Let’s be honest, working in the home renovations business these days is more and more challenging, especially with the growing underground cash economy. Who are the culprits fueling this market?
Government readily points out that this underground economy is about avoiding taxation-responsibility at the expense of all Canadians. Participation in this economy places an unfair burden on law abiding businesses and individuals, and reduces the amount of money available for important government programs such as health care, education and the environment. Who can disagree with this logic?
Putting logic aside and getting into the real world, let’s address who really are the main culprits fuelling this cash economy. I believe it’s homeowners. It’s they who want to circumvent paying the HST on renovations, it’s not the contractors. Furthermore, these homeowners are then willing to forfeit receipt for payments or receive a written guarantee for the work. The questions are: what happens if the job goes wrong and they don’t have a paper trail? What if the contractor causes unnecessary damage at the residence, will the contractor have liability insurance? Worse still, what happens if someone has an injury and they visit the hospital for treatment? Will this not alert investigation from Ministry of Labour and WSIB? Will this blow the whistle on these homeowners and contractors activities?
It’s simple, contractors who are not willing to accept cash normally don’t get these jobs, as these homeowners will find others who are willing to accept king cash. Some contractors have adjusted their attitude in order to secure work. They accept the cash work; they eat the HST and take the loss. Behind the scene they put this work legally through their books. It’s a case of using tactics to safeguard your survival in today’s economy.
The dangers facing contractors who accept cash without reporting is it opens you up to the possibility of later problems. And it’s a myth that if you fail to keep records, it makes you immune to taxes. If your lifestyle is not in line with the income you report, like you drive nice vehicles, go on great holidays and more, how can you explain this to the CRA on assessment or investigation? Keep in mind, evading taxes is illegal and it can result in criminal convictions leading to fines and jail time in addition to any taxes and penalties owing under the Income Tax and Excise Tax Acts.
Remember, someday it all catches up with us!
Posted by Alec Caldwell on February 12, 2013 in Alec Caldwell at Canadian Contractor