Tax Gap in Canada: A Conceptual Study

Minister's Message

Diane Lebouthillier Minister of National Revenue

I am pleased to present the Canada Revenue Agency's (CRA) study on tax gap estimation.

The study represents the first step toward understanding the concept of the tax gap and what it can – and cannot – tell Canadians and the CRA about compliance with Canada's tax system.

Canada enjoys a high level of compliance, with 93 percent of individuals filing their tax returns and paying their taxes on time. However, despite this commitment by the vast majority of Canadians to play by the rules and pay their fair share, we know that some attempt to avoid or evade the taxes they rightfully owe.

Budget 2016 made a historic investment to improve the CRA's ability to detect, audit, and prosecute tax evaders. This will build on the strong identification, audit and enforcement programs already in place and delivering results at the Agency.

It is important that the CRA use every tool at its disposal to ensure that Canadians and Parliamentarians have confidence in the fairness of the tax system. It is equally important that we continue to seek innovative ways to understand and combat non-compliance.

That is why the Government of Canada is publishing an open and transparent discussion of the tax gap as
a concept. We want to understand the benefits and drawbacks of tax gap estimation so we can maximize the value of this tool in the Canadian context.

In cooperation with the Department of Finance, we are also releasing a companion paper entitled Estimating and Analyzing the Tax Gap Related to the Goods and Services Tax/Harmonized Sales Tax which, contains an estimate of the tax gap related to the Goods and Services Tax/Harmonized Sales Tax (GST/HST). This estimate gives us an indication of the level of non-compliance with GST/HST rules and also demonstrates some of the insight that can be gained through tax gap estimation.

Together, these reports lay the foundation for the Government's future work on the tax gap and complement the work underway to deliver on our commitment to transparency and to a tax system that functions fairly.

Looking ahead, we will continue our work toward developing the tools necessary to estimate the tax gap and we will keep the lines of communication open with stakeholders and all Canadians as we progress in this important work.

 

The Honourable Diane Lebouthillier, P.C., M.P.  
Minister of National Revenue

Page details

Date modified: