Have you ever paid someone to replace your kitchen counters in cash? Or, paid for a haircut in cash and didn’t notice whether or not GSH/HST had been applied? Or, hired someone “under the table” to conduct home renovations? Well, you might be contributing to a problem that costs the government billions in unpaid tax dollars each year. The underground economy (UE) is a serious problem, and for years, has been a consistent issue in Canada.
It may be tempting to pay for certain things in cash because we think that saving a few dollars here and there can’t hurt; however, we fail to see the larger impact of what happens when we do. The underground economy is a form of fraud and is considered an illegal economic activity. The Canada Revenue Agency, defines the underground economy as being any activity that is unreported or under-reported for tax and GST/HST purposes[1].
In June 2016, Statistics Canada released a report estimating the value of Canada’s underground economy to be $45.6 billion in 2013 — equivalent to 2.4 per cent of Canada’s GDP. The research also highlights that four sectors accounted for nearly two-thirds of the total estimated underground economy: residential construction, finance, insurance / real estate, and retail trade. Participation in the underground economy hurts all Canadians, including responsible citizens and businesses that pay the correct amount of tax.
So, here’s what you can do to help level the playing field for persons who pay their taxes:
- As consumer: be sure to hire responsible businesses by asking questions and doing research. Any reputable business will abide by the rules and not accept under the table transactions. Get a written contract and copy of payment for your records. These will give you the protection you deserve and the peace of mind you need.
- As business owner: report your income accurately with the CRA — taking short cuts when reporting your income could result in penalties, fines, and even jail time. The best way to ensure that you are reporting income accurately is to keep your sources of income organized and know what the CRA expects you to claim.
If someone offers to provide services to you for cash, or you suspect an individual or business has not reported all their income or GST/HST, you can contact the CRA through the Informant Leads Program.
Michelle Auger is Coordinator of the National Affairs team in Ottawa and has been with the CFIB since August 2015. Michelle holds an Honors Baccalaureate in Social Sciences from the University of Ottawa and is fully bilingual. An avid runner and cross-country skier, Michelle spends much of her free time exploring the Gatineau Park.
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