Newspaper article The Canadian Press

Tax Agency Fails to Create New Strategy for Cheats after Three-Year Effort

Newspaper article The Canadian Press

Tax Agency Fails to Create New Strategy for Cheats after Three-Year Effort

Article excerpt

Tax agency fails in new strategy for cheats

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OTTAWA - After a three-year effort, the Canada Revenue Agency has failed to produce a new national strategy to combat the underground economy -- despite repeated requests to do so from cash-starved provinces.

The provinces, especially Ontario and British Columbia, have been pressing the agency since late 2010 to update its strategy for extracting taxes from the underground economy, estimated to be worth more than $35 billion annually.

The current guiding document is a decade old, and changes since then -- including the advent of cash-register "zapper" technology that conceals sales -- have made it increasingly out of date.

The agency regularly audits offenders in three most-active underground sectors, that is, construction, retail trade and food services, including table-waiting staff.

In 2011-12, the last year for which statistics are available, the agency carried out almost 11,000 underground-economy audits, finding more than $300 million in unpaid taxes.

But internal documents from last October show that an updated strategy for targeting the right businesses and workers, with enough resources and agency-wide co-ordination, has eluded officials.

"A number of stakeholders have been consulted, all with varying opinions and suggestions as to what the focus and direction of the strategy should be, such that a strategy has not emerged," says an Oct. 23 report to the CRA's senior management.

The report suggests there were too many differing views among provinces and agency officials about exactly what constitutes the underground economy -- and warns against bad targeting.

"The risk of future non-compliance increases if compliance interventions are targeted at the wrong people or if taxpayers feel they are not treated respectfully," it says.

"The CRA has finite resources and deterrents such as audit are costly. As such, deterrents should be focused on the highest-risk UE (underground economy) participants."

The document was obtained by The Canadian Press under the Access to Information Act.

The failure to update a key guidance document echoes a similar finding by Canada's auditor general last fall. …

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