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August 16, 2021

Underground economy on the upswing: report

Here’s a big shock: Most Canadians have, at some point, paid cash for goods and services to avoid paying tax.

A recent poll found 19% of respondents take advantage of under-the-table opportunities just about every chance they get. Another 38% said they don’t do it regularly, but have done it once or twice. Only one-quarter of Canadians said they would never pay cash in order to get a tax break.

Ontarians are most likely to take advantage of the underground economy by paying cash while residents of B.C. and Atlantic Canada are least likely, the numbers suggest.

Not surprisingly, home renovations lead the way where as many as one-in-three projects are settled in cash, to avoid paying not only the sales tax, but income and payroll taxes as well. The result in Ontario is more than $2.4 billion drained from the public purse over the past two years, according to some estimates.

All of which is little more than theft, says Ottawa Citizen columnist Mark Sutcliffe in recent editorial: “That's effectively what people do when they participate in the underground economy – steal from their neighbours. And those who help them – either by agreeing to a cash transaction in return for a discount or simply by condoning their behaviour – are complicit in a growing problem with dangerous implications.”

And the Canada Revenue Agency agrees, which is why it sponsored a YouTube video contest to promote the message that those who participate in the underground economy are avoiding their tax responsibilities at the expense of everyone else.

Aside from that, there are going to be risks if you decide to pay cash: No warranty, no recourse for shoddy workmanship and the added risk of liability if an injury takes place on your property.

After all, if contractors are willing to cut corners when it comes to paying taxes, who’s to say they won’t do the same with their work as well?

What’s your take? Is 'working for cash' part of a larger tax revolt or is it really just theft?

By Gordon Powers, MSN Money

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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...