OTTAWA — A two-year probe of the restaurant industry in Canada has uncovered at least $40 million in “phantom” cash sales so far, says the Canada Revenue Agency.
And the amount of hidden cash income — with no taxes paid — will likely be much higher once the pilot project concludes in March, officials say.
Agency auditors are swooping in on restaurants across the country to determine whether their electronic cash registers contain illegal software that can selectively delete sales from official accounting records.
So-called zappers and phantom-ware have been around since at least the mid-1990s, but prosecutions have been few and far between.
The Canada Revenue Agency launched a two-year pilot project in 2008 to better focus its investigations into the so-called “electronic suppression of sales,” or ESS, by sending in teams to selected establishments to ferret out hidden software in cash-register systems.
Before the pilot began, the agency had identified 11 such cases — and has since found others, though a spokeswoman would not provide details. The new cases have been referred to enforcement officers.
“Preliminary work indicates that ESS is prevalent across Canada,” Caitlin Workman said in an email.
“These are ongoing investigations, and the CRA has identified additional businesses using electronic sales suppression.”
Once the pilot is complete in March and the level of fraud better estimated, the agency will launch the next enforcement phase, she added. Restaurants were chosen in the first phase because of the high volume of cash sales.
Workman declined to indicate how agency auditors can determine whether cash sales have been hidden or deleted on computer systems, saying it could jeopardize investigations.
The Quebec government estimates cheats in that province cost their treasury $425 million in 2007-2008.