Canadian Tax Avoidance. Examining the Potential Tax Gap At a Glance • The tax gap is the value of tax revenue that should be collected compared to the actual amount that is collected. • When some individuals and companies do not pay their fair share of taxes, it increases the burden of funding public services on compliant taxpayers. • By applying estimates used in other countries and assuming Canada’s tax gap was the same, the available literature suggests that Canada’s tax gap could range from $8.9 billion to $47.8 billion. BRIEFING  FEBRUARY 2017 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap The leak of the Panama Papers in 2016 is just one of the latest developments to sharpen the focus on individuals and corporations who are not paying their fair share of taxes. Global attention has been focused on income inequality, concerns that real wage growth in the middle class has stagnated globally, and equal concerns that certain businesses and individuals are avoiding paying their fair share of taxes. In light of these issues, the recent Panama Papers leak provides further encouragement for action to minimize aggressive tax avoidance and evasion schemes that largely benefit wealthy companies and individuals. Factors that contribute to the loss of tax revenue include evasion, unacceptable avoidance, or simply mistakes on prepared returns. The tax gap refers to the value of tax revenue that should be collected compared to the actual amount that is collected. When a tax gap exists, it implies that some individuals or companies in an economy are not paying their fair share, which increases the burden of funding public services on compliant taxpayers. Estimating a country’s tax gap—and ideally its components—provides important information to tax agencies that could be used to increase the revenue it collects. Until just a few months ago, there was no official government estimate of the Canadian tax gap. In June 2016, the Canada Revenue Agency (CRA) published a conceptual paper on tax gap estimation and released its tax gap analysis related to the Goods and Services Tax/Harmonized Sales Tax (GST/HST). According to the CRA, non-compliance has caused an average annual loss in potential GST/HST revenues of 5.6 per cent for every year from 2000 to 2014.1 The CRA has indicated it plans to develop more papers on other aspects of the tax gap over the next two to three years. In the absence of a wider estimate at this time, this analysis seeks to provide estimates of the potential size of Canada’s tax gap by drawing on information provided by tax agencies in other countries and studies that 1 Canada Revenue Agency, Estimating and Analyzing the Tax Gap. Find Conference Board research at www.e-library.ca. 2 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada A further step toward closing the gap would be to adopt successful strategies from other jurisdictions. have attempted to quantify such gaps. No attempt was made to gather the information required to provide a rigorous single estimate of the tax gap. This analysis examined the tax gap estimates in the United States and the United Kingdom, where their respective tax agencies compile detailed estimates. It also takes into account other studies that employ a top-down approach by estimating the size of a country’s shadow economy and then approximating the tax gap using that estimate and taxes paid as a share of gross domestic product in the observable economy. This analysis used the assumption that the gap in Canada is similar in size to the estimates derived for other developed countries. While this approach has obvious limitations for estimating the size of the gap, it does provide a comparative measure of the types of tax avoidance and a sense of how much each component could contribute to the overall gap. The size of the estimated tax gap varies significantly by country according to the results of this analysis, the literature reviewed, and the different methodologies developed so far. By applying estimates used in other countries and assuming Canada’s tax gap was the same, the available literature suggests that Canada’s tax gap could range from $8.9 billion to $47.8 billion. In recent years, the government has stepped up its efforts to increase tax collections to close the tax gap. The 2013 federal budget devoted additional resources to tax enforcement. The 2016 budget included a significant increase in resources for the Canada Revenue Agency to increase collection of taxes owed and detect cases of tax evasion and avoidance. It also detailed Canada’s implementation plan for sharing information with other tax agencies in an effort to reduce base erosion and profit shifting (BEPS). A further step toward closing the gap would be to adopt successful strategies from other jurisdictions including increased use of data analytics, which has the potential to optimize workload allocation at the Canada Revenue Agency while also improving processes to detect evasion and errors. These measures can help to close the tax gap, but a more precise estimate of the size and source of Canada’s tax gap could Find Conference Board research at www.e-library.ca. 3 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap potentially equip policy-makers with the information necessary to better target initiatives aimed at maximizing tax revenues. Introduction Unacceptable tax avoidance, including the use of offshore tax havens, and the potential cost of tax evasion have received a lot of interest in recent years. At the multilateral level, there has been active discussion, and research, and recommendations on how to mitigate unacceptable tax avoidance, referred to as base erosion and profit shifting (BEPS). The debate has included steps to discourage the use of tax havens— small jurisdictions that offer exceptionally low business and personal taxation. In early 2016, the leak of the “Panama Papers”—an exhaustive list of clients using offshore tax havens—from the office of a Panamanian law firm sparked renewed interest in clamping down on tax evasion. Tax evasion is just one component of the tax gap—an estimate of what a government should collect in revenues, based on its current tax rates and laws, compared to what it actually collects. Tax evasion also raises the question of tax fairness, since it implies that some individuals and corporations are not paying their fair share of taxes, leaving compliant tax payers to make up the shortfall required to fund public services. While the tax gap should be considered as a fairness issue irrespective of the federal government’s fiscal position, the existing gap likely contributes to the current federal deficit of $25.1 billion this fiscal year. There is little information to gauge how much of the operating gap would be eliminated by identifying and collecting the taxes owed to the government. The size of the tax gap can have important implications for policy-makers since it could act as a potential guide for public resources and policy priorities devoted to increasing tax compliance. Although the size of the gap is an important piece of information for governments, many countries either do not estimate or do not publish information on the size of their gap.2 The Parliamentary Budget Office has tried for several years to acquire the information required to produce 2 Global News, “Panama Papers: Why Doesn’t Canada Measure the ‘Tax-Gap?’” Find Conference Board research at www.e-library.ca. 4 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada this estimate from Canada Revenue Agency (CRA).3 Due to legislative restrictions to safeguard the confidentiality of taxpayer information, the CRA was unable to provide the Parliamentary Budget Officer with data on individual taxpayers to estimate the tax gap.4 In April 2016, the Minister responsible for the CRA indicated that the Agency would begin work to estimate the tax gap. One reason there are few estimates of the tax gap is that it is inherently difficult to estimate tax evasion and the amount of money that is being intentionally hidden from tax authorities. Elements of the tax gap are subjective, including what is considered a fair share of tax. In addition, there is no standardized method for the calculation. To shed light on the tax gap issue in Canada, this briefing examines the components of the tax gap, reviews studies that have attempted to estimate the degree of non-compliance in Canada, examines data from countries that do provide tax gap estimates, and reviews current government initiatives aimed at reducing Canada’s tax gap. Defining the Elements of a Tax Gap Several factors cause the amount of tax revenue to fall short of what should be collected. Identifying and defining which components are included or not included is crucial to making an effective analysis of the size and scale of the tax gap. Components of the tax gap can include: • evasion—deliberately ignoring a specific part of a law to evade taxes; • unacceptable avoidance of taxation—undertaking activities that comply with the letter of a law, but contravene the spirit and intent of the law; • errors or reasonable care not taken—mistakes made by tax filers; • nonpayment of assessed tax liability. 3 Leblanc, “Ottawa Under Pressure to Calculate ‘Tax Gap’ in Wake of Panama Papers.” 4 Comment from Canada Revenue Agency, November 1, 2016. Find Conference Board research at www.e-library.ca. 5 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap What is a Tax Gap? Tackling the tax gap related to the underground economy is difficult. The tax gap is an estimate of the value of tax revenue that should be collected minus the actual amount collected. A tax gap can arise from the purposeful under-reporting of income, non-reporting of income, legal actions to minimize taxes, errors made, or taxes assessed but not paid. Even in the absence of these behaviours, a tax gap is still likely to exist due to unintentional mistakes made by tax filers. A common source of the tax gap is under-reporting of income. According to the U.S. Internal Revenue Service (IRS), the most prevalent source of this under-reporting occurs when there are no third-party withholding taxes or reporting information.5 In Canada, an example of third-party reporting is when employers and financial institutions send T4 and T5 information to CRA. According to the IRS, information with this type of third-party verification is usually reported correctly. Significant issues arise, however, when the taxpayer is the only source of information provided to tax authorities. For example, businesses providing services to homeowners, such as plumbers or contractors, earn income from these services that should be claimed on tax returns. But it is difficult for a tax agency to confirm that this transaction actually took place because the homeowner does not claim these expenses unless they are incurred to earn income (e.g., when a homeowner rents a unit), or the expenses are eligible for a targeted tax credit (such as the temporary home renovation tax credit in 2009). Economic activity that occurs but is either not fully recorded or not recorded at all is part of the underground economy. The CRA defines the underground economy as legal activity that is unreported or under-reported for tax purposes.6 Tackling the tax gap related to the underground economy is difficult due to the lack of income verification, although tax agencies generally have resources devoted to detecting under- or non-reported income. Miscalculations or unintentional misuse of tax credits or deductions can also lead to a tax gap. In the U.K., errors on tax returns account for an 5 Internal Revenue Service, Tax Gap Estimates for Tax Years 2008 to 2010. 6 Canada Revenue Agency, About the Underground Economy. Find Conference Board research at www.e-library.ca. 6 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada estimated 7.6 per cent of the tax gap even when the return was prepared with reasonable care.7 In the U.S., an analysis of tax data by the Government Accountability Office found that 50 per cent of tax returns prepared by individuals contain mistakes and 60 per cent of returns filed by hired tax preparers have errors.8 Tax Gap Estimates in Other Countries This section looks at the estimates of the tax gap in other developed countries to infer the potential size of Canada’s tax gap. International estimates can be broadly grouped into different types. Tax agencies may apply a bottom-up approach using the tax compliance information from a sample of taxpayers and extrapolating the amounts. They may also use a top-down approach to estimate the gap between actual tax collected and the total amount that should be owed. It is also possible to estimate a jurisdiction’s shadow economy, for which there are many different definitions. However, many studies measuring it have defined the shadow economy as legal, market-based activities that are hidden from authorities, while excluding illegal activities. The IRS defines its gross tax gap as total taxes owed minus the taxes paid on time. Its latest estimate, based on averages from 2008 to 2010, pegs the U.S. gross tax gap at $458 billion, which the IRS breaks down into three main components: • non-filing gap (7 per cent); • under-reporting tax gap (85 per cent); • underpayment tax gap (9 per cent).9 Through enforcement actions and collection of late payments, the IRS expected to collect $52 billion, reducing its net tax gap to $406 billion. This amount still represents just over 19.4 per cent of total taxes collected, or 16.3 per cent of the total true tax revenue it should collect.10 7 HM Revenue & Customs, Measuring Tax Gaps 2015 Edition. 8 U.S. Government Accountability Office, Testimony Before the Committee on Finance, U.S. Senate. Paid Tax Return Preparers. 9 Internal Revenue Service, Tax Gap Estimates for Tax Years 2008–2010. 10 Ibid. Find Conference Board research at www.e-library.ca. 7 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap The U.S. tax gap is much larger than that of the U.K., which HM Revenue and Customs (HMRC) estimates to be £34 billion—equivalent to 6.4 per cent of the total true tax liability in 2013–14, down from 8.4 per cent in 2005–06.11 The U.K presents its tax gap estimates in three ways: by type of customer, type of tax, and type of behaviour. By type of customer, the gap is largest for small- and medium-sized enterprises and large corporations. By type of tax revenue, the largest gaps were for income taxes, national insurance contributions, capital gains, and valueadded taxes. Most interesting is their classification by type of behaviour, as summarized in Table 1. Table 1 U.K. Tax Gap in 2013–14 by Type of Behaviour Type of Behaviour Cost (£ billions) Hidden economy 6.2 Undeclared economic activity that involves “ghosts” (whose entire income is unknown to HMRC) and “moonlighters” who are known in relation to part of their income, but have other sources of income that HMRC does not know about. Hidden economy involves an entire source of income going unreported and is different from evasion, which involves deliberately understating income. Criminal attacks 5.1 Co-ordinated and criminal attacks on the tax system, including smuggling goods such as alcohol or tobacco, value-added tax (VAT) repayment fraud, and VAT missing trader intra-community (MTIC) fraud. Legal interpretation 4.9 Legal interpretation relates to the potential tax loss from cases in which HMRC and individuals or businesses have different views of how, or whether, the law applies to specific and often complex transactions. Evasion 4.4 Illegal activities that involve registered individuals or businesses deliberately omitting, concealing, or misrepresenting information to reduce their tax liabilities. Nonpayment 4.1 For direct taxes, nonpayment refers to tax debts that are written off by HMRC and result in a permanent loss of tax, mainly due to insolvency. Failure to take reasonable care 3.9 Failure to take reasonable care results from a customer’s carelessness and/or negligence in adequately recording their transactions and/or in preparing their tax returns. Avoidance 2.7 Avoidance is exploiting the tax rules to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no commercial purpose other than to produce a tax advantage. It involves operating within the letter but not the spirit of the law. It does not include international tax arrangements such as base erosion and profit shifting. Error 2.6 Errors result from mistakes made in preparing tax calculations, completing returns, or supplying other relevant information even though the customer took reasonable care. Definition Sources: The Conference Board of Canada; HM Revenue & Customs, Measuring Tax Gaps 2015 Edition, 5 and 20–21. The U.K report that classifies the gap by type of behaviour is important because it identifies specific behaviours that lead to a tax gap. This approach can help policy-makers target initiatives for changing these behaviours more effectively. 11 HM Revenue & Customs, Measuring Tax Gaps 2015 Edition. Find Conference Board research at www.e-library.ca. 8 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada There are inherent difficulties and wide variation associated with measuring the tax gap. Estimates of the Size of the Canadian Tax Gap Of the available research on this issue, very little has been applied directly to Canada. World Bank research aimed at defining the size of the shadow economy in 162 countries12 indicated that Canada’s shadow economy was worth 15.3 per cent of GDP in 2007. This research defined a country’s shadow economy as legal activities that are deliberately concealed from public authorities. A 2011 study by the Tax Justice Network used the World Bank estimates, along with taxes as a share of GDP, to determine the cost of tax evasion.13 For Canada, it calculated the tax revenue loss to be $81.2 billion based on an estimated shadow economy of $247 billion. Canada’s tax obligation as a share of GDP used in this study was 32.9 per cent. This estimate suggests that the calculation represents the loss to all levels of government, not just to the federal government. By comparison, the Tax Justice Network study found that the shadow economy cost $337 billion in forgone tax revenues in the U.S. and $109 billion in the U.K. The U.S. estimate is therefore below the overall tax gap estimated by the IRS, while the U.K. figure is far above HMRC calculations. This finding highlights the inherent difficulties and wide variation associated with measuring the tax gap. Employing different methodologies (a top-down methodology based on the shadow economy versus a more bottom-up approach employed by HMRC) results in significantly different estimates. Complicating efforts to assess the tax gap is the lack of a standard method for estimating the size of the shadow economy. Statistics Canada estimated the size of Canada’s underground economy at 2.4 per cent of GDP or $45.6 billion in 201314 —a much smaller estimate than that of the World Bank. Applying the average tax rate15 for all levels of government as a share of GDP to the Statistics Canada estimate yields a 12 Schneider, Buehn, and Montenegro, Shadow Economies All Over the World. 13 Tax Justice Network, The Cost of Tax Abuse. 14 Statistics Canada, The Underground Economy in Canada, 2013. 15 Taxes included are income taxes, contributions to social assistance plans, and taxes on production and imports. Find Conference Board research at www.e-library.ca. 9 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap cost of $14.2 billion in foregone tax revenue in 2013 due to the shadow economy. However, estimates based on the shadow economy are not a complete representation of how much tax revenue governments have foregone. As previously noted, other factors such as mistakes on tax returns or underpayments also contribute to the gap. Table 2 summarizes the range of potential Canadian tax gap estimates based on the literature reviewed for this briefing. For comparison purposes, all numbers in the table are based on the 2010 tax year. Table 2 Potential Estimates of the Canadian Federal Tax Gap (2010 tax year) Tax Gap (billions) Estimation Method 8.9 Statistics Canada’s estimate of the shadow economy in 2010 multiplied by federal taxes as a share of GDP. 16.0 Uses the estimate from HMRC for the size of the U.K. tax gap as a share of theoretical revenues from 2010, and national income accounts data for Canadian federal tax receipts to derive the tax gap if Canada had a gap equivalent to that of the U.K. 31.8 Estimate from the Tax Justice Network, scaled to reflect the federal share of taxes and rolled back to 2010 using the growth in nominal GDP. 47.8 Uses the IRS estimate of the tax gap as a share of theoretical revenues and Canada’s national income accounts data to determine the tax gap if it was the same size as in the U.S. Source: The Conference Board of Canada, calculations based on data as indicated above. As Table 2 indicates, applying the tax-gap estimates used in other countries to Canada produces a wide range of potential values for the federal tax gap. Statistics Canada’s valuation of the shadow economy is by far the smallest estimate, while the U.S. IRS tax-gap method results in a Canadian tax gap of almost $50 billion. The range in estimates is unquestionably wide, so Table 2 is merely a starting point for discussion. A detailed and rigorous analysis of the Canadian tax gap would provide a much more robust estimate upon which policies and practices could be implemented. Find Conference Board research at www.e-library.ca. 10 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Tax evasion and unacceptable tax avoidance do not account for the entire tax gap. In addition, this analysis only focuses on the gap in federal taxation revenues. Over the last five years, the federal government has accounted for 41 per cent of total taxes collected. The estimates in Table 2 do not include foregone tax revenues for other levels of government, which would significantly add to the total Canadian tax gap. What Can be Done to Reduce the Tax Gap? The tax gap in Canada and elsewhere can be attributed to economic activity in the underground or shadow economy and to misreporting of activity in the legal economy. In both cases, more sophisticated processes for gathering data, evaluation, and auditing could help to reduce the tax gap. Consultations with other tax administration authorities and learning from best practices should be at the centre of strengthening efforts to reduce the Canadian tax gap. It is clear from the earlier discussion that tax evasion and unacceptable tax avoidance do not account for the entire tax gap—some of it stems from unintentional misreporting. One way to shrink this part of the gap is to reduce the complexity of the tax code. Reforms could make it easier for those who are trying to pay their fair share of taxes but, nonetheless, inadvertently misinterpret how different tax credits, income deductions, and income reporting requirements pertain to them. The Canadian tax system is known to be complex, however estimates of the number of returns in Canada with errors could not be found.16 As a result, streamlining tax codes could be one avenue for reducing the tax gap. Over the past few years, federal budgets have directed funding toward decreasing the amount of uncollected taxes owing. In its 2013 budget, the federal government increased funding for tax enforcement. Recently published figures indicate that these measures increased tax collections by $1.6 billion in 2014–15.17 In its 2016 budget, the federal government announced several initiatives to increase the integrity and fairness of the tax system. The budget committed $444 million over five years to combat tax avoidance and 16 Hodgson and Macdonald, Examining Fiscal Incentives. 17 Curry, “Tax-Cheat Crackdown Nets $1-Billion More Than Expected, CRA Data Show.” Find Conference Board research at www.e-library.ca. 11 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap evasion. Based on these measures, the government expects to collect $2.6 billion in revenues over the next five years. The 2016 budget also addressed another common component of the tax gap—nonpayment of taxes—by devoting $351.6 million over five years so the CRA can improve its ability to collect outstanding taxes. Measures being undertaken by the CRA include: • increasing information collection on all international fund transfers over $10,000 to more fully examine potential tax evasion across an entire jurisdiction, starting with the Isle of Man; • creating a special program dedicated to stopping the organizations that create and promote tax schemes for the wealthy; • hiring 100 additional auditors to investigate high-risk multinational corporations; • embedding legal counsel within investigation teams so cases can be brought to court more quickly.18 The budget estimates indicate that these measures will increase tax collected by $7.6 billion over five years. The 2016 federal budget also discussed the government’s multilateral initiative to address BEPS, which should help to address the component of the tax gap resulting from purposeful avoidance of tax obligations. The Organisation for Economic Co-operation and Development (OECD) is spearheading the development of guidelines to address BEPS, with the aim of minimizing sophisticated tax avoidance schemes that move profits to more favourable tax jurisdictions. The goal is to have profits taxed in jurisdictions where the value-added occurs. A large part of this initiative involves the exchange of financial information between tax agencies. In the 2016 budget, the government indicated that Canada will join the more than 90 other jurisdictions that are implementing the Common Reporting Standard developed by the OECD. Canada is set to implement the standard next July and begin sharing information with other countries in 2018.19 18 Canada Revenue Agency, Government of Canada Cracks Down on Tax Evasion. 19 Department of Finance Canada, Budget 2016: Growing the Middle Class, 219. Find Conference Board research at www.e-library.ca. 12 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Adopting strategies used in other jurisdictions could close the tax gap further. While the 2016 budget provides measures that are likely to help to close the tax gap, further progress could be made by adopting strategies successfully employed in other jurisdictions. A recent strategy that some tax agencies have used is greater use of data analytics technology. In the U.K., HMRC has invested in advanced analytics to derive risk profiles and improve the targeting of resources to boost tax compliance. A 2014 report showed that these investments enabled HRMC to increase its year-to-date yield by £2.6 billion while employing 40 per cent fewer staff.20 The Office of the Revenue Commissioners in Ireland has also been using advanced analytics to improve the identification of cases for audits.21 In a pilot project, Revenue evaluated whether predictive analysis could identify which cases would yield the highest return. The results showed that by identifying risky cases and potential yields, predictive analysis did indeed produce better results compared to traditional measures employed by the agency. The U.S. IRS is increasing its use of analytics through several programs designed to identify mistakes in filed returns, detect fraud, and extract information from credit and debit card transactions to identify under-reported income.22 The Canada Revenue Agency is also using data to better target its actions in many of these areas. The CRA has demonstrated success in using additional resources to increase collections. The extra funding committed in the 2016 budget and Canada’s plan to share financial information with other tax agencies to minimize BEPS are positive steps toward reducing the tax gap. Adopting strategies used in other jurisdictions to improve compliance, such as investing in data analytics, could provide the tools necessary to close the tax gap further. Summary It is not easy to estimate the tax gap, and Canada has only started undertaking a rigorous analysis of the tax revenue that governments are 20 Capgemini, Business Intelligence Technology Helps HMRC Increase Yield. 21 Cleary, “Predictive Analytics.” 22 Harbert, IRS Implements Analytics. Find Conference Board research at www.e-library.ca. 13 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap foregoing. Using available estimates of the tax gap in other countries suggests that Canada’s tax gap is potentially within the range of $8.9 billion (based on Statistics Canada’s estimate of the shadow economy) to $47.8 billion (assuming our gap is the same size as the U.S. gap). More sophisticated evaluation and auditing, regular consultations with other tax administration authorities, and learning from best practices helps to reduce the tax gap. In addition, taking steps to reduce the complexity of the tax code itself could also work hand-in-hand with improved tax administration to increase the revenue available to governments. Tell us how we’re doing—rate this publication. www.conferenceboard.ca/e-Library/abstract.aspx?did=8570 Find Conference Board research at www.e-library.ca. 14 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. The Conference Board of Canada Acknowledgements This report was made possible through the financial support of SAS Analytics. In keeping with The Conference Board of Canada guidelines for financed research, the design and method of research, as well as the content of this study, were determined solely by the Conference Board. Alicia Macdonald, Principal Economist for the National Forecast in the Forecasting and Analysis Division, conducted the research. For the Conference Board, Matthew Stewart, Brent Dowdall, Craig Alexander, and Glen Hodgson provided feedback on the analysis. The team would like to thank Gabe Hayos, Vice-President, Taxation, Chartered Professional Accountants of Canada, and other anonymous reviewers for their comments and feedback on the research. Find Conference Board research at www.e-library.ca. 15 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap APPENDIX A Bibliography Canada Revenue Agency. Estimating and Analyzing the Tax Gap Related to the Goods and Services Tax/Harmonized Sales Tax. www.cra-arc.gc.ca/gncy/stmtng-nlyzng-tx-gp/stmntg-nlyzng-tx-gp-eng.html (accessed November 15, 2016). —. Government of Canada Cracks Down on Tax Evasion. http://news. gc.ca/web/article-en.do?crtr.sj1D=&crtr.mnthndVl=12&mthd=advSrch&crtr. dpt1D=450&nid=1049689&crtr.lc1D=&crtr.tp1D=1&crtr.yrStrtVl=2016&crtr. kw=&crtr.dyStrtVl=1&crtr.aud1D=&crtr.mnthStrtVl=1&crtr.page=2&crtr. yrndVl=2016&crtr.dyndVl=31 (accessed November 15, 2016). —. About the Underground Economy. www.cra-arc.gc.ca/ undergroundeconomy/ (accessed January 19, 2017). Capgemini. Business Intelligence Technology Helps HMRC Increase Yield. Capgemini, 2014. www.uk.capgemini.com/resource-file-access/ resource/pdf/hmrc_connect_final_11.pdf (accessed June 11, 2016). Cleary, Duncan. “Predictive Analytics: Using Data Mining to Assist Better Target Selection for Audit.” Tax Tribune, no. 27 (2011): 54–58. Curry, Bill. “Tax-Cheat Crackdown Nets $1-Billion More Than Expected, CRA Data Show,” The Globe and Mail, April 28, 2016. www.theglobeandmail.com/news/politics/tax-cheat-crackdown-netsnearly-three-times-expected-total-cra-data-shows/article29795295/ (accessed May 2, 2016). Department of Finance Canada. Budget 2016: Growing the Middle Class. Ottawa: Department of Finance Canada, 2016. Find Conference Board research at www.e-library.ca. 16 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. Appendix A   The Conference Board of Canada Global News. “Panama Papers: Why Doesn’t Canada Measure the ‘Tax Gap?’” Global News, April 5, 2016. www.globalnews.ca/news/2619198/ why-doesnt-canada-measure-the-tax-gap/ (accessed May 3, 2016). Harbert, Tam. IRS Implements Analytics for Compliance, Fraud Detection and Workforce Management. September 19, 2012. http://datainformed.com/irs-implements-analytics-for-compliance-fraud-detectionand-workforce-management/ (accessed June 13, 2016). HM Revenue & Customs. Measuring Tax Gaps 2015 Edition: Tax Gap Estimates for 2013–14. London: HM Revenue & Customs, 2015. http://webarchive.nationalarchives.gov.uk/20160612044958/https://www.gov. uk/government/statistics/measuring-tax-gaps (accessed May 4, 2016). Hodgson, Glen, and Alicia Macdonald. Examining Fiscal Incentives—The Need for Tax Reform: Perspective of Business Leaders. Ottawa: The Conference Board of Canada, 2014. Internal Revenue Service. Tax Gap Estimates for Tax Years 2008 to 2010. 2016. www.irs.gov/PUP/newsroom/tax%20gap%20estimates%20for%20 2008%20through%202010.pdf (accessed May 2, 2016). Leblanc, Daniel. “Ottawa Under Pressure to Calculate ‘Tax Gap’ in Wake of Panama Papers.” The Globe and Mail, April 4, 2016. www.theglobeandmail.com/news/politics/ottawa-under-pressure-tocalculate-tax-gap-in-wake-of-panama-papers/article29521364 (accessed May 3, 2016). Schneider, Friedrich, Andreas Buehn, and Claudio E. Montenegro. Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007. The World Bank, 2010. https://openknowledge. worldbank.org/bitstream/handle/10986/3928/WPS5356.pdf?sequence=1 (accessed May 10, 2016). Statistics Canada. The Underground Economy in Canada, 2013. June 20, 2016. www.statcan.gc.ca/daily-quotidien/160620/dq160620b-eng.htm, (accessed Nov. 30, 2016). Find Conference Board research at www.e-library.ca. 17 For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Canadian Tax Avoidance Examining the Potential Tax Gap Tax Justice Network. The Cost of Tax Abuse: A Briefing on the Cost of Tax Evasion Worldwide. Chesam, United Kingdom: Tax Justice Network, 2011. www.tackletaxhavens.com/Cost_of_Tax_Abuse_TJN_ Research_23rd_Nov_2011.pdf (accessed May 2, 2016). U.S. Government Accountability Office. Testimony Before the Committee on Finance, U.S. Senate. Paid Tax Return Preparers: In a Limited Study, Preparers Made Significant Errors—Statement of James R. McTigue, Jr., Director Strategic Issues. Washington: U.S. Government Accountability Office, 2014. www.gao.gov/assets/670/662356.pdf (accessed May 4, 2016). Find Conference Board research at www.e-library.ca. 18 © The Conference Board of Canada. All rights reserved. Please contact cboc.ca/ip with questions or concerns about the use of this material. About The Conference Board of Canada We are: • The foremost independent, not-for-profit, applied research organization in Canada. • Objective and non-partisan. We do not lobby for specific interests. • Funded exclusively through the fees we charge for services to the private and public sectors. • Experts in running conferences but also at conducting, publishing, and disseminating research; helping people network; developing individual leadership skills; and building organizational capacity. • Specialists in economic trends, as well as organizational performance and public policy issues. • Not a government department or agency, although we are often hired to provide services for all levels of government. • Independent from, but affiliated with, The Conference Board, Inc. of New York, which serves nearly 2,000 companies in 60 nations and has offices in Brussels and Hong Kong. For the exclusive use of David Seglins, dave.seglins@cbc.ca, CBC Radio. Insights. Understanding. Impact. Canadian Tax Avoidance and Examining the Potential Tax Gap Alicia Macdonald To cite this briefing: Macdonald, Alicia. 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