Are You Participating in the Underground Economy?
Most of like to keep our tax responsibilities above board and compliant with the law, however there are times that we may be tempted to cheat just a little bit. It may be that someone has offered to perform a service for you for cash only but with no taxes. Or you may be the one offering this deal. Either way, you could be participating in the underground economy issue, and as such, beware, because the CRA is getting ready to crack down on this type of tax manipulation.
The formal description of UE (underground economy) according to the Canada tax department includes any business activity that goes unreported or under reported for tax purposes. There are some industries that are more involved in this than others such as home repairs and renovations, some types of construction and retail, and this is just a short list of the many types of business that may be tempted or are already involved in the underground economy.
For those who only on occasion participate in underground activity they often think how much can it really hurt? According to the CRA this can hurt everybody. Also, if everyone adopted this type of thinking then the negative aspects of it become accumulative.
It is detrimental for those businesses who are committed to following the law. They won’t take the chance of cash deals with no tax charging, and as a result they are having to compete unfairly with those businesses that are involved in the underground economy.
Less tax money is being generated through these actions which in turn means less money to pay for the amenities and necessities that the tax dollars are spent on. The bottom line is you may be saving a few tax dollars by not paying them out of your pocket, but you could be losing by way of cut backs the government is forced to make because of fewer tax dollars.
Another tax argument that is raised is that people really don’t mind paying taxes, provided the money is used properly and to its fullest beneficial extent. When we as tax payers hear of huge projects that have been taken on by the Government that end up failing, then we know it’s our tax dollars that are lost. This is truly frustrating, but again it comes down to us as individuals making sure we know everything we can about our politicians before we vote them into office. It means becoming pro-active and expressing your discontent to your local political representative so they can bring it before parliament. However, many of us do a lot of groaning about some tax situations but don’t take the proper channels to make our concerns known.
You have the responsibility as a tax payer to make the right decisions, and besides being proactive and speaking up about your discontentment with the tax system, make sure that you understand your particular tax situation and become involved in it where you are going to take advantage of everything that is available to you by way of tax breaks and incentives, and yes, even tax planning. This is where your real tax savings are, and they are all legal when done properly.