13/01/23

CANADA: CRA is bad at fighting tax avoidance by wealthy, poll finds.

As published on westernstandard.news, Thursday 12 January, 2023.

The Canada Revenue Agency rates poorly when it comes to fighting tax avoidance by wealthy individuals, according to in-house research.

The latest finding follows complaints that auditors are more likely to hector small tax filers over trivial breaches of the Income Tax Act.

“There is a segment of high net worth individuals who use various strategies of tax avoidance and evasion to avoid paying what they owe,” said an agency report Public Attitudes Towards Tax Avoidance And Evasion Conducted By High Net Worth Individuals. “One of the core mandates of the Canada Revenue Agency is ensuring people and businesses appropriately report and pay the taxes they owe.”

“The agency sought to better understand Canadian public perception of tax avoidance and evasion among high net worth individuals,” wrote researchers. Auditors are developing a 2023 “strategic plan” targeting wealthier tax filers, it said. The report did not elaborate.

According to Blacklock's Reporter, when asked “Do you think the agency is currently putting too much, too little or about the right amount of effort into detecting tax evasion by wealthy Canadians?” a majority of respondents, 53%, said there was “too little effort.”

When asked, “Would you say the agency does an excellent, good, just satisfactory or poor job in making sure wealthy Canadians pay their fair share of taxes?” 26% said auditors did a good or excellent job. A larger number, 34%, rated it poorly.

Canadians said they expected wealthy tax filers would always outsmart auditors. A majority, 74%, agreed with the statement: “No matter what the Canada Revenue Agency does the wealthy will always find a way to avoid paying their fair share of taxes.”

A large minority added they did not fault rich Canadians for using tax loopholes. A total of 43% agreed with the statement, “There is nothing wrong with wealthy people finding legal ways to pay as little tax as possible.”

Findings were drawn from questionnaires with 1,601 people nationwide. The agency paid Environics Research $98,672 for the report.

It follows 2014 federal focus groups with small business owners and accountants that found widespread skepticism of agency practices.

“Canada Revenue Agency dedicates too much energy to minor issues with small businesses and individuals rather than larger, bigger ticket items,” said Corporate Research, a focus group summary by Walker Consulting Group.

“Items like mileage for vehicles, medical expenses, child care and donations were all viewed as small issues that generate few dollars but engender unnecessary mistrust and anxiety toward the Agency among clients,” wrote consultants.

“In contrast, some question how much energy is put toward tackling the more significant tax avoiders.”

Senator Elizabeth Marshall (Nfld. & Labrador), a former provincial auditor, told a 2018 hearing of the Senate national finance committee that Canadians shared a common perception auditors picked easy targets.

“The impression that’s being left with many taxpayers is you’re picking the low-hanging fruit, the student who’s moving out to Calgary to get a job and is claiming their moving expenses,” said Marshall.

A 2020 federal report Audit Yield confirmed the agency recovered an average $5.90 for every dollar spent on GST audits compared to an average return of $4.90 on income tax audits.

More complex cases “can take years,” said the report.