The CRA’s compliance and collection activities appear to have had a significant impact on reducing the GST/HST gap. The report highlights that the CRA has focused its efforts on auditing high-risk GST/HST registrants. Historically, most audits of smaller businesses were combined audits, with single audits covering both income tax and GST/HST. However, the CRA has shifted from this generalised approach to a more specialised compliance approach, with high-risk businesses facing full GST/HST audits. The GST/HST audits often target complex transactions or specific non-compliance initiatives such as the underground economy. They also involve comprehensive audit procedures and other evidence gathering techniques at the registrants’ premises.
The report highlights that Canada’s federal tax authority is, like virtually all tax authorities around the globe, looking to reduce the “VAT Gap” and maximise tax collections. As changing HST/GST and PST registration rules lower the nexus threshold for foreign businesses to be required to register for indirect taxes in Canada, we will likely see an increase in compliance activity and audits focused towards non-established companies. It is therefore important for businesses with customers in Canada to understand if they have a GST/HST registration requirement and/or sales tax registration requirement in individual provinces and territories.
To find out more about how Avalara can help with your global indirect tax compliance requirements, including Canada, get in touch today and speak to one of our experts.
