The federal government is letting $23.4 billion a year in uncollected taxes escape into the underground economy, Canada Revenue Agency’s stated in a report estimating Canada’s tax gap.
As the Globe & Mail reports, the gap – which refers to the difference between how much tax Ottawa collects each year and how much it should have collected based on what the government is legally owed – is due mainly to unreported revenue from businesses and cash payments to workers, as well as misclassification schemes and hiding of offshore assets or investments.
The CRA report estimates the total tax gap across all categories of tax and covers the years from 2014 to 2018.
The report comes as the Canadian Trucking Alliance has been increasing pressure on the federal government and CRA to begin cracking down on the growing illegal labour and business misclassification scheme in the trucking industry, known as Driver Inc.
Driver Inc companies deliberately misclassify employee truck drivers as personal service businesses or contractors to avoid paying payroll taxes, workers compensation and other labour benefits. Workers, meanwhile, are convinced to enter the Driver Inc. system to avoid paying income taxes, but many are also taken advantage of and unsuspectedly give up their labour rights as true employees.
Because Driver Inc is a business model based on cheating the system, many of these carriers are also routinely non-compliant with safety and environment rules as well.
CRA’s report specifically points to the construction industry as a main source in lost business and worker taxes, at about $1.7 billion. However, the Canadian Trucking Alliance conservatively estimates that as one of the country’s largest employers, the problem in the trucking industry at least matches that, if not surpasses it. Recent analysis by CTA shows that growth of misclassified, zero-employee companies in the trucking sector is outpacing all other industries at a torrid rate.
CRA said this report will provide a baseline for future reports that can show which areas of the tax gap are improving or worsening. The Agency cited cryptocurrency as a specific area of evolving concern.
CTA, meanwhile, looks forward to ongoing consultations with the Agency to show how, arguably there is no faster growing tax leakage model in Canada than Driver Inc. in the trucking industry. It hopes the agency will soon join other government departments like ESDC and WSIB in Ontario, which have already begun enforcement campaigns on Driver Inc.
Read full G&M article here.