TRAPPING TAX EVADERS
The Canada Revenue Agency can quickly track down taxpayers who fail to file their income tax returns on time or make an error in arithmetic or mistakenly omit a few dollars of income and, without delay or due process, penalize them with heavy fines and threaten them with imprisonment.
Yet money-launderers buy multimilliondollar properties in Vancouver, flip them for enormous profits, and live like potentates while reporting poverty-level incomes but seem to attract no scrutiny from the tax authorities.
It’s easier to trap a hapless Canadian who innocently slips up on an income tax filing than a sophisticated crook who is scamming the system and the CRA has long plucked the low-hanging fruit. CRA whistleblowers claim there was a deliberate decision not to pursue reports of “students” or “homemakers” with little income buying million-dollar properties in Metro Vancouver.
There’s plenty of blame to go around. NDP MLA for Vancouver-Point Grey David Eby accuses Christy Clark’s Liberal government of inaction notwithstanding its introduction of a 15 per cent foreign buyers tax last month intended to cool the real estate market. Others point a finger at banks for facilitating financing and at the real estate industry for aggressively marketing Vancouver residential property. The federal government has been criticized for not giving the CRA the funding it needs to investigate cases of fraud and tax evasion.
One of those critics is Vancouver Mayor Gregor Robertson, who said this week that he’d heard the CRA lacked the resources to enforce tax-evasion laws. He said he’d expressed his concern to federal Finance Minister Bill Morneau that speculators weren’t paying capital gains and other taxes.
Meanwhile, National Revenue Minister Diane Lebouthillier said this week she has asked the CRA to look into the specifics of one particularly egregious case involving Vancouver real estate. She added that between April 2015 and June 2016, the CRA conducted 2,500 B.C. real estate-related audits and imposed more than $11 million in penalties.
Perhaps the CRA would have more resources available to go after the big fish if it didn’t spend quite so much time and effort harassing hardworking, moderate-income Canadians who may have missed a deadline or a decimal point.
Some have called for reform of the tax system, including eliminating the capital gains exemption on the sale of a private residence. That could be politically palatable if combined with the introduction of mortgage interest deductibility, but both measures would be a significant departure from the status quo.
On the other hand, bringing money-launderers and tax evaders to justice carries little political cost and would go a long way toward making the tax system fairer for everyone.