What is Canada’s Tax Gap?

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How much revenue exactly slips through the CRA’s hands because of tax avoidance and tax evasion? According to the CBC article, “CRA not tracking billions in potential taxes lost each year,” nobody really knows as CRA does not release any of its data on the matter.

Unlike other countries such as the US that has been publicly reporting its tax gap for 50 years, Canada does not disclose or even track its tax gap. Tax gap is the term used to describe the difference between the government’s potential tax revenue and the actual taxes collected.

According to OECD, the US has an annual tax gap of $689 billion, the European Union with $261 billion, Sweden with $24 billion and Australia with $3 billion.

For years, Senator Percy Downe of PEI has been campaigning to get the CRA to disclose the raw data that they have on the country’s tax gap. According to him, it could be $40 billion or 6 billion. The point is, he said, was that we need to know and track it to be able to assess just how big the problem is.

Attempts to get the CRA to release their raw data on just how much in offshore, GST and income taxes are lost have failed. CRA, at one time, responded to request for data as a breach to the privacy of Canadian tax payers. In another, the CRA agreed to give some of their data if paid $140,000 to process the request.

In a statement last October 2017 with regards to the tax gap, the CRA claims that they are taking steps to tax gap estimation and furthering their knowledge on the matter.

Last year, the CRA released its first tax gap estimate: $4.9 billion in revenue lost each year because of non-compliance with GST and HST.

According to estimates by academics, Canada’s international tax gap is at $6-7.8 billion per year.

Source: http://www.cbc.ca/news/business/paradise-papers-tax-gap-1.4384532, https://www.thestar.com/news/world/2016/07/01/cra-releases-first-tax-gap-estimate.html
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