VANCOUVER—The Canada Revenue Agency has found nearly $600 million in unpaid taxes in Ontario and British Columbia’s real estate sector over the past three years. It has levied $47 million in penalties for the same period.

In B.C. alone, $169 million in unpaid taxes were related to real estate transactions and income tax, the agency found. In Ontario, whose population is three times greater than B.C.’s, that number was $423 million.

“I am delighted,” said Richard Kurland, a Vancouver immigration lawyer who for years has lobbied for more scrutiny of real estate transactions, as well as several immigration programs that were directed toward wealthy investors.

“It’s a reasonable representation,” he said of the amount of unpaid taxes, “but I don’t think it tells the whole picture at all.”

The federal agency began examining real estate transactions more closely starting in 2015, and says there continue to be “compliance risks” in real estate transactions in the heated Vancouver and Toronto markets.

In British Columbia, CRA auditors found that 54 per cent of the unpaid taxes came from not paying GST, while 45 per cent was from income tax.

In Ontario, 90 per cent of the unpaid taxes were related to homebuyers not paying the GST, which is required on all newly built homes in Canada, as well as GST on other real estate transactions.

In a statement, CRA staff said a number of factors increase the risk of tax evasion in the country’s two hottest real estate markets, including a questionable source of funds to buy properties, property flipping, unreported GST, unreported capital gains and unreported worldwide income.

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A mismatch between reported income and lifestyle (such as owning a multimillion-dollar home) can trigger a closer look from CRA auditors to discover whether income is not being reported or being earned illegally.

Kurland said he believes a new tax information-sharing agreement that will come into effect in September between Canada and 60 other countries will reveal more tax evasion. That’s because even though residents of Canada (who may or may not be citizens) must report their worldwide income to the CRA, the system was not well enforced, resulting in something of an “honour system,” he said.

“It’s what I call the show-me game,” Kurland said of the new agreement between countries. “You show me what this person declared to you ... as global income and property, and we will show you what this person declared to us as global income and property holdings.

“It puts people who have not exactly been open with their property transactions in a quandary.”

While in Vancouver much of the scrutiny has been on the impact that buyers from Mainland China may have on the market, Kurland emphasized: “It is not a one-stop China shop at all. This issue cuts across all jurisdictions internationally.” China is one of the 60 countries included in the new agreement.

The information-sharing agreement is part of an effort led by the Organisation for Economic Co-operation and Development to tackle global tax evasion, including secretive offshore banking.

In its February budget, the B.C. government announced it would require land owners to reveal their identity in the province’s land registry, instead of shielding property ownership behind numbered companies.

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“Lack of transparency in the land registry means it is not clear who owns nearly half of Vancouver’s more expensive properties. This is wrong,” the provincial budget document stated. “The concealment of beneficial ownership can be part of international webs used to facilitate tax evasion, money laundering, corruption and other criminal activities.”

It added, “Having a registry means we’ll know who owns what.”

With files from Marco Chown Oved and Robert Cribb

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