Canadians who file their income-tax returns online are more likely to cheat, suggests a recently uncovered Canada Revenue Agency report.
The department studied a random selection of Internet returns for the 2005 tax year and found about 15 per cent of them were non-compliant, translating into an estimated $569 million in outstanding taxes.
The agency found that people filing online using Netfile, a service advertised by Ottawa as a quick and efficient way to file, were more likely to deceive the taxman by understating the amount of taxes owed. No physical receipts are required when filing using the online software. The system does require receipts to be available upon request in the event of audit.
"The participants demonstrated a perception that not having to attach receipts to the return creates a temptation for electronic filers to overstate their claims for deductions and credits," says the document dated in September and obtained by The Canadian Press under the Access to Information Act.
"There is no need to supply receipts, so sometimes (people) may think they can get away with it without getting caught," Cleo Hamel, a senior tax analyst with H&R Block, told Â鶹´«Ã½net on Monday.
Hamel says people filing close to deadline are more likely to rush through their return and make mistakes.
"They are not necessarily cheating," said Hamel. "The underestimating part could be more forgetting or not adding things up properly or maybe (they're) not sure they have all their information," she said.
The agency's focus-group also revealed the software's ability to calculate tax refunds quickly with the click of a mouse fueled the temptation for filers to fudge the numbers.
"They believed they would not be caught as long as the overstatements were relatively small," said the report.
"I would recommend people who think they can get away with this, (to) not try it," said Hamel.
The agency also found that Canadians who sent in their tax information the traditional way -- using paper forms and manually attaching their receipts -- were more likely to comply with tax laws.
"When you file a paper return there is a process you have to follow, but when you file online you push a button and it goes," said Hamel.
Roughly 4.2 million Canadians filed their 2007 returns over the Internet as of this past May, almost five per cent more than the year before.
With files from The Canadian Press
