Monday, August 01, 2011

Thou Shalt Not Steal: Restaurant Fraud in Canada

[109/365] Taxation.  Image by kardboard604 via Flickr
A third of Canada's restaurants may be ripping off the taxman by using sophisticated “zapper” programs and other software to hide their sales. 
The Canada Revenue Agency has found an estimated $141-million in phantom sales that were deliberately erased in electronic cash registers to dodge taxes. 
The widespread fraud was uncovered in a three-year pilot project that analyzed electronic sales data at 424 establishments to find faint traces of sales that were wiped clean. 
A team of 14 data specialists discovered at least 143 cases of suspected fraud, each with an average of $1-million in hidden sales. That works out to about 34 per cent of all the sale systems that came under scrutiny.
Canada is built on Judeo-Christian values. Without them, we will crumble.

Throw them all in jail.

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Lynn said...

This just proves that the government can't trust small businesses. The best idea would be to institute a surcharge of say, $10,000 on every restaurant when it applies for a business licence.

Do the same to every small business in the Country, and pretty soon the government would have lots n' lots of money,and there'd be no more fraud!

Maybe the new prisons can be filled with restauranteurs.

Alain said...

Excessive and unfair taxation will always produce this type of thing along with a black market. Nothing new at all.

Thucydides said...

While I am opposed to fraud, I am somewhat suspicious of the claims being made here. There should be other supporting evidence besides a "faint trace" which would probably be successfully refuted in a court of law.

Forensic accounting, looking at and comparing inputs like purchases, utility bills and wages and corroborating evidence such as the amount of tips and EFT transactions through Interac and credit card records to estimate the number of customers is needed to confirm the idea that sales are somehow not being recorded.

Anonymous said...

Sorry...I just can't get excited when someone finds a way to keep the government from stealing less of their money. The theft we should be concerned about is the 50% of my income the government steals from me. I so wish I could find a way to keep their damn hands off of it.

RkBall said...

When the restauranteur goes to the hospital for his bypass surgery, he'll be using your money to pay for it.

The more people evade taxes, the more your taxes will be going up. If everybody evades, our society breaks down.

Thou shalt not steal.

Anonymous said...

"faint trace" which would probably be successfully refuted in a court of law.

Yes, and we all know how wonderfully unbiased our courts are. Basically you could machine gun a group of nuns in the town square at high noon during a parade and a canadian judge would search until they found some way to let you walk.

Maybe while the taxman is taking a close look at the local "XYZ-Orange-Chicken-Express" restraunt till tapes the immigration man might want to check out the immigration status of whomever is bussing tables or washing dishes.

Gee how many dishwashers do you think are making $2.00 per hour and are here illegally?

potato said...

"When the restauranteur goes to the hospital for his bypass surgery, he'll be using your money to pay for it."

It's the government that is forcing you to pay for it, not the restauranteur. So your problem is still with the government, not the tax evader.

Secondly, how can you steal something that's your own property? These are your own earnings through mutual agreement. It is taken from you by force by the government, hence it is never the property of government, even once in its possession.

I'm with Anonymous on this one. I will be much more sympathetic to catching tax cheats when the government stops looting us and treating us like tax slaves.

Anonymous said...

Fight, flight or fraud. This is always the response to excessive taxes. The majority of these people are probably resorting to this because if they don't they won't be able to continue in business. Most people are more than willing to pay their fair share. If this many think it is unfair then the problem is with the tax system.

Anonymous said...

If the government wasn't taking so flippin much I could afford my own health insurance - and have much better medical care than that they're selling me (Or I'm being forced to sell myself - rather.


Anonymous said...

just try and stay in a small restaurant business with all the bs regualtions and taxes imposed by several levels of government. only the big guys can survive because they have lots of lawyers on staff. this from someone who been there done that.

Joe said...

Agreed Richard 'thou shalt not steal'. That being said however I would love to have someone set a limit on the size and scope of government. As someone else pointed out we are spending half of our income on government and the question needs to be asked if that is fair or right. I'm thinking of 1 Kings 10 and 2 Chronicles 10.

Anonymous said...

rk ball. evading taxes is not stealing when the tax burden becomes oppressive. it is long past time to get the socialist monkey off our back. i am tired of paying the freight for people who don't or won't work. before medicare people were not dropping dead in the streets and this applies to all gov programs. get off your a-- and produce.

Frances said...

I'm with Thucydides in being skeptical about the evidence. After all, I would think the majority of payments these days are not cash, but debit and credit payments to the restaurant bank account. So a quick check of the bank account(s) would reveal the money actually going into the business. Also, Visa, MC, etc., produce statements - look at those.

I know CRA will go into a restaurant and demand print-outs of sales by server, showing cash, credit, and debit sales. These are used to see if the tips have been properly declared. Surely they can do the same for the businesses instead of declaring phantom electronic 'faint traces' sure evidence of fraud. But that would involve real work by qualified persons.

Lynn - you've just put me out of business. I can't afford that kind of surcharge. But it won't matter anyway, as the same surcharge would knock out all my clients who are small businesses. BTW, my clients are clean.

Your way, Lynn, would have only large chains operating at their convenience and with minimal staff and service, malls and streetscapes full of boarded-up shops, and massive unemployment. Forget the government 'windfall', the social costs of EI and welfare would more than eat up any mythical increase in revenues.

CRA already goes disproportionately after the little guy, the small businessman whose main focus is not going belly-up and who has neither the time nor the resources to hire the top-end professionals. The auditors sent out are often poorly trained and totally lacking in an understanding of what running a small business involves. The received wisdom among accountants who work with small business is to let the CRA auditor find something so another 'success' can be reported, even if the something found is probably perfectly okay. The costs of arguing are too great, and will be totally borne by the small business. Reality, cynical as it is, is that small business owners are advised to pay up so the auditor will go away. It's become just another cost of doing business.

Those of us who have watched CRA in action are distinctly cynical about such pronouncements, just as we are cynical about their 'success' rate. And there has been too much harrassing of business owners and destruction of lives.

RkBall said...

"Faint trace" comments -- we know that the software exists to "disappear" electronic restaurant sales. Whether it's from credit card or cash only (Frances), I don't know.

RkBall said...

"a canadian judge would search until they found some way to let you walk."

Depends what class you are a member of -- victim or oppressor.

RkBall said...

"Secondly, how can you steal something that's your own property?"

Governments have the right to tax their citizens. In a democracy, this is implicit in our election of representatives to govern us.

RkBall said...

"this from someone who been there done that."

Sorry to hear about your experience.

RkBall said...

"excessive taxes."

I have run a small business for 25 years, and never felt the small business corporate taxes were excessive. What I felt was excessive was the 50% whack on marginal earnings on personal income tax. The business rate is around 22%, and that's after deductions, etc.

Certainly not excessive to the point of justifying tax evasion.

RkBall said...

Neither "excessive", or "oppressive".

RkBall said...

Frances -- Having been on the receiving end of the CRA boot, I sympathize with your comments. I spent $5,000 of my own hard-earned money, money which kept me away from my family while I was out earning it; fortunately, I met a reasonable reviewer from the CRA in Moncton, a human being, and I was totally vindicated. Every penny they confiscated was paid back. But the anti-CRA feeling still lingers. And, of course, I'm out the $5,000 in legal and accounting fees.

The line they crossed was this. They stopped interpreting the tax rules, and started telling me how I should run my business. They said instead of maintaining an office condo in Toronto, I should have sold the condo, used hotels, charged clients for the hotel (at the risk of losing my Toronto business which I had built up!) and kept a phantom office address.

How dare they tell me how to run my business!

"... nothing intellectually compelling or challenging.. bald assertions coupled to superstition... woefully pathetic"