TORONTO - Ontario is failing to collect hundreds of millions of dollars every year in taxes on tobacco, gasoline and diesel fuel.
Auditor General Jim McCarter estimates the lost tobacco taxes alone are worth about $500 million a year, though the government insists that number can't be known with any accuracy.
First Nations residents are allowed to buy tax-free tobacco on reserves for personal use -- up to 2.5 cartons a month for every adult who smokes -- but the auditor found those rules were virtually ignored.
One tobacco manufacturer-wholesaler alone sold 250 per cent of the total allocation for all adult smokers on all reserves across Ontario, costing the government at least $100 million in lost taxes.
Another $26.6 million in tobacco taxes wasn't collected on 76 million cigars sold on Ontario reserves in 2006-07.
McCarter says he warned the province in 2001 to update its policies and information technology so it could collect all the tax dollars it's entitled to, but complains it has failed to make those improvements.
He says a review of one month's receipts on diesel sales suggested the province could have lost about $19 million in taxes because collectors reported selling 128 million more litres of tax-exempt fuel than they reported purchasing.
The auditor also found the government fails to keep any information on Certificates of Exemption for gasoline taxes prior to 2000, even though they don't have expiry dates.
The gasoline tax exemptions are meant for First Nations residents who live on reserves, but McCarter said the government doesn't even know who was issued an exemption prior to 2000.
"There is no evidence that the Ministry (of Revenue) has assessed the likely extent and risks associated with various tax-evasion schemes," McCarter wrote.
"Based on this and the fact that each inspector issues an assessment on average only once every three or four months, we question whether its current inspectors are being effectively deployed."
