Canada Revenue auditors are prowling Auto Trader magazine, Craigslist and municipal building permits in a multi-million dollar crackdown on tax cheats, documents show.
The federal strategies to curb the underground economy are detailed in tax office reports released through Access to Information.
In an operation run through its Surrey, B.C. office, Canada Revenue monitored private listings of vehicles for sale at Auto Trader, Craigslist and newspaper classified ads to identify “curbers” – unlicensed car salespeople passing as private owners.
“It is clear from this research that a significant portion of the used car sales industry is controlled and operated by unlicensed dealers,” noted one tax report. “Many purchasers of used cars have a negative perception of licensed dealers, preferring to purchase a car through a private sale. Often purchasers are unaware they are buying from a reseller, believing instead they are participating in a private sale.”
Auditors recovered more than $1 million in tax in the British Columbia operation. Of 435 suspicious car sellers, 90 were identified as “curbers” – a 21 percent delinquency rate. Nationally the tax department estimates an average seven to 15 percent of Canadians do not pay taxes as required.
“From a collections perspective, this project helped to corroborate that there is a large underground curbing industry,” auditors reported. “It is likely similar throughout the country.”
In a separate special audit in Ontario, tax agents scoured lists of municipal building permits to check on worksites for unregistered small-town subcontractors. The review of 8,396 permits identified 2,751 unregistered companies with a resulting tax collection of $4.5 million.
Auditors wrote they were “aware anecdotally…that there are many subcontractors in the construction industries who have not filed for income tax purposes or have not registered for GST,” according to a department report Construction Sectors In Small Communities.
“Building permits proved to be an excellent source of information and attending building sites helped identify contractors who operated off the grid,” wrote auditors; “The reception from municipal officials…has been excellent.”
The Ontario campaign targeted building permits issued in Sudbury, North Bay, Parry Sound, Muskoka, Sault Ste. Marie, Orillia and Barrie, and authorities proposed it go nationwide: “The underground economy in the construction industry is a national issue, and this approach could be successful on a national level.”
Auditors at the Canada Revenue’s Kelowna, B.C. office also targeted installers who work for hardware and home improvement stores. Revenue agents targeted 93 hardware stores in 19 communities, finding 7 percent of installers were tax delinquents. Canada Revenue collected $4.5 million in taxes, $559,000 in interest payments and $843,000 in penalties: “This sector, given the lack of reporting of this type of income in these circumstances, may form part of a future high-risk profile,” auditors reported.
By Tom Korski