VANCOUVER - An enormous amount of taxable income is going untaxed in Vancouver’s Wild West real estate market.

Those in the know say that includes presumed evasion of both income tax on earnings from flipped property and GST payments that are not being remitted on newly built residences.

Two former lawyers interviewed Monday assert such tax evasion has become widespread in the Lower Mainland’s overheated housing market.

They blame not only developers, builders and flippers, but also the Canada Revenue Agency.

The CRA, they contend, often nitpicks legitimate taxpayers to death for negligible sums but is unable to get a handle on unpaid taxation related to Vancouver real estate flips.

They do not want their names disclosed for fear of CRA retribution by way of audits.

Such assertions about evasion come atop concerns raised recently about unpaid taxation by flippers partaking in contract assignments.

According to Caroline Battista, senior tax analyst at H & R Block, “the concern is that the middlemen (involved in contract assignments) are earning income on sales before the closing, but that this income is not being reported because it wouldn’t be on file as part of the land transfer.

“There is a concern that there are people engaging in such activities that are then not reporting their accurate income.”

That untaxed income can be on both a flipper’s sales commissions, if they happen to be a realtor, and, more significantly, on clear profit made — which can be as much as $100,000 or more in income — through the flip.

Retired lawyer Harry Lipetz told me in an email last week: “I can guarantee you that hundreds of millions of tax dollars are unpaid in Vancouver alone. Enforcement would bring the escalating market to heel.”

He notes that some builders create an illusion of having lived in their newly built properties with a view to avoiding taxation on the sales.

Retired Vancouver realtor Keith Quan notes that contract assignments were deployed back in the 1980s and 1990s in Vancouver for pragmatic and legitimate reasons.

But since then they have become a way of making a quick — and too often tax-free — buck on the back of a beleaguered housing market.

Quan recalls the era when many in Hong Kong were fleeing their homes in advance of the 1997 Chinese takeover, choosing Vancouver as their destination.

It was common, before global travel and the Internet became so entrenched, says Quan, for people to ask friends, already here, to scout properties on their behalf. Through contract assignments, it was possible for a friend to thereby reserve a presumably ideal property, subject to financing and inspection, until such time as the potential Hong Kong buyers landed in Vancouver for a first-hand look.

If the buyers did not like the property, the subjects then would be used by the friends to back out of the deal.

Quan says contract assignments also were used by realtors selling commercial property to ensure they would receive all sales commissions involved.

The realtors would assign a contract to a middleman who would make the purchase on paper, again with subjects that could later be used to back out of the sale.

The realtor thereby would buy himself several weeks during which time he could try to find a genuine buyer for the commercial property.

More recently, of course, the contract assignments have being used to flip property to the advantage of middlemen, sometimes realtors, trying to profit in a city where housing prices escalate by the week.

And those middlemen too often have been able to exploit the market without paying their fair share of taxation, unlike the end buyer who ultimately pays property transfer tax.

It’s a jungle out there and it appears the Canadian Revenue Agency has been unable to keep up with the machinations and scheming of those out to capitalize on it.

byaffe@postmedia.com