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Restaurants dodge dues, taxman finds

A third of Canada’s restaurants may be ripping off the taxman by usingsophisticated “zapper” programs and other software to hide their sales.

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.



The pilot project was originally scheduled to run only two years. But the work was extended by an additional year, to March 31 this year, after the potential tax losses from the electronic suppression of sales were deemed “significant.”



The fraud has been detected so far only in the food-and-beverage sector, as well as at one grocery store in Quebec. The tax dodge usually — but not always — involves hard-to-trace cash transactions.



Restaurants that want to cheat often buy software with built-in hidden features, called “phantom-ware,” that can remove sales data. Or they use stand-alone software — “zappers” — on a thumb-drive or CD that does the same work.

 
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