Lower tax rates would discourage evaders Revenue Minister wants more auditors to fight scofflaws - 5.0 out of 5 based on 10 votes

( 10 Votes )


Financial Post - Personal Finance - Friday, November 12, 2004

National Revenue Minister John McCallum says his department wants to hire more tax collectors to crack down on the underground economy and use of offshore tax havens.

"We want to put more money into hiring auditors to go after those who don't pay their share of taxes," McCallum told the National Post editorial board yesterday. For every $1 spent on additional tax collection, $5 to $7 in extra revenue can be generated, he said.


McCallum is concerned both about outright tax evasion in the underground economy as well as the greyer area of aggressive accounting. The latter is "euphemistically called aggressive tax planning," he said, practiced by "people who are at or over or at least very close to the edge in terms of lawful behaviour."

The Department of Finance started to tackle aggressive accounting a few years ago, when it introduced civil penalties for tax advisors and accountants - they are now liable for half of any taxes illegally evaded by their clients.

But that hasn't made the problem go away. Tax Lawyer Paul DioGuardi argues in his book Tax Amnesty - Avoiding the Tax Trap that the Government of Canada loses $80-billion a year to tax evasion. He estimates that if the Canada Revenue Agency hired 1,000 agents at $70,000 a year and collected just 10% of the tax being evaded, such an expenditure would pay for itself.

"I definitely agree with that," McCallum said. New auditors would make "five or six times their salary in terms of the revenue they bring in, so in that sense it's a paying proposition for the Government."

Apart from the potential absolute savings, McCallum is also concerned that tax evasion will spread if too many citizens perceive their neighbours are getting away with it.

"Our tax system relies fundamentally on voluntary compliance. If there were not a general willingness on the part of the general population to pay the taxes owed, the system would be in great trouble. One of the reasons people may become less willing is if they see others getting away with not paying their fair share."

Since the year 2000, the so-called "detax" or "untax" movement has spread from Western Canada to Ontario and points East. Even the groups who put on "detax" seminars put the numbers of detax scofflaws at 25,000.

"I can tell you we're diligent in pursuing these people," McCallum said, "I think we could be more proactive in publicizing convictions and demonstrating that there are consequences...the last thing we want is people who claim they can abuse the system with impunity."

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