Tax Gap – Why CRA Refuses Measuring It?

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Tax Gap – Why CRA Refuses Measuring It?

Tax Gap in Canada: A Conceptual Study is just CRA avoiding measuring it.

Tax Gap in Canada: A Conceptual Study is just CRA avoiding measuring it. (Canada.ca)

Summary

Tax gap is the amount of tax collected versus the amount of tax owing. Various entities are asking the CRA to measure it. However, CRA repeatedly refuses. We propose why: what if your tax gap is actually zero? This is because Canada concedes individual income made within the provinces is outside federal jurisdiction. Therefore, you choose to make such income taxable.

Background

CRA’s 2015 Fact Sheet discusses the tax gap:

 As a concept, it can encompass revenues lost to tax evasion, taxpayer error, and unpaid liabilities. It includes both domestic and international dimensions.

That CRA 2015 Fact Sheet then quickly devolves into justifying why they cannot measure it:

  • Most countries do not measure it
  • Measuring it is costly
  • Methods for measuring it are inaccurate
  • Individual taxpayer information is confidential
  • CRA already has numerous programs fighting non-compliance, such as tax evasion

CRA Refuses Measuring Tax Gap

Senator Percy Downe wants CRA to measure Canada's tax gap.

Senator Percy Downe wants CRA to measure Canada’s tax gap.

Three Parliamentary Budget Offices (PBO) have asked CRA to measure the tax gap. A Toronto Star/CBC investigation details a five-year battle for data ending in a stalemate and no information shared. In addition, Liberal senator Percy Downe is asking the PBO to take CRA to court about it. He has also introduced a bill in the Senate that would force the CRA to report it in the annual report it submits to the Minister of National Revenue.

Tax Gap Discussion Paper by CRA

On June 30, 2016, CRA released a discussion paper called, “Tax Gap in Canada: A Conceptual Study“. In a nutshell, it is a 31-page paper where CRA justifies not measuring it.

The Law

Canada enacted the Employment and Social Insurance Act in 1935. However, the federal government conceded it is illegal. In fact, they asked the Supreme Court of Canada (SCC). The result? The SCC also agrees that Act is illegal. (It was repealed). Their decision states:

Supreme Court of Canada. Picture credit: Apu Nahasapeemapetilon

Supreme Court of Canada. Picture credit: Apu Nahasapeemapetilon

Constitutional law—The Employment and Social Insurance Act, 25-26 Geo. V, c. 38—Constitutional validity—Taxation—Property and civil rights.

[Page 428] It being well understood, and in fact conceded, that the subject-matters of the Act fall within the legislative authority of the provinces, the Dominion Parliament may not, under pretext of the exercise of the power to deal with its property or to raise money by taxation, indirectly accomplish the ends sought for in this legislation.

Opinion

Perhaps what Canada conceded, and what the SCC ruled, is why CRA’s “Tax Gap in Canada: A Conceptual Study” has on page 29 this diagram :

Tax Gap Map for Canada, from CRA's "Tax Gap in Canada: A Conceptual Study"

Tax Gap Map for Canada, from CRA’s “Tax Gap in Canada: A Conceptual Study”

CRA says federal taxes are based on voluntary compliance. We think that means you self-assess, and so may agree to Canada’s laws deeming your income being received as a federal officer. That results in legally converting your former provincial private property into federalpublic money“. In short, that is Apu’s Theory, which is our research on how Canada’s individual income tax seems to really work.

Conclusion

If Apu’s Theory is correct, then individuals self-assess their income type to determine whether such income is inside or outside federal government jurisdiction.

WARNING

DO NOT ASSESS YOUR INCOME AS YOUR PRIVATE PROPERTY. This is because, as we discussed earlier, Canada no longer follows the Rule of Law. Therefore, it seems it doesn’t matter that Canada concedes, and the SCC agrees, that the federal government has no jurisdiction over your work within the provinces. In summary, their legal system is institutional fraud.

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