OTTAWA, ON, 17th December 2020 / CNW / – The Honorable Treasury Secretary Diane Lebouthillier announced today the release of two new tax gap reports on the excise duty on cigarettes and the payments gap. This stems from a 2016 government commitment Canada Calculating the tax gap as a means of targeted compliance with regulations and security Canada The tax system remains fair to all Canadians.
The rating agency undertakes to ensure the integrity of the tax system to be protected Canada Income base and provide the necessary benefits that improve the lives of all Canadians. We know the vast majority of Canadians pay their fair share, and we are committed to ensuring that all taxpayers comply with tax laws.
A better understanding of the tax gap allows the agency to maximize investment from federal budgets to modernize its collections operations, improve communications with Canadians, and step up compliance promotion activities.
The sixth report found that the gap in the federal customs duty is likely to exist before the audit results $ 486 million for the tax year 2014. This corresponds to 16% of the receipts from the consumption tax on cigarettes or about 4% of the total consumption taxes, taxes and other specific federal charges. The vast majority of tobacco licensees (legal manufacturers) meet their tax obligations. In general, non-compliance is primarily due to smuggling or unlicensed tobacco production, and the rating agency works with provinces / territories as well as other federal organizations to conduct targeted compliance activities.
The seventh report found that due to the successful compliance and debt collection measures implemented by the rating agency, the 2014 payment gap was generally narrowing from year to year. This report examined the payment tax gaps for natural persons, companies, registrants for goods and services tax (GST) / Harmonized Sales Tax (HST) as well as for excise and tax licensees / registrants for a certain period. For example in December 2015was the total payment gap for the 2014 tax year $ 5.29 billion. in the July 2020was the total payment gap for the 2014 tax year $ 2.19 billiona decrease of 59%.
Canada is part of a select group of countries that estimate and publish their tax gaps, including the Great Britain, The United States and Australia. The credit rating agency intends to build on this series of tax gap reports by issuing a future report on Canada Total tax gap in 2021.
Quotes
“Our government is fulfilling its duty to calculate the tax gap to ensure that our tax system is fair and equitable for all Canadians. A better understanding of the tax gap can help the credit rating agency better align its compliance activities and improve the tax gap.” Integrity of the tax system. “
-The Honorable Diane Lebouthillier, Minister for National Revenue
Fast facts
- The tax gap is the difference between the taxes that would be paid if all obligations were fully met in all cases and the tax that is actually paid and collected.
- This report is part of a series of reports: A Conceptual Study (June 2016), a report on the GST / HST (June 2016), a report on domestic income tax (June 2017), a report on international income tax (June 2018) and a report on the corporate income tax gap (2019). The 2014 tax year was audited in all seven reports.
- The rating agency has consulted other tax administrations, government departments and experts to refine the methodologies used in the report and will continue to use them for methodology and research in the future.
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Tax loophole for federal excise tax on cigarettes and
Payment Tax Gap Reports
Canada Revenue Agency
background
The Canada Revenue Agency (CRA) has published a number of studies Canada Tax gap. The tax gap is the difference between the taxes that would be paid if all obligations were met in full in all cases and the tax actually paid and collected. A separate unit was set up at the rating agency to examine different parts of the gap.
The rating agency has complied with its obligation to estimate the tax gap and to publish these estimates. It will continue to work with outside experts and stakeholders to ensure Canadians are informed about tax compliance and collection.
Tax loophole for the federal excise tax on cigarettes (December 2020)
The rating agency’s sixth report in the tax loop series focuses on federal consumption taxes on cigarettes. Important highlights are:
- Tax gap: The report estimates the excise duty gap for cigarettes using two methods based on administrative tax data and external data sources.
- Based on the first method called gap analysis, the federal excise duty gap for cigarettes was estimated to be approximately $ 483 million for the tax year 2014.
- An alternative approach, an econometric model, was also used to estimate the gap. It estimated the federal excise duty gap for cigarettes to be approximately $ 490 million for the tax year 2014.
- Because the two estimates are relatively close in dollar value, an average was used (each was weighted equally).
- The federal cigarette tax gap is estimated $ 486 million for the tax year 2014. This corresponds to 16% of the receipts from the consumption tax on cigarettes or approximately 4% of the total consumption taxes, taxes and other specific revenue from the federal government.
- Tax gap method: Given the complexities of estimating the tax gap and data availability, several methods are required to measure appropriately Canada Tax gap in terms of excise duties and taxes. The rating agency has consulted other tax administrations, government departments and experts to refine the methodologies used in the report and will continue to use them for methodology and research in the future. For the federal cigarette excise tax gap, the rating agency used gap analysis and econometric modeling to estimate the tax gap. Further details on these methods are provided in the report.
Payment tax gap and collection efforts (December 2020)
The seventh report by the rating agency in the series of tax gaps focuses on the payment gap. Important highlights are:
- Tax gap: The total payment gap for the 2014 tax year was $ 5.29 billion after a year (2015) before it dropped by 59% to $ 2.19 billion in 2020.
- In particular, the payment gap between individuals narrowed faster (-76%) than the payment gap between businesses (-38%) and GST / HST registrants (-30%).
- For the tax year 2014, the payment gap between individual filers was $ 3.09 billion after a year (2015) before the decline $ 0.73 billion from 2020 a decrease of 76%.
- Around 88% of the individual filer’s current payment gap was due to unpaid taxes, while 22% was due to refundable deductions and credits.
- The corporate payment gap for the 2014 tax year was $ 1.09 billion after a year (2015) before falling on $ 0.68 billion from 2020 a decrease of 38%.
- While small and medium-sized enterprises (SMEs) made up 99% of all applicants, the payment gap between SMEs and large companies was roughly evenly distributed.
- For the 2014 tax year, the GST / HST payment gap was $ 1.11 billion after a year (2015) before the decline $ 0.78 billion from 2020 a decrease of 30%.
- The excise duty gap for the 2014 tax year was negligible due to the small number of non-compliant licensees / registrants. The exact amounts could not be reported to protect the confidentiality of taxpayers.
- The payment gap amounts presented in this report include outstanding debt and write-offs, but exclude interest and penalties. The payment tax gap has been calculated using the credit rating agency’s accounting data and the results of the tax gap take into account recent re-evaluations (e.g. reviews, appeals) and collection efforts from 2020 onwards.
- Tax gap method: While previous tax gap estimates required advanced statistical or econometric approaches to measure what is not directly observed by the credit rating agency (e.g. hidden income), payment gaps can be calculated based on the credit rating agency’s accounting records as taxpayers have either paid or have not paid their taxes owed.
- The accounting records record the balance of outstanding debt, total depreciation and revaluation amounts for all taxpayers.
- The payment tax gap is the sum of the estimated taxes that have not been paid in full by the payment deadline for a specific tax year.
- In general, the payment gap includes federal and certain provincial taxes owed (the portion recovered by the rating agency) as well as badly written off amounts (i.e. depreciation). However, the payment gap excludes all interest and penalties, including those written off, as they are not a tax liability.
- Total payment gap
- The total payment gap for each tax year was calculated by aggregating the payment gap amounts for all four types of taxpayers.
- There are key features of the payment tax gap that make it difficult to compare with previous CRA estimates of the tax gap. Therefore, the payment gap cannot be added directly to previous estimates of the tax gap without special consideration.
- Federal government tax gaps estimated to date: Combination of the federal excise tax gap with other components of the tax gap previously published by the rating agency, Canada The federal tax gap in 2014 is estimated to be between $ 20.1 billion and $ 24.3 billion or between 9.2% and 11.2% of the corresponding revenue – before considering the impact of audits and eliminating the payment gap.
SOURCE Canada Revenue Agency
For more information: Jeremy Bellefeuille, Press Secretary, Office of the Minister for National Revenue, 613-995-2960, [email protected];; Media Relations, Canada Revenue Agency, 613-948-8366, [email protected]
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