OTTAWA — One of every four Canadian businesses that collect GST fail to turn the money over to the federal government on time, often because they want to improve their own cash flow, says a new report.
The most common reason for failure to meet filing obligations was ensuring funds on hand didn’t run dry, says an April analysis from the Canada Revenue Agency.
“The majority of repeat non-compliant behaviour is a conscious decision on the part of the GST registrant. When cash flow is low, registrants may give priority to other suppliers and themselves, and avoid filing or making payments to the CRA.”
The report, based on 2007 statistics, found 776,000 businesses with “unresolved” accounts, meaning one or more of their scheduled GST remittances to the government was late.
With 3.2 million businesses authorized to collect the sales tax in trust on Ottawa’s behalf, the non-compliance level means one-quarter of all businesses are benefiting from unauthorized loans from the federal government.
And that rewards the tardy over the diligent, warns the report.
“Non-compliant registrants enjoy a distinct competitive advantage over compliant registrants,” says the analysis.
“Unless CRA corrects non-compliance and levels the playing field, compliant businesses may become non-compliant to ensure they can remain competitive.”
Most of the offending firms have between $30,000 and $100,000 in gross annual sales, and the problem is more common with new businesses.
The analysis also found a growing number of repeat offenders.
“Registrants having a history of repeat non-compliance have learned to manipulate the CRA’s efforts to recover tax returns and arrears payments.”
The document does not indicate the dollar value of the missing GST payments. But a report to Parliament last year indicated the overdue GST receivables were worth $4.81 billion in 2007-2008 — up by half a billion over five years.