Minister’s Underground Economy Advisory Committee meeting - April 11, 2019 - Record of Discussion

1. Introductory comments

The Minister of National Revenue welcomed participants and guests to the meeting. She highlighted her interest in reducing participation in the Underground Economy (UE), noting especially that the UE disadvantages Canadian small and medium businesses

The Minister also issued a sixty-day challenge to members of the Committee to propose joint initiatives aimed at reducing the UE in their sectors.

2. Review of updated Terms of Reference

The Canada Revenue Agency (CRA) highlighted changes to the Terms of Reference of the Committee, which reflect the CRA’s openness to working with Committee members on joint compliance or communications projects. Members were given the opportunity to provide feedback on the changes up to two weeks following the meeting.

3. Canadian-Certified Aging in Place Specialist

The Canadian Home Builders’ Association (CHBA) described their new training and accreditation program, the Canadian-Certified Aging in Place Specialist, which is meant to formalize and recognize the set of skills renovators need to perform aging in place modifications. The CHBA pointed out that, with Canada’s aging population, the demand for these types of renovations will grow rapidly. With this in mind, the new program will help an increasing number of consumers identify competent professionals, while also encouraging tax compliance in this growing area of home renovation activity.

A discussion followed on other possibilities for encouraging renovators to provide receipts to consumers.

4. Tips and Gratuities: a Collaborative Approach

The CRA presented its collaborative efforts with Restaurants Canada aimed at educating employees and employers on their tip reporting obligations. The resulting education campaign included: a new easy-to-understand webpage complete with in-house video, articles in regional print media to expose a greater audience across the country to the issue (who may not have been reached by social media), a social media campaign, and a fact sheet which was distributed at numerous restaurants across Canada and made available on the new webpage in downloadable format.

Restaurants Canada noted that the materials were received positively among their members, and expressed their desire to continue collaborating with the CRA to distribute accurate information about tips and gratuities. The Tourism Industry Association of Canada indicated that they shared the materials with members, and they were also well received.

Participants discussed the possibility of examining how the taxation of tips and gratuities is regulated by peer tax administrations at a future meeting.

The Committee was also encouraged to explore the possibility of similar communications partnerships with other industries.

5. Academia and the UE

University of Ottawa PhD candidate Aline Coutinho, along with professor Nathan Young, presented an overview of academic literature on the UE, and highlighted specific concepts that have been developed by academic study such as the “Psychological Tax Contract” and the “Slippery Slope Paradigm”. Trust in tax authorities was discussed as a particularly important variable for predicting tax compliance.

It was also noted that there appears to be a lack of academic studies examining the UE in the Canadian context, including studies on the UE in each province and territory. In addition, an emerging trend of sourcing international “gig work” online was discussed as an area of concern for tax authorities.

A discussion followed on options for instilling trust in the CRA among taxpayers, such as early education that focuses on how taxes are spent, and how they benefit communities across Canada. Education was also noted as an important tool in ensuring those participating in the “gig” economy are aware of their tax obligations.

The CRA noted that a future Committee meeting could feature presentations on the gig economy and digitization’s effect on tax compliance.

6. Filing and Balance Confirmation Initiative

The CRA updated the Committee on its Filing and Balance Confirmation (FBC) letter, which can now be generated automatically through the CRA’s My Business Account service, and which is used by the Province of Ontario to “green-light” provincial contractors. The CRA expressed its hope that other provinces and government departments, in addition to private corporations and associations, will use the FBC letter to confirm filing and payment details, which in turn would encourage (nudge) filing and payment compliance.

Participants discussed the logistical challenges of validating the letter’s content, but expressed optimism that the letter could be of use in the construction industry. Other suggestions for its use included financial institutions and business-to-business contracting.

7. Closing Remarks

The CRA thanked the members for participating, reiterated that the Committee’s purpose is to generate ideas for future work, and expressed its desire for collaborations with Committee members to find innovative solutions in the fight against the UE.

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