Harper Government joins forces with industry to take aim at the underground economy

News Release

Minister Findlay launches three-year strategy to tackle the underground economy

November 25, 2014 Ottawa, Ontario Canada Revenue Agency

The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P., and Minister of National Revenue announced today a three-year strategy to combat the underground economy in Canada. Entitled “Reducing Participation in the Underground Economy,” the strategy was tabled in the House of Commons, and follows the inaugural meeting of the Minister’s Underground Economy Advisory Committee (Advisory Committee) on November 17, 2014.

The UE strategy signals a renewal of the Government’s ongoing efforts to reduce the social acceptability of, and participation in, the underground economy. Members of the Minister’s Advisory Committee, selected from a broad cross-section of industry leaders and academics, have reviewed and endorsed its approach and will be instrumental in advising on the strategy’s implementation.

The mandate of the Minister’s Advisory Committee is to advise on the current underground economy trends, help identify emerging risks, deepen government’s understanding of taxpayer compliance behaviour, and contribute to the development of innovative compliance tools. In addition, committee members have the networks and communications channels to broadly consult, inform, and educate high-risk members.

Quick facts

The CRA strategy, Reducing Participation in the Underground Economy, focuses on three broad approaches to reduce participation in the underground economy over the next three years:
- further refine the CRA’s understanding of the underground economy;
- seek to reduce the social acceptability of participation in the underground economy; and
- deploy a range of initiatives to encourage compliance and reduce participation in the underground economy.
In 2011, Statistics Canada estimated the value of the underground economy activity in Canada at 2.3% of the GDP. In 2013-2014, the CRA audited almost 8,000 underground economy files. 83% of the files audited resulted in a tax assessment resulting in the identification of $718 million of unreported income.
Through the Liaison Officer Initiative (LOI), the CRA is providing in-person support to small and medium businesses at key moments of their business life cycle. The LOI has received overwhelmingly positive feedback from 330 survey respondents. Over 90% said the visit from a Liaison Officer helped them understand and clarify their tax matters and over 93% feel the Liaison Officer Initiative approach would be useful to other businesses.
On November 17, 2014, the Minister’s Underground Economy Advisory Committee held its inaugural meeting in Toronto, Ontario. The Committee is comprised of an academic representative and eight industry association stakeholders representing the financial, restaurant, retail, home building and construction industries as well as small businesses and chambers of commerce. The Advisory Committee will meet twice a year or when convened by the Minister. http://news.gc.ca/web/article-en.do?nid=905469

Quotes

“If left unchallenged, the underground economy will erode the integrity of Canada's tax system. The business environment is ever-changing, and the CRA must stay nimble. We must refine our compliance actions and we must evolve our strategies. That is why our Government is joining forces with industry and taking action. Our three-year plan includes measures to reduce the social acceptability of participating in the underground economy, target high risk sectors to improve and promote compliance, and ensure a level playing field for hard-working Canadian entrepreneurs and taxpayers.”
- The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P. Minister of National Revenue

“Working with public and private sector partners, our underground economy strategy charts a clear course to enhance our ability to detect and address UE activities in high-risk areas of the economy. This sustained, focused, and collaborative effort is the first of its kind and promises to impact the underground economy in a significant way”
- The Honourable Kerry-Lynne D. Findlay, P.C., Q.C., M.P. Minister of National Revenue

“Participation in the underground economy hurts all Canadians. With the new strategy to combat the underground economy, I am pleased that the Canada Revenue Agency and CPA Canada will continue to work together, with taxpayers' best interest our first priority, to protect the integrity of our tax system and ensure that all Canadians comply with their tax obligations as required by law”
- Gabe Hayos, Vice President Taxation, Chartered Professional Accountants of Canada

“Merit Canada is pleased to participate on the Ministerial advisory panel on the underground economy as both consumers and taxpayers lose with the underground economy. We are pleased the Government takes this issue seriously and are looking forward to working together to find ways to discourage both contractors and consumers from engaging in this type of activity.”
- Terrance Oakey, President, Merit Canada

“The Canadian Payroll Association is proud to partner with the Canada Revenue Agency to combat the underground economy. Canadians count on payroll professionals to pay billions of dollars in wages, taxable benefits, federal and provincial statutory remittances, and health and retirement benefits. We have a unique compliance perspective when it comes to fighting the underground economy, and we look forward to continuing to work with the Minister to inform the Government of Canada's strategy to tackle it.”
- Patrick Culhane, President, Canadian Payroll Association

“All Canadians are affected by the underground economy. Not only does it provide an unfair advantage to dishonest businesses, but it takes away money that could be used for important investments in our communities, such as schools, hospitals, infrastructure, and other vital government services. The Canadian Chamber of Commerce is pleased to collaborate with the CRA to combat the underground economy so that we can provide our members with a fair and productive business environment in which to prosper.”
- Émilie Potvin, Vice President, Public Affairs & Stakeholder Relations, Canadian Chamber of Commerce

“The underground economy is a complex issue and a collaborative approach is key to the success of any initiative to combat it. The Government's strategy to fight the underground economy will help foster collaboration that will favour modern, innovative, and coordinated approaches grounded in practical, business, economic, and behavioural insights. I am happy to play a part in the development and implementation of this strategy together with key representatives from the private and public sectors. I commend the Canada Revenue Agency's open and collaborative approach.”
- Nina Mažar, Associate Professor of Marketing, Rotman School of Management, University of Toronto

“Underground contractors who cut corners when it comes to their taxes are also likely to cut corners in their work. That's bad news for Canadian consumers. The Canadian Home Builders' Association wants to ensure that Canadians don't expose themselves to undue risk, both physical and financial. The Government of Canada's underground economy strategy is a significant step in fighting this issue of vital importance to our members and to Canadians generally. We're glad to have the opportunity to have a say in how the Canada Revenue Agency tackles this important problem.”
- Kevin Lee, Chief Executive Officer, Canadian Home Builders Association

“The Retail Council of Canada represents small, medium and large retailers across Canada. Our members operate over 45,000 store fronts in every community across the country. The underground economy comes in many shapes and sizes and includes; counterfeit products, the failure to pay payroll taxes on behalf of unregistered employees and the avoidance of duties and tariffs for goods not declared at the border. These and other practices hurt the vast majority of Canada's honest business owners who are making a contribution in their communities by creating employment, making investments in local economies, and supporting community activities. The Retail Council of Canada is pleased to work with the CRA to provide our members' perspectives and input to help fight the underground economy.”
- David Wilkes, Senior Vice President, Government Relations, Retail Council of Canada

“The CFIB supports the Government of Canada's underground economy strategy. Independent business owners are particularly vulnerable to the unfair competitive edge that the underground economy provides to dishonest businesses. Giving our members the opportunity to share regular input on the Government's strategy to combat the underground economy is a welcome and promising step in the right direction to level the playing field across all business sectors.”
- Corinne Pohlmann, Senior Vice President, National Affairs, Canadian Federation of Independent Business

“Restaurants Canada is pleased to be a part of the Government of Canada’s collaborative efforts to tackle the underground economy. It is an excellent opportunity for our organization to work with the Canada Revenue Agency to ensure that our members can operate on a level playing field and continue to prosper in today’s competitive business environment, while reassuring our customers that the taxes they’re paying are duly remitted to the government. We look forward to continuing to work with Minister Findlay and the Government of Canada to act on this strategy.”
- Joyce Reynolds, Executive Vice President, Government Affairs, Restaurants Canada

Associated Links

http://www.cra-arc.gc.ca/undergroundeconomy

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613-995-2960

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Canada Revenue Agency
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Harper Government joins forces with industry to take aim at the underground economy

News Release

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