The Canada Revenue Agency (CRA) has affirmed that it is actively monitoring social media influencers and video-game streamers within Canada. This scrutiny aims to ensure that their earnings from paid endorsements and activities on social media and online gaming platforms are accurately disclosed in their individual income tax returns. The CRA’s objective in closely observing these individuals is to detect instances of tax evasion, promote adherence to Canada’s tax regulations, and recover taxes on any undisclosed income.

The CRA has undertaken preliminary research into the earnings of social media influencers and video-game streamers. Presently, it is in the stages of developing an enforcement strategy to enhance compliance with Canada’s income tax system. The enforcement plan is specifically targeted at individuals in these categories who generate annual incomes exceeding $500,000.

The CRA is leveraging open-source intelligence to uncover unreported income from social media influencers and video-game streamers. Open-source intelligence involves the collection and analysis of data from publicly accessible platforms like Facebook and X (formerly Twitter) linked to these influencers and streamers. The CRA credits open-source intelligence for enabling contact with vendors connected to the specified social media influencers and video-game streamers.

The CRA’s enforcement plan is designed to inform social media influencers and video-game streamers of their tax obligations under Canada’s income tax laws and assess their compliance. The CRA notes that many Canadian influencers and streamers, with substantial online followings on platforms like YouTube and Amazon, have become high earners through sources like subscription fees and merchandise sales. For instance, Evan Fong from Richmond Hill, Ontario, reportedly earned around $17 million USD in 2018 with over 25 million subscribers on his VanossGaming Channel.

To enhance compliance with Canada’s tax laws, particularly in the realm of social media and video gaming, the CRA plans to collaborate with consulting businesses, ensuring awareness of the upcoming digital tax legislation effective from July 1, 2021. The proposed legislation aims to mandate digital corporations like Google, Netflix, and Airbnb to collect federal sales tax from Canadian consumers, pending parliamentary approval. The CRA projects a revenue boost of $1.2 billion over the next five years by implementing this measure. Additionally, the CRA is ready to introduce a new corporate tax on digital services if required. Furthermore, the CRA disclosed plans to allocate $606 million in new funding over the next five years to support initiatives targeting international tax evasion and aggressive tax avoidance.

Pros and Cons of CRA Tax Auditors Monitoring Tax Revenues Among Canada’s Social Media Influencers and Video-Game Streamers

The CRA has a history of scrutinizing social media platforms to identify discrepancies between taxpayers’ reported income and the information shared online. The current focus on social media influencers and video-game streamers aligns with the CRA’s broader strategy to enhance compliance with Canada’s tax system, particularly in the context of e-commerce transactions and digital platforms. This enforcement plan underscores the CRA’s commitment to tackling challenges related to international tax evasion and aggressive tax avoidance. It also emphasizes the agency’s dedication to fostering transparency and fairness within Canada’s tax system.

However, the effectiveness of the CRA’s enforcement plan in uncovering unreported revenue from e-commerce transactions and digital platforms remains uncertain.

The use of open-source intelligence by the CRA poses challenges. Ongoing concerns revolve around the reliability of information extracted from the internet, including social media platforms like Facebook and X. Even if open-source intelligence provides compelling evidence, its conclusiveness is inconclusive. Relying on data from Facebook and X pages for collection, analysis, and decision-making may result in misrepresentations, errors, and improper actions by CRA tax agents, potentially causing financial hardships for Canadian taxpayers.

As mentioned earlier, the CRA’s enforcement plan targets social media influencers and video-game streamers earning over $500,000 annually. This approach could pose challenges as it may divert the CRA’s attention away from enforcing Canada’s Income Tax Act on those with income below $500,000 in these categories. Focusing solely on those exceeding $500,000 does not comprehensively address ongoing non-compliance issues within Canada’s tax systems, particularly in the realms of e-commerce transactions, the digital sphere, and unreported cash sales. While establishing tax audit criteria is essential, the CRA’s narrow focus seems to overlook individuals with tax revenue below $500,000 who may still have substantial unreported income.

Tax Pro Tips – Tax Advice and CRA’s Pursuit of Unreported Tax Revenues

If you have inquiries about CRA’s tax audits, or if you’re a social media influencer or video-game streamer undergoing a CRA tax audit, or if you possess unreported income from social media or online video games, you might be eligible for relief through the CRA’s Voluntary Disclosures Program. The program aims to prevent “tax evasion and aggressive tax avoidance,” ensuring a responsive and fair tax system for all Canadians. Canada’s Voluntary Disclosures Program encourages compliance with the law and provides taxpayers the opportunity to voluntarily (1) rectify inaccurate or incomplete information, and/or (2) disclose to the CRA information not previously reported. In the context of unreported income earned through social media or online video games, Canadian taxpayers may qualify for penalty relief and partial interest relief under the Voluntary Disclosures Program. A valid Voluntary Disclosures Program application must:

• Be submitted voluntarily;
• Be comprehensive in providing all relevant information;
• Include payment for the estimated taxes owed. If a taxpayer cannot make the payment at the time of the application, he or she may request consideration for a “payment arrangement”;
• Contain details about income tax that is at least one year past due;
• Incorporate information about GST/HST for at least one overdue reporting period.

To be eligible for relief under the Voluntary Disclosures Program, the taxpayer needs to submit a thorough application that fulfills the program’s requirements outlined above. If you have unreported income or seek tax planning to minimize your tax liability, please get in touch with our tax law office for expert guidance from one of our leading Canadian tax lawyers.

Disclaimer:

“This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the articles. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.”

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