax evasion, accusing the government of “turning a blind eye” to offshore tax havens.
This report by The Canadian Press was first published on June 28, 2022.
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