In its first report on Canada’s “total tax gap” released on Tuesday, the CRA estimates that the net tax gap for those five years, or the amount of money owed to the government that did not actually collect, totaled $ 111.2 billion.
Although the amount of uncollected tax showed an upward trend in that period, with estimates ranging up to $ 23.4 billion in 2018 and $ 23.5 billion in 2017, the ratio remained stable each year at 9 percent of total federal tax revenue.
The personal income tax gap was between $ 8.4 billion and $ 10.6 billion a year, according to the report, which accounts for between five and eight percent of total personal income tax revenue.
This amount included unpaid taxes, hidden offshore income and non-compliance related to the informal economy, an analysis that ruled out illegal activities.
However, the CRA considers that the personal income tax system is largely “tax-secured”, meaning that it expects a low risk of non-compliance.
The corporate tax revenue gap, meanwhile, was estimated at between $ 4.6 billion and $ 7.3 billion a year, representing between 10 and 17 percent of expected revenue in this category.
Non-compliance related to large companies was the most important factor, the report said, while small and medium-sized enterprises were less obvious.
The report also found that between eight and 10 per cent of expected revenue from harmonized sales taxes were not paid each year – an average of about $ 3.9 billion.
Smaller sums of between $ 400 million and $ 500 million a year were left unpaid under the excise tax system, which is largely due to the illicit production of cigarettes, although non-compliance by licensees and registrants was “very low”.
The CRA says compliance and recovery efforts over the five years covered by the report have raised an additional $ 72.4 billion that would not otherwise have been paid.
The report states that the agency uses a “specialized compliance approach” to sort out business audits and follows a “balanced approach” to non-compliance, providing options such as payment arrangements and taxpayer exemptions before taking legal action.
The size of the tax gap is affected by the overall size of the economy, the agency says, and bankruptcy levels, which can vary depending on the health of the economy.
While deliberate tax evasion, income reporting failure, and excessive tax credit are responsible for some of the uncollected money, the service adds, unintentional mistakes and ignorance also play a role.
The federal NDP reacted to CRA statistics by calling on the Liberals to do better in cracking down on tax evasion, accusing the government of “turning a blind eye” to offshore tax havens.
This Canadian Press report was first published on June 28, 2022.
