The federal government forgoes as much as $47.8 billion in uncollected taxes every year, according to a new report that Ottawa has yet to release.
These billions represent only a fraction of all taxes that go unpaid because they don’t include taxes owed to the provinces and municipalities — all of which are in need of additional revenues to close budget deficits and deliver on major public works projects.
“Everyone wants to make sure that everyone else is paying their fair share of taxes,” said Matthew Stewart, who oversaw the research for the report, published by the Conference Board of Canada on Monday.
“We wanted to use an initial study to push the (Canada Revenue Agency) into doing more work on this. . . . The first step is figuring out what the gap is, then you can come up with a plan to crack down on it.”
Despite a promise during the last election campaign, Ottawa hasn’t produced an official figure for the tax gap — an estimate of the difference between all tax due on paper and the actual tax revenue collected by the government.
In the interim, researchers used techniques developed by tax agencies in the U.K. and U.S. to estimate a Canadian tax gap of between $16 billion and $47.8 billion for the 2010 tax year. This lost revenue would have provided a significant boost to the $160 billion the CRA collected in federal taxes that year.
Beyond sales taxes, tax gaps calculated by foreign governments include tax evasion, both “onshore” and using the offshore tax havens that featured prominently in the Panama Papers revelations.
Those reports brought offshore tax evasion into the public eye, demonstrating how it impoverishes public coffers while exacerbating inequality, said Carl Hammersburg, an analyst with SAS Analytics, who consulted on the report.
“Offshore is really big dollars from a smaller number of entities, but the majority of the tax gap is actually small amounts from a large number of people,” Hammersburg said.