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The tax gap is the estimated
difference between what taxpayers would have paid if they fully complied with
all tax rules, and what was actually paid and collected. The new estimates are
part of an anti-tax evasion strategy that was funded in 2016.
For example, Canada recently
estimated that the tax gap on offshore investment income was up to C $3 billion
When combined with
an earlier estimate of the personal income tax gap, the total estimate is C
$11.7 billion. There is also an estimated GST gap of about C $2.9 billion.
The tax authority has a number
of initiatives to address this problem. It has put new systems in place to
capture all international electronic funds transfers over C $10,000. It also
has initiated an offshore tax informant program, paying whistleblowers for
information leading to tax recoveries. That program has yielded C $11.6 million
in additional revenue, with over 350 taxpayers identified for audits involving
offshore tax noncompliance. Audit capacity has also increased, with a focus on
Offshore tax evasion has been a
constant theme of nearly every government in recent years. For example, on 28
June, Canada, the United States, the United Kingdom, the Netherlands, and
Australia created an international enforcement group call the Joint Chiefs of
Global Tax Enforcement, within which they will work cooperatively to identify
offshore evasion and collect unpaid taxes.
Related: Canada Looks to Begin Taxing Digital Economy
Governments worldwide are
becoming much better at finding and pursuing those with assets and income
offshore who do not report it. Worldwide ERC® members must be alert to these
efforts, and caution employees assigned abroad as to tax requirements.