What is the underground economy?

Dealing in cash or trading goods and services are often part of the illegal, underground economy.

Dealing in cash or trading goods and services are often part of the illegal, underground economy.

Two Canadian Revenue Agency representatives came to Houston last week Tuesday to talk about the underground economy.

The underground economy is any business activity that is unreported or under-reported for tax purposes, and all business conducted with cash or otherwise needs to be reported on a tax return.

Business done “under the table” is not covered by WorkSafe B.C.

If you pay cash you have no warranty, no recourse for poor workmanship, and the added risk of liability if an injury takes place on your property, said a CRA informational pamphlet.

The underground economy also undermines the principles of fairness and equity and puts legitimate business at a disadvantage to competitors that do not comply with the law.

All Canadians should pay their fair share of taxes – no more, no less – and the underground economy robs the tax base of needed funds for things like schools and hospitals.

The CRA states that they fight the underground economy through education and through enforcement.

To educate about the underground economy, the CRA does community visits, presentations at schools, colleges and universities, as well as seminars for trade and business groups.

Enforcement includes audits in sectors where non-reporting and under-reporting is common, reviewing and acting on referrals from the public, and working with government and key industry groups.

Those caught cheating on their taxes can be charged interest and penalty fees, lose their assets, be prosecuted for failure to file tax returns or for tax evasion, or be sentenced to pay significant fines and possibly go to jail.

Another reason not to participate in such business dealings, is that business done “under the table” is not covered by WorkSafe B.C.

If you pay cash you have no warranty, no recourse for poor workmanship, and the added risk of liability if an injury takes place on your property.

To protect yourself, CRA recommends asking a lot of questions before conducting business, seeking a written contract, and asking for proof of Workers’ Compensation.

Tax reporting can be difficult, and some questions people often have involve things like who reports what and what all needs to be reported.

Below are a few specific tips:

If a company-owned vehicle is taken to and from work, that is considered personal use and needs to be reported as such, unless a person is on-call through the night.

Waitress and waiter tips need to be reported by the individual waitress if tips are direct and kept individually, but if tips are collected by the employer and evenly distributed, then it needs to be reported by the employer.

Anyone with more questions is asked to check out the CRA website at www.cra-arc.gc.ca.

 

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