Canadian Prime Minister Justin Trudeau says that Ottawa will finally release the data needed necessary to calculate Canada’s “tax gap” — the difference between the amount of tax owed to the federal government and what Revenue Canada actually collects each year.
The Prime Minister made the announcement in the House of Commons Monday afternoon, saying that the data will be released to the government’s independent auditor before the end of February. It comes after five years of stonewalling by officials in Ottawa who are concerned the dollar amount of uncollected taxes could attract considerable media attention and become a political embarrassment.
“The Canada Revenue Agency (CRA) and the Parliamentary Budget Officer have reached an agreement that will allow the (PBO) to do the work he has wanted to do for a long time,” Prime Minister Trudeau told the House of Commons during Question Period Monday.
Prime Minister Trudeau said the data will be provided in a way that ensures the privacy of Canadians, one of the perceived sticking points in turning over raw tax data to the parliamentary watchdog. However, the current PBO, Jean-Denis Fréchette, said he has been given no indication that the CRA will release the numbers on the tax gap.
“It was a surprise,” Mr. Fréchette told The Toronto Star newspaper concerning the Prime Minister’s comments. “I’m excited about the announcement. It’s been five years. It’s been a long fight.”
Mr. Fréchette is the third PBO to ask the CRA for the raw statistical data to be able to calculate the tax gap. It’s a number that could top $47 billion per year, say economists. Under the previous government of Conservative Prime Minister Stephen Harper, the CRA refused to calculate the tax gap, dismissing it as “unreliable.” The Liberal government pledged to start counting the lost tax revenue, and the CRA has released three partial studies to date.
According to the CRA, individuals failed to pay the government $8.7 billion in income tax in 2016. The underground economy costs nearly $5 billion in uncollected GST and HST every year, adds the CRA. But when it comes to the tax gap related to offshore tax evasion, an issue thrust into headlines by the Panama and Paradise Papers leaks, the CRA has no current estimates. The best guesses from credible sources place Canada’s tax losses to offshore shelters and havens at between $6 billion and $15 billion each year.