Tax Gap in Canada: A Conceptual Study
This study has demonstrated the insight the concept of the tax gap can provide for tax administrations around the world and the complexities of tax gap estimation. It sets the baseline for the future work of the CRA on the tax gap and will contribute to the Agency's ongoing intelligence gathering with respect to non-compliance.
Following the release of this paper and its companion paper today, it is anticipated that a series of additional papers on other aspects of the tax gap will be published over the next two to three years, approximately every six to eight months. The release of the next paper is planned for early 2017.
These papers will take a variety of approaches to analyzing further the methodological and practical considerations associated with tax gap estimation. Examples of the types of papers currently under consideration include:
- Estimates of particular components of the tax gap: studies of the tax gap related to a particular type of tax (e.g. personal income tax), a particular stage of the compliance continuum (i.e. registration, filing, reporting, or payment) or a particular subset of taxpayers. These studies will investigate non-compliance within the particular the particular component being analyzed and, depending on the data available, will likely include an estimate of that component of the tax gap. These studies will enrich the CRA's analysis of a variety of aspects of non-compliance and provide additional insight into the concrete work being done on the part of the CRA to combat non-compliance.
- Discussion papers related to particular components of the tax gap: studies of the tax gap related to a particular sector of the economy (e.g. the restaurant sector, or the sharing economy) These studies will deepen the CRA's analysis of a particular focus of non-compliance and, depending on the data available, could where appropriate include an estimate of that component of the tax gap.
- An examination of the international tax gap: an in-depth study of the international tax gap, focussing on offshore compliance issues from a Canadian perspective. The paper will investigate previous estimates of the international tax gap, and will outline the methodological and practical considerations that come into play when developing an international tax gap estimate. In particular, it will determine whether it is currently possible to estimate an international tax gap for Canada, and will identify the type of data that would assist the CRA in estimating the international tax gap component overall. Given the international experience to date, it is possible that such a paper would not include an estimate of Canada's international tax gap.
As part of the CRA's work on the tax gap to date, officials have had a number of productive and informative discussions with the Agency's international counterparts on the concept of tax gap, its estimation, and the respective experiences of those countries. The CRA intends to continue this collaboration with our international counterparts, as well as the OECD, the International Monetary Fund, and other organizations, as we progress in our work on the tax gap to ensure that the Agency benefits from international best practices. In addition, the CRA will engage with academics and experts in the field to obtain independent analysis of various aspects of tax gap estimation to deepen the Agency's understanding of this tool.
Finally, the CRA also intends to partner with stakeholder organizations to hold a seminar in the course of the next year to engage with experts, academics, and other interested parties. Details on this event will be released in the coming months.
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