The underground economy: Be part of the solution

All Canadians benefit from taxes collected

Taxes pay for Canada’s world-renowned programs and services like healthcare, education, beautiful parks, the Canada child benefit, Old Age Security, and Employment Insurance.
Paying the taxes you owe helps strengthen your community and your country by funding many services that Canadians use every day.

Understanding the underground economy

The underground economy includes any activity not reported for income tax and GST/HST purposes. It is sometimes called moonlighting or working for cash or working under the table, and can include not reported or under-reported income from:

• tips and gratuities
• employment
• business
• money earned through the sharing economy such as renting out a room of your home and ride sharing
• gift cards received for work done
• cash payments for goods or services
• exchange of goods or services for other goods or services (bartering) without using money
• gifts received from suppliers (also called incentives)

Generally, income you earn is taxable and you have to report it on your tax return. This is true even when you don’t receive a T4 slip and when the activity is not your main source of income.

How the Canada Revenue Agency finds underground economy activity

Some people think that if they don’t declare a small amount of income, if they operate in cash, or if they don’t keep records, the Canada Revenue Agency (CRA) won’t find out. That’s false. The CRA has many tools to detect underground economy activity and works with many partners to combat the underground economy.

Evading taxes is illegal and can result in severe consequences such as penalties, fines and criminal convictions.

Not convinced? See criminal investigations actions, charges and convictions.

Be part of the solution

A few dollars of unreported income may not seem like a big deal, but collectively they amount to billions of dollars lost that are needed to fund public services in your community. So be part of the solution! Know how to recognize the underground economy and help fight it.

Consumers

When you help someone cheat by agreeing to pay cash to avoid the taxes, Canada has less money to fund the programs and services you use. Instead, choose honest businesses that follow the rules, and support your community by paying the taxes they owe. Here’s what you can do:

• Avoid businesses that promise lower prices if you pay cash and don’t get a receipt.
• When contracting for work in and around your home, hire businesses that will give you a written contract to help ensure you are protected against incomplete or poor-quality work and cost overruns.
• When you’re shopping or dining out, make sure you get a receipt.

It may not always be the easy choice, but you’re helping to make sure our tax system continues to be fair to everyone.

If you think an individual or a business is not respecting their tax obligations, tell the CRA. Report a lead on suspected tax cheating in Canada.

Don’t help others cheat. Be part of the solution instead.

• Insist on being on the payroll of an employer so that you can benefit from a workers' compensation program if you are injured on the job and employment insurance.
• Be part of the solution: pay your share and demand your receipt to protect yourself.

Businesses

Planning to expand your business or sell it one day? If you don’t report all your business income, it could be hard to prove its true value to qualify for a loan or attract investors. The same is true if you hope to sell it: you won’t have paperwork to prove true business income to a would-be purchaser. Plus, if you’re caught hiding income, a conviction for tax evasion could also ruin your reputation.

It’s not worth the risk. Report all of your sales or income and all work your business did for cash. File your tax return and register your business for GST/HST when you’re supposed to. If you’re not sure about your tax obligations, you may be able to get help from CRA’s Liaison Officer service.

Pay your employees on the payroll, not under the table. That way they will receive the benefits and protection they’re eligible for, like employment insurance and Canada Pension Plan payments. Being a responsible employer also means securing workers’ compensation coverage to protect your greatest asset—your employees.

If you participated in the underground economy in the past, you might be able to avoid prosecution and penalties if you tell us about it through the Voluntary Disclosures Program.