Canada Revenue Agency clarifies its compliance actions

PUBLISHED : Friday, 15 July, 2016, 4:44pm
UPDATED : Friday, 15 July, 2016, 11:26pm

I would like to clarify some of the content of the article by Ian Young (“Leak reveals secret tax crackdown on foreign-money real estate deals in Vancouver”, July 13).

When new risks of tax non-compliance emerge, such as in the real-estate sector, the Canada Revenue Agency (CRA) will begin compliance projects and track results closely.

In 2015-16, the CRA conducted 339 audits in British Columbia related to real estate transactions with total audit recoveries over C$14 million (HK$83.9 million). These audits focused on the areas where the risk of non-compliance was highest, mainly related to property flips and goods and services tax/harmonised sales tax (GST/HST) non-compliance. Worldwide income audits are just one component of the real estate transaction compliance projects.

In addition, your article claims that 50 auditors are focused solely on real estate purchases funded by foreign income. That is incorrect, the 50 income tax auditors and 20 GST auditors are focused on detecting and addressing a number of different risk areas related to real estate transactions. These include profits from property flipping that are not being reported or are being reported incorrectly, unreported capital gains, unreported GST/HST on the sale of new or substantially renovated homes, and ineligible GST/HST new housing rebate claims. The source of funds for the real estate purchases are not the focus of tax non-compliance.

The real estate project was not undertaken to satisfy the concerns of CRA senior management, nor to address questions of housing affordability. The CRA does not have any role to play concerning the affordability of real estate. However, as explained in our real-estate compliance web pages, the CRA is actively monitoring areas of emerging compliance risk. Transactions in the Greater Toronto Area have been the subject of greater scrutiny for a number of years. More recently, the CRA has been actively monitoring and auditing real estate transactions in British Columbia.

The real estate sector is one of many sectors in which the CRA is actively addressing tax non-compliance. There is no secrecy about the CRA’s compliance actions in respect to real estate transactions. The CRA takes compliance activities very seriously and is committed to protecting the fairness and integrity of the tax system.

I invite your readers to consult our website to find out how the Canada Revenue Agency addresses non-compliance in the real estate sector.

Anne-Marie Lévesque, assistant commissioner, domestic compliance programmes branch, Canada Revenue Agency, Ottawa