Minister Lebouthillier releases a study on individual income tax gap in Canada

June 6, 2017                           Ottawa, Ontario                  Canada Revenue Agency

Canadians work hard for their money, pay their fair share of taxes and expect a tax system that is responsive and impartial. The Government of Canada is committed to making sure that Canadians can have confidence in their tax system and it is clearly communicating its efforts in this regard.

Today, the Minister of National Revenue, Diane Lebouthillier, continues to deliver on her commitment to estimate Canada’s tax gap by releasing a study on individual income tax compliance in Canada. The results of this study will help the Government better understand the gap between the taxes that would be paid if all obligations were fully respected in all cases, and the taxes that are actually paid and collected.

The study shows that Canadians can be highly confident that the overwhelming majority of the tax base is at low risk of non-compliance though there is minimal direct intervention by the Canada Revenue Agency (CRA). For the 2014 tax year, we are confident that 86% of income was assessed, 74% of deductions were reported and 83% of credits were claimed.

Overall, based on available information, the study estimates Canada’s tax gap for individuals at the federal level to be about $8.7 billion or 6.4% of personal income tax revenues in 2014. This calculation was based on estimates of taxes that were assessed but not collected and on unreported income from the underground economy.

This study responds directly to the October 2016 report of the House of Commons Standing Committee on Finance on tax avoidance and tax evasion. It recommended that the CRA calculate Canada’s federal tax gap and provide information about the size of that gap and the methodology used to calculate it.

The CRA has established a team that is already examining other aspects of the tax gap. The CRA will continue to collaborate with various international partners to inform its work on the tax gap. The next study in the tax gap series will focus on international tax evasion and will draw on increasingly available international tax data to support the analysis. This study will be released in 2018.

The CRA’s commitment is part of a series of measures announced by Minister Lebouthillier in 2016 that will provide the Government with more insight into the tax gap and related issues. These measures will help us make better decisions to more effectively fight tax evasion and tax avoidance and to make sure that Canada’s tax system is fair.

Further, over the last two budgets, the Government has invested close to $1 billion to help the CRA crackdown on tax evasion and avoidance. Preliminary results show that the Agency is on track to generate over $13 billion from audit efforts for the most recent fiscal year ending March 31, 2017.