Cash money payment
Most Canadians have paid cash in order to avoid the sting of taxes – and they don't feel bad about it either, according to a new poll.
The results, released Wednesday by H&R Block Canada, found that 84 per cent of those surveyed admitted to paying cash for a product or service to avoid the sales tax. When presented with two quotes from a contractor – a cheque payment or a lower cash payment with no tax – 55 per cent of Canadians said they would choose cash.
On the ethics of avoiding the taxman, only 30 per cent felt that doing so was wrong. There were, however, demographic and gender divides among those surveyed, with 17 per cent of those aged 18 to 34 saying it was wrong to pay cash to avoid paying sales tax, compared with 43 per cent of Canadians 65 and older. Men were more likely than women to see nothing wrong with it.
Retailers and contractors who get paid under the table are clearly evading income tax, says Mark Goodfield, a tax partner at Cunningham LLP in Toronto. "They would not only be subject to income tax on any sales not reported but potentially subject to a penalties for tax evasion that range from 50 per cent and 200 per cent of the amount of income tax evaded – and or imprisonment."
Contractors and retailers run the risk that consumers will snitch on them to the CRA, if the good or service does not meet their expectations, Mr. Goodfield said, while the consumers risk having no legal recourse without an invoice for the goods or services.
Cleo Hamel, a senior tax analyst with H&R Block Canada in Calgary, said the results of the survey are hardly surprising, given how much Canadians like to gripe about their tax bill.
"People feel like they already pay a lot of taxes and if they can save a few hundred dollars on this project, they can use that for something else. Also, some of them may think it is perfectly okay to do so."
But while paying cash is not illegal on the part of the consumer, there are serious implications for the overall Canadian economy, Ms. Hamel said. "The income that is not reported properly by the contractor has a wider impact – that adds up to billions of dollars going into the underground economy."
In addition, she says, all Canadians have an obligation to pay their taxes. "I, as a taxpayer, am upset when people do not pay their fair share of taxes. Because I do."
According to the latest government data, Canada's underground economy was estimated to be worth as much as $36-billion in 2008, with personal spending on underground goods and services making up $24-billion of that total. The report said that underground activities were most prevalent in the construction and retail trade industries.
A recent audit of by the Canada Revenue Agency of income earned by 145 wait staff in St. Catharines, Ont., revealed $1.7-million in unreported tips and gratuities. But of the people surveyed by H&R, 51 per cent said waiters and waitresses should not have to pay taxes on their tips.
"Unfortunately, tips are considered income and need to be reported on your tax return whether you think they should be included or not," Ms. Hamel says.
The survey was conducted online from July 30 to Aug. 1, 2012 by Leger Marketing, with a sample of 1,500 adult Canadians.