Marriott Halifax Harbourfront, Halifax, NS
March 5, 2015
Check against delivery
Thank you for your kind introduction and for inviting me to speak with you today.
It's a pleasure to be here today.
Our Government has long understood the importance of Canada's small businesses.
Small businesses are the fabric of our communities.
In Canada today there are more than one million businesses like that - one million small businesses.
In fact, operations with fewer than 100 employees comprise 98% of all Canadian businesses.
These businesses also employ almost eight million Canadians - that's almost 70% of the private sector workforce.
And they're responsible for creating four out of every five private-sector jobs.
As Prime Minister Harper has said, small business is nothing less than the beating heart of the Canadian economy.
But you already know that and so does our Government. That's why we've made it a priority to make life easier for the men and women who run small businesses.
It's why we've cut taxes on small businesses and changed the rules to make more businesses eligible for the lower rate.
We know that anyone who puts in an 18-hour day running a small business, because that's what you do, they would rather put their hardworking revenues back into that business, creating more jobs, growth and opportunities, than hand the revenue over to the tax man, and we're behind that one hundred per cent.
Our Government will always choose jobs and growth over taxes and red tape.
Since 2006, our government has responded with many measures to help businesses, including reducing corporate taxes and cutting red tape
When we cut red tape, we are cutting the time you - business owners - have to spend dealing the bureaucrats, and increasing the time you have available to your customers and your families.
In fact, in a study released last month by PWC, Canada is the best country among our G7 peers -- and 9th worldwide --ease of paying business taxes. By comparison, the United States was 46th overall.
The PWC study is supported by Globally recognized authorities - such as Organisation for Economic Cooperation and Development to the International Monetary Fund - have ranked Canada as one of the best countries in the world in which to do business. They expect Canada to remain one of the strongest growing economies in the G-7 this year.
Most Canadians are hard-working citizens who voluntarily follow Canada's tax laws. However, there are always a few looking to make a quick buck and skirt the rules.
The underground economy creates an unfair advantage for those who engage in it. It undermines the competitiveness of honest businesses, especially small businesses, who abide by the law.
The Organisation for Economic Co-operation and Development (OECD) ranks Canada's underground economy among the lowest of OECD countries. We're proud of that ranking - and of the strong identification, audit, and enforcement programs that help us achieve it.
Since 2006, the percentage of the GDP for the underground economy has dropped to 2.3%. Nevertheless, any amount is unacceptable. In fact, the very existence of the underground economy flies in the face of core Canadian values of fairness, honesty, and integrity.
If left unchallenged, the underground economy will erode the integrity of Canada's tax system.
Participants in the underground economy, disrespect Canada's tax base by either receiving payment or paying for services and products "under the table"—that is, outside the formal economy. This is a serious problem in your industry.
Individuals who conduct their operations off the books make it harder for honest companies like yours to compete. Because of that, your business may suffer. You may end up hiring fewer employees, working longer hours, and having less to invest in your businesses.
It's simply unfair that law-abiding business owners like yourselves should heed such consequences at the hands of those who are breaking Canada's tax laws. And you're not the only ones suffering.
We are examining all sectors of the economy where cash transactions are common and the temptation to participate in the underground economy is high.
Underground economy activities may be found in any industry, but those hardest hit are:
… construction;
... retail trade;
… accommodation and food services;
… and finance, insurance, real estate, rental, leasing and holding companies.
Our Government's goal is to put greater emphasis on reducing the social acceptability of, and participation in, the underground economy. But we can't achieve that alone.
Last fall, it was my pleasure to chair the inaugural meeting of my Underground Economy Advisory Committee.
I will meet and correspond with this Committee regularly, as it is comprised of the groups and individuals best qualified to advise us on the current trends, help us identify emerging risks, deepen our understanding of taxpayer compliance behavior, 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.
I also very much appreciate the invaluable input from Kevin Lee and David Foster, the CHBA representatives on our Underground Economy Advisory Committee.
In addition to the home building and construction industries, advisory committee members represent the financial, restaurant, and retail industries, as well as small businesses and chambers of commerce.
As its first order of business, the advisory group worked closely with the CRA to finalize its Underground Economy Strategy - and they will partner with us in the coming years to ensure it is put into effective action.
I table our new strategy - called Reducing Participation in the Underground Economy - in the House of Commons last November.
Our strategy is the framework to:
- further refine the CRA's understanding of the underground economy;
- 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.
Through education and enforcement, this new strategy will ensure that an increasing majority of Canadians are playing by the rules.
First, we remain committed to education through proactive outreach and communication activities.
We have a three-point plan to improve voluntary compliance for small and medium-sized enterprises. Our "get it right from the start" approach gives these businesses the support and information they need to correct preventable errors.
For example, the Liaison Officer Initiative provides in-person support to small and medium businesses at key points in their business cycle to help them more easily meet their tax obligations. Early support reduces red tape, saving businesses time and money. The initiative has been rolled out nationally with very positive results and feedback from participating entrepreneurs.
Second, we balance education with enforcement to further discourage people from being a part of the underground economy. That means we crack down hard on the minority of people who do not pay their taxes.
CRA auditors have many tools at their disposal to find unreported income, including spot visits by officers, lifestyle audits, and specialized computer software.
I know plenty of you have horror stories about what can happen to people who hire contractors under the table. That's because you're the ones who end up picking up the pieces - sometimes literally picking up the pieces - after shoddy work has been done and the illegal contractor is not returning calls.
Many Canadian consumers are learning too late that the simple act of asking for a receipt helps to protect them from undue risks, both physical and financial.
As a consumer, we must ask … if this contractor is willing to cut short his or her legal tax obligations, what other corners will they cut?
When consumers pay under the table for home renovations and repairs, we not only place ourselves in personal and financial risk, but we also hurt the economy and reduce the amount of resources available for healthcare, education and public safety. Everybody loses when tax cheaters take part in the underground economy.
Where there is a receipt, there is consumer recourse. And where there is a receipt, there is also a record of a tax obligation.
The Canadian Home Builders' Association has long been a valuable partner of the Government in helping to raise public awareness about the risks of participating in the underground economy in the construction industry. CHBA is also a leader among peers in increasing consumer awareness.
Kevin Lee, your CHBA CEO, has noted that Canadians spend over $60 billion each year renovating and improving their homes. In turn, this supports more than a half-million jobs, and generates more than $27 billion in wages. That's an amazing boon to the economy and to our revenue base!
So I am happy to announce that our Government is partnering with CHBA by contributing nearly $745,000 over three years to support the CHBA's Get it in Writing! campaign. This is a key plank in part of our shared fight against the underground economy in the construction industry.
The Get it in Writing! campaign provides consumers and home renovation contractors with tools and information to discourage and reduce participation in the underground economy.
Effective campaigns like Get it in Writing! are clear examples of the multifaceted and collaborative approach that is required to address the ongoing challenge of the underground economy. We are proud of our long-standing partnership with the CHBA, who has spearheaded the Get it in Writing! campaign since 1997.
Together, we are spreading the message that, without a receipt from a legitimate contractor, consumers have no recourse if a contractor does a bad job or cuts corners while working in their home or business. Saving a few dollars to pay an illegal contractor may well end up costing more in the long run if something goes wrong.
Our Government has also streamlined the legal process that allows the CRA to get information from third parties such as banks. This makes it easier for us to access information on unnamed individuals—which has already resulted in significant non-compliance being identified and corrected.
In 2013-2014, the CRA audited almost 8,000 underground economy files. 83% of the files audited resulted in a tax change. This has led to the identification of $718 million of unreported income in just one year.
The Underground Economy affects every Canadian and is especially damaging to the majority of businesses who operate above board. In short, it is in everyone's best interest - government, industry, consumers and taxpayers - to stop the underground economy.
By ensuring an increasing majority of people are playing by the rules, our Government is deepening Canada's tax base while lowering taxes for all.
We are fulfilling that promise. That's why we take the abuse of Canada's tax laws very seriously. The CRA has the tools and resources it needs to help honest taxpayers get it right from the start and to deal effectively with tax cheats. We are making it easier for those who want to comply and harder for those who don't.
Ladies and gentleman, our Government is committed to supporting small businesses because that in turn supports our communities, our families. For every job created, there is a Canadian family better able to make ends meet, to achieve financial security, to plan for a future of prosperity and opportunity.
Our Government is also proud of our efforts to make Canada the best country in the world in which to do business because there is no better safeguard for the financial security of Canadians, their families, and their communities than having good, well-paying jobs.
Our Government is delivering on our commitment to balance the budget and, in our view, keeping tax rates low is the single most important thing we can do over the long term to spur economic growth and job creation, and keeping our budget in balance is the key to making sure we keep taxes down over that longer term.
Not just for businesses like yours, but for Canadian families as well.
We do all this because it is what works.
Canadians expect and deserve a level playing field for all taxpayers, and we're working tirelessly to achieve that. We know we can count on partners like you—the Canadian Home Builders' Association—to help us take the necessary action to root out the underground economy.
Our strategy is working. Together, we are getting the job done. Thank you for your continued support.
Thank you
