Honest Canadians pick up tab for tax evaders

Every year, it’s the same story: I agonize as my accountant uses his noisy adding machine to tote up what I owe the Canada Revenue Agency.

This excruciating halfhour exercise comes even after 26 paycheques’ worth of tax deductions made throughout the year.

Eventually, the accountant delivers bad news and I reach for my chequebook, to be quickly done with it.

Then, later in the year, it’s not uncommon for the Canada Revenue Agency to mail notification that, due to a missing T4 or some such, I must ante up further.

It seems that I’m lowhanging fruit for the CRA; tax is deducted at source. I have few writeoffs and a bit of investment income. So it is no surprise that people like me — and there are legions of us — are becoming increasingly aggravated by stories documenting tax evasion.

The CBC is reporting on a newly publicized list of more than 450 Canadians with offshore trusts, some of who may be evading taxation.

An Ottawa-based group calling itself Canadians for Tax Fairness estimates the so-called “tax gap” — taxation owing but not being re- mitted — could be $7 billion to $10 billion federally, and $80 billion when provincial taxation is included.

The group is mainly comprised of left-leaning individuals who want corporations and the rich to pay their share. Mind you, its advisory council includes heavyweights such as former Toronto-Dominion Bank chief economist Douglas Peters and one-time clerk of the Privy Council, Alex Himelfarb.

If the tax gap is as large as the group believes, Canada has a serious problem. Ottawa collects some $115 billion in income tax annually, and $30 billion from corporate taxes. Think how much lower the tax bill for the rest of us would be if there was no evasion or fraud.

Last August, Canadians for Tax Fairness board member Toby Sanger, a Canadian Union of Public Employees economist, used StatsCan data to identify preferred Canadian tax havens: Bermuda, Barbados, Ireland, the Cayman Islands and Luxembourg.

Ottawa, quietly scurrying to sign tax information exchange agreements with suspected havens, is of course aware of this. But the feds are reluctant to estimate the tax gap, insisting there is no good way to calculate it. This, despite pressure from at least one senator, albeit a Liberal, to fess up. P.E.I. Senator Percy Downe has been banging the drum for greater transparency on the missing money, as has former par- liamentary budget officer Kevin Page.

Revenue Minister Gail Shea, also from P.E.I., has bragged that her 40,000-person agency has identified $4.5 billion in unpaid taxes since 2006. (“Identified” doesn’t mean “collected.”) That, she notes, compares to just $174 million identified in 2005 under the governing Grits.

And Finance Minister Jim Flaherty lately is signalling Ottawa’s intention to further crack down on cheaters. According to his March budget, the CRA plans to start paying contracted informants up to 15 per cent of recovered taxes (a reward that would be taxable).

Ottawa also will beef up reporting requirements for electronic fund transfers of $10,000-plus. And it’s extending tax reassessment periods for holders of foreign investment property in excess of $100,000. But Conservatives also want to balance the budget by 2015, and are cutting the CRA’s budget — by another $61 million by 2015-16.

This is stupid, because it is not just a matter of collecting sufficient revenue to cover the cost of government services. Nonpayment of tax, through evasion and fraud, leads to a dangerous level of disillusionment and disgruntlement on the part of those who turn up every year at their accountants’ offices, shivering in their boots.