A real estate sold sign hangs in front of a west-end Toronto property, Friday, Nov. 4, 2016. The Canada Revenue Agency has identified $291.7-million in taxes owing in Ontario and another $78.6-million owing in B.C.Graeme Roy
Federal tax auditors have identified about $370-million in taxes owing from real estate transactions over a roughly two-year period in B.C. and Ontario, but it is unclear how much of that money has actually been recovered.
The agency doesn't track compliance based on particular audit targets, such as real estate.
"The CRA does not break down collection results specific to each compliance initiative," CRA spokeswoman Heidi Hofstad said in an e-mail.
"While the CRA does not track this information specifically, we can confirm that the agency has effective collection processes," she added.
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Despite a push by the agency to step up tax investigations around real estate transactions, only three cases nationwide – all related to tax non-compliance in the B.C. real estate sector – have been referred for criminal prosecution since the agency began tracking such referrals in 2016.
The agency noted it cannot comment on specific investigations and that criminal investigations may take months or years to complete.
For example, Surrey real estate investor Harjinder Dhudwal was just recently convicted and fined for evading taxes on real estate deals going back a decade.
The tax agency has been under pressure to scrutinize potential tax cheating in real estate deals for at least the past two years as housing prices skyrocketed in Vancouver and Toronto amid concerns related to foreign investment, regulatory loopholes and tax evasion.
Since April of 2015, the CRA has been posting updates from its real estate investigations every three months, with the most recent update in July.
That update identified $291.7-million as owing in Ontario and $78.6-million in B.C.
David Chodikoff, a Toronto tax lawyer and former prosecutor with the Department of Justice, said the agency simply doesn't provide enough information for an average person to make an assessment.
"I'm very concerned that the government has not been able to produce a very clear picture of what the difference is between their current enforcement activities and prior enforcement activities in dollar amounts," Mr. Chodikoff said. "We don't know how well they are doing."
On its website, the CRA says it audits "high risk" taxpayers based on five main areas of concern in real estate transactions: questionable source of funds; property flipping; unreported goods and services tax and harmonized sales tax on the sale of a new or renovated property; unreported capital gains; and unreported worldwide income. In 2015, the agency says, it doubled its level of effort focused on the real estate sector in B.C.
The CRA website shows it has since handed out 1,006 additional penalties – totalling $23.1-million – to people who "knowingly" made a false statement on their tax returns. The highest penalty was almost $2.5-million.
"There is certainly a striking disconnect between housing costs and reported incomes in certain areas. So it is natural for the CRA to look into these cases, as they seem to be doing," Joshua Gottlieb, an associate professor in the Vancouver School of Economics at the University of British Columbia, said in an e-mail.
"However it's fundamentally a costly, challenging approach," added Prof. Gottlieb, who suggests that shifting the tax base from income taxes to property taxes would provide a more accurate reflection of wealth and make taxes easier to evaluate and collect.
According to Statistics Canada figures released earlier this month, the median total reported income for households in Metro Vancouver in 2015 was $72,662 – 15th in urban regions across the country. Average housing costs for Canadian cities are scheduled to be released in October, but current data show homes in the Vancouver region are among the most expensive in the country, with the average price for condos, homes and townhouses hovering around $1-million.
During B.C.'s provincial election campaign, the NDP's platform promised a yearly 2-per-cent "absentee speculators' tax," saying revenue from that tax would go into a Housing Affordability Fund.
The platform also promised a "multiagency task force to fight tax fraud and money laundering in the B.C. real estate marketplace."
A September budget update did not include a speculators' tax or a task force.
NDP Finance Minister Carole James was not available for an interview.
The B.C. government amended the Income Tax Act and the Home Owner Grant Act to improve information sharing with the federal government and allow income-tax administrators additional access to assessment data, her office said in a statement, adding, "These changes are a start to help fight tax evasion, reduce fraud, and ensure people are paying the right amount of tax."
In a report last October on overall tax avoidance and tax evasion, the House of Commons standing committee on finance recommended that the CRA set up a regular reporting program that would "facilitate the public availability of statistical information about enforcement efforts."
In a Sept. 7 update labelled "cracking down on tax cheats," Minister of National Revenue Diane Lebouthillier provided preliminary results from April 1, 2016, through March 31, 2017.
Those results included 335 cases overall referred for criminal investigations; 32 criminal charges laid under the Income Tax Act, the Excise Tax Act and/or the Criminal Code; $10-million in court fines and 50.6 years of jail time, the update said.