For Immediate Release - June 18, 2019
Today’s corporate tax gap report from Canada Revenue Agency reveals widespread tax avoidance and evasion, particularly for larger corporations. The CRA estimates that corporations are responsible for approximately $10 billion or 40% of the federal government’s estimated $24 billion overall tax gap. The Parliamentary Budget Office is expected to release its own report on Canada’s tax gap later this week.
“This report shows corporate tax dodging is costing the government billions in lost revenues, which in turn costs Canadians through reduced spending on social services such as healthcare and education,” said Toby Sanger, executive director of Canadians for Tax Fairness.
Canadians for Tax Fairness analyzed the CRA estimates and found large Canadian corporations failed to pay approximately a third of their taxes assessed, compared to a rate of half that for small and medium sized enterprises (SMEs) and rates of seven-to-eight percent for individual and sales taxes. Much of this tax dodging is by large corporations are in the finance and resource sector.
“The federal government urgently needs to devote more resources to the audit, enforcement and prosecution of tax evasion, especially by large corporations, and it also needs to bring in tougher laws and penalties,” Sanger said.
These findings also confirm Canadians’ suspicions and what a recent survey of CRA auditors and tax professionals also found: 90% agreed “it is easier for corporations and wealthy individuals to evade and/or avoid tax responsibilities than it is for average Canadians.”
What’s even more disturbing is that the estimates don’t account for additional losses through international tax avoidance and evasion by corporations with offshore establishments. Canada loses at least $8 billion in revenues annually from profit and tax shifting by multinational corporations. A separate study published by Statistics Canada today found that one-fifth of foreign direct investment by Canadian corporations abroad may be fueled by tax avoidance.
Canadians for Tax Fairness released its Platform for Tax Fairness last week, which proposes a number of measures to address this problem such as increased enforcement and harsher penalties.
“While the Trudeau government has devoted more resources and made some progress in this area, after cuts under the Harper government, much more needs to be done,” said Sanger.
Canadians for Tax Fairness advocates for fair and progressive tax policies aimed at building a strong and sustainable economy, reducing inequalities and funding quality public services.