Canada’s income inequality may be much worse than statistics suggest, because Canada’s biggest earners are hiding their actual incomes by incorporating themselves, says a new study.

Recent measures of income inequality have shown an increase in Canada over the past few decades, but not nearly to the same extent as in the U.S.

According to StatsCan’s analysis of National Household Survey data, the average income among Canada’s top one per cent of earners was $381,300 in 2010.

But that number is actually closer to $500,200, according to a new study to be presented at a tax conference at the University of Waterloo this week.

The study, from University of Ottawa professor Michael Wolfson, McMaster University’s Mike Veall and York University’s Neil Brooks, says the biggest earners commonly set up what are known as Canadian-controlled private corporations (CCPCs), essentially taking advantage of lower business tax rates while sheltering their income from higher individual tax rates.

Story continues below