CRA insiders say Canada’s tax system helps rich avoid paying taxes: study

A man cleans a sidewalk in front of the luxury jeweler Cartier in Manhattan on September 28, 2017 in New York City. (Photo by Spencer Platt/Getty Images)

Canada’s tax system may be skewed towards helping the rich avoid paying taxes, and according to Canada Revenue Agency employees themselves, it may not have the funding it needs to change.

According to a survey of over 2,170 members of the CRA’s Audit, Financial and Scientific Group (AFS), Canada’s tax system makes it easier for wealthy people and corporations to avoid paying taxes.

WATCH: B.C. man battles Canada Revenue Agency over old tax credit

Click to play video: 'B.C. man battles Canada Revenue Agency over old tax credit' B.C. man battles Canada Revenue Agency over old tax credit
B.C. man battles Canada Revenue Agency over old tax credit – May 7, 2018

Nine out of 10 CRA tax professionals who participated in the survey said that it’s much easier for rich Canadians and corporations to evade or avoid tax responsibilities as opposed to average Canadians.

Story continues below advertisement

“There are a number of loopholes and grey areas in the existing laws. It’s not illegal for companies or wealthy individuals to take advantage of those loopholes, but they need to be closed, because it results in not everybody paying their fair share,” explained Debi Daviau, president of the Professional Institute of the Publish Service of Canada (PIPSC), the group which administered the survey.

WATCH: Trudeau grilled over rules that allow tax evaders into Canada

Click to play video: 'Trudeau grilled over rules that allow tax evaders into Canada' Trudeau grilled over rules that allow tax evaders into Canada
Trudeau grilled over rules that allow tax evaders into Canada – May 7, 2018

The findings show that 81 per cent of those surveyed agree that tax loopholes and exemptions disproportionately benefit wealthy Canadians. Furthermore, three-quarters responded that multinational corporations shift profits to low-tax regions even when there is little-to-no economic activity taking place in that region.

Daviau clarifies that while it’s not illegal for companies to take advantage of loopholes, they need to be closed to ensure that everyday Canadians aren’t paying more in taxes to make up the deficit. She did not specify on exactly which “loopholes” the survey referred to.

Story continues below advertisement

READ MORE: Does Canada really need an inheritance tax?

“From our perspective, you can’t fault a company or even an individual for taking advantage of a loophole, but those loopholes absolutely need to be closed so that everybody is contributing what they ought to be contributing under those laws,” she said.

The survey highlighted cuts to CRA funding made in 2012 by Stephen Harper’s Conservative government, which Daviau said included several agencies tasked with investigating international tax evasion and aggressive tax avoidance.

READ MORE: Canada needs tax reform to boost competitiveness, OECD says

At the time, the Conservatives were aiming to cut spending across several departments to eliminate the national deficit. Since then, the Liberal government has restored some of that funding. However, PIPSC states that there remains a budget shortfall in the CRA of approximately $500 million compared to 2012 funding targets.

“Back in 2012, we had specialized teams for going after criminal investigations, for going after international tax evasion, for dealing with complex cases of people simply not paying what they ought to… Those teams were broken down along with the cuts in 2012, with the Conservative government trying to do more with less,” she explained.

WATCH: Tax and debt tips from BDO Canada

Click to play video: 'Tax and debt tips from BDO Canada' Tax and debt tips from BDO Canada
Tax and debt tips from BDO Canada – Apr 24, 2018

As a result, technology advancements within the CRA have not kept pace with the complexity of tax avoidance systems, the report states, nor can it keep pace with agile tax lawyers, accountants and other specialists who keep on helping clients pay less. Furthermore, the algorithms used to replace human CRA employees in recent years have focused their efforts away from the worst offenders.

Story continues below advertisement
“An investment is required, [as well as] some focus on training in the tools and the technology needed to put us in the same ballpark with the people we’re coming up against,” said Daviau.

This past July, PIPSC issued a poll asking 1,000 Canadians whether they felt the tax system benefited the rich, and 79 per cent responded that they believed it does. Daviau emphasizes that this is not a coincidence, and that working Canadians may be paying for more than their fair share of public services as a result.

WATCH: Canada 2018 tax season: What’s new this year?

Click to play video: 'Canada 2018 tax season: What’s new this year?' Canada 2018 tax season: What’s new this year?
Canada 2018 tax season: What’s new this year? – Mar 6, 2018

“That’s the money that funds all the critical programs that we need in Canada and that people rely on, from health to infrastructure to environment. Canadians can’t go without those programs, so one way or another they need to be funded,” she said.

Story continues below advertisement

“And when billions of dollars are being lost because of the capacity to go after these tax avoiders, or even tax evaders, that’s a problem for everybody. It means that everybody else is going to have to pay more in order to cover the deficit.”

Global News reached out to the CRA for comment on the survey. Spokesperson Etienne Biram responded saying that “unprecedented” investments have been made into the agency between 2016 and 2018 to “rebuild and strengthen the CRA after the budget reductions of 2012.”

READ MORE: Regina police warn residents of CRA scams as tax season comes to an end

“Those investments are allowing the CRA to deliver better data, approaches and results for Canadians. The compliance functions of the CRA are achieving unprecedented results, and have a track record of strong professional conduct,” said Biram.

He went on to say that over 6,300 auditors currently have several tools at their disposal to assist them with “challenging and important work.”

Sponsored content