Minister Lebouthillier announces the release of the Canada Revenue Agency's fourth tax gap study
June 28, 2018 Ottawa Canada Revenue Agency
The Government of Canada is working to ensure a tax system that is fair for all Canadians. Building on that commitment, today the Honourable Diane Lebouthillier, Minister of National Revenue, announced the release of the fourth study of the tax gap in Canada which focuses on individuals’ international income tax compliance.
The approach of the study is based on methodologies developed by international experts. According to the most recent study, the estimate for the offshore investment tax gap for individuals was between $0.8 billion and $3 billion in 2014, or between 0.6% and 2.2% of individual income tax revenue. Canada is the first G7 country to study the offshore tax gap. In previous studies, the tax gaps for personal income tax and the federal portion of the goods and services tax / harmonized sales tax were estimated at up to $14.6 billion in 2014.
The studies conducted to date underline the importance of examining not only individuals, but also their related entities when investigating non-compliance. The Government of Canada's recent Budget 2016, 2017, and 2018 investments in the fight against tax evasion and aggressive tax avoidance will further support this approach and promote enhanced information sharing among the Canada Revenue Agency (Agency) and its international partners.
With these investments, the Government is delivering better data, better approaches and better results. Furthermore, the Agency has the capacity to leverage new global collaboration and data sharing to crack down on tax cheating.
New approaches include being able to automatically access and review all international electronic funds transfers over $10,000 entering or leaving the country, allowing us to better risk assess individuals and businesses. The Agency has also improved its audit capacity to focus on high net worth taxpayers and thanks to the Common Reporting Standard is gaining easier access to information on Canadians’ overseas bank accounts.
The Agency's next tax gap study will be released in 2019 and will focus on incorporated businesses.
"Most Canadians pay their fair share of taxes. They expect their government to do all it can to pursue people and businesses that try to avoid doing the same. This latest study of the tax gap is evidence of our Government's ongoing commitment to better target international tax evasion and aggressive tax avoidance."
– The Honourable Diane Lebouthillier, Minister of National Revenue
The Agency describes the tax gap as the difference between the taxes that would be paid if all obligations were fully met in all cases and the taxes that are actually received and collected.
Each year, the CRA processes about 29 million income tax and benefit returns and assesses about $180 billion in individual federal income taxes.
Based on international audits completed between 2014 to 2015 and 2016 to 2017, almost $1 billion in income was uncovered and assessed from 370 individuals, 200 corporations and a small number of trusts. The additional tax identified was $284 million. Of this, 23% was attributed to individuals and 77% to corporations and trusts linked to those corporations.
In 2014, about $429 billion in assets, $9 billion in foreign income and $13 billion in capital gains were reported. Top countries where assets were held and foreign income was reported tended to be the U.S. and the U.K.
Canada is one of over 65 nations sharing Country-by-Country Reports (CbCRs). CbCRs provide automatic access to information about multinational corporations’ activities in every country they operate in, giving us a deeper understanding of the operations of these large companies.
- This year, we are also gaining easier access to information on Canadians’ overseas bank accounts, with the implementation of the Common Reporting Standard. With this new system, Canada and close to 100 other countries will begin exchanging financial account information. This information will help us connect the dots and identify instances where Canadians hide money in offshore accounts to avoid paying taxes.
- Backgrounder - Tax gap estimates in Canada
- International Tax Gap and Compliance Results for the Federal Personal Income Tax System
- Tax Assured and Tax Gap for the Federal Personal Income Tax System
- Tax Gap in Canada: A Conceptual Study
- Estimating and Analyzing the Tax Gap Related to the Goods and Services Tax / Harmonized Sales Tax
- Video: Minister Lebouthillier tables fourth report on the Tax Gap
Office of the Minister of National Revenue
Canada Revenue Agency
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