08/05/2013 04:05 EDT | Updated 10/04/2013 05:12 EDT

CRA Tax Cheats In Remote B.C. Targeted In Pilot Program


OTTAWA - The unregulated couriers, paramedics and drivers who work on contract for big resource firms have become the Canada Revenue Agency's newest headache.

A pilot project focusing on British Columbia's remote Peace River region found hundreds of small-time operators who haven't been paying taxes.

The two-year probe into tax cheats working in the area's resource sector uncovered almost $2 million in unpaid taxes, and officers levied another half-million dollars in fines and interest.

"Self-employed contractors that support the larger businesses ... have extensive opportunities to work for cash," says an internal CRA report on the operation.

"Much of the work occurs in remote and sparsely populated areas that traditionally have limited visible interactions with the (CRA)."

The pilot project is among dozens the agency has ordered to help develop techniques for eradicating the underground economy, which Statistics Canada estimates was worth $38 billion in 2008.

Other probes have targeted waiters, used-car dealers, construction workers, house-flippers, truckers — even maple-syrup producers.

In northern British Columbia and the Yukon, investigators fixed their sights on three types of businesses that serve the resource sector: pilot car drivers, who guide oversized and overloaded trucks on remote roads; mobile first aiders, who provide paramedic services at job locations, as required under provincial law; and "hot shots," couriers who deliver time-sensitive materials to often-remote worksites.

Many of these transient workers are off the grid, operating in isolated areas accessible only by off-road vehicles, some living out of their cars for weeks on end, and getting jobs through word of mouth.

"It can be very challenging to meet with them," says the May 2012 report, obtained by The Canadian Press under the Access to Information Act.

The project eventually reviewed more than 4,000 tax accounts, the vast majority in the Peace River region of northeastern B.C., site of an oil-and-gas boom.

As word of the probe spread through the region, investigators found more resistance to their demands for information. But in the end, the project produced some $2.5 million in tax and penalties for government coffers.

The pilot project clearly demonstrated that the taxman needs to be on the ground wherever there's a new resource boom, officials concluded.

"Our province is on the cusp of great change and growth in the resource development industries," says the heavily censored final report.

"The timing of the initiative allows the agency to be well positioned as the economy recovers and begins to gain global strength."

A spokeswoman for the CRA, Mylene Croteau, says no criminal charges were laid as a result of the project.

Croteau added the pilot was expected to "increase the CRA's visibility thereby leading to an increase in voluntary compliance. ... Results indicated that non-compliance does exist in this sector."

The hunt for modest-income tax cheats in the remote northeast corner of British Columbia is at one extreme of the policing challenges currently facing the Canada Revenue Agency.

The agency is also under pressure to collect taxes from wealthy Canadians stashing their money in the bustling banking centres of Switzerland and Liechtenstein.

The agency says it has obtained convictions in 44 cases of offshore tax evasion since 2006, though critics dispute that claim.


Thumbnails of other pilot projects launched by the Canada Revenue Agency to combat the underground economy. Most ended mid-year in 2012:

Used-car sales: A project in the Burnaby, B.C., area focused on 90 so-called "curbers," individuals who sell used vehicles for cash, using Craig's list, Autotrader, etc. Found $185,000 in taxes owing.

Installers: Examined sub-contractors doing home renovations in association with big retail stores in Winnipeg, Regina and Saskatoon. About $339,000 in unreported income found.

Construction: Looked at 8,400 building permits in Ontario communities in the Sudbury and Barrie areas, and sent investigators to building sites. Identified more than 2,700 people who failed to file proper tax returns.

Gift cards: Focused on gift cards and certificates issued by stores and others in the Saskatoon area. Review of 74 businesses in the city found few instances of deliberate non-compliance, though firms were confused about rules on reporting gift-card income.

Waiters: A blitz of 145 serving staff in St. Catharines, Ont., flushed out $1.7 million in unreported tips and gratuities.

(Source: Internal reports from CRA obtained under the Access to Information Act.)

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