Minister's Underground Economy Advisory Committee meeting - May 28, 2018 - Record of Discussion

1. Introductory comments

The Minister of National Revenue welcomed participants and invited guests to the meeting. She reiterated that the underground economy (UE) robs all Canadians of benefits and services funded through Canada’s tax system. The Minister thanked the Canadian Federation of Independent Business (CFIB) for hosting webinars on the Liaison Officer service, and also thanked members for their continuing support and contributions to the agenda.

2. The Impact of regulations on small business

The CFIB presented their research on the experiences of small business owners in complying with government regulations, including tax obligations. From the CFIB’s perspective, an important way to combat the UE is to help ease the regulatory burden for businesses who wish to comply.
Advisory Committee members offered the following suggestions and/or comments:

  • The recent reduction in the frequency of remittances for source deductions and previously when it was done for GST/HST, is a positive example of how tax compliance can be made easier for small businesses.
  • Conduct a more timely review of source deduction and GST/HST thresholds- members were encouraged to provide insight on what thresholds seem reasonable and how often they should be reviewed.
  • Consider the multitude of other regulations (provincial, municipal, federal) when creating new and/or making changes to regulations (in relation to the cost and administrative burden they cause for business).

3. Operating in multiple jurisdictions

The Canadian Chamber of Commerce presented on the challenges faced by small businesses that operate across provincial borders, and other difficulties arising from the quantity and complexity of government regulations. Advisory Committee members noted that the key to helping businesses operating in multiple jurisdictions is harmonization between regulating bodies, recognizing the impact of layered and sometimes contradictory regulations.

4. Exposing concerns regarding tips

Restaurants Canada and the CRA presented their viewpoints on how to proceed in the area of income received as tips and gratuities. Restaurants Canada expressed that some restaurant owners need clarification and training on how to treat tips and gratuities, and the CRA expressed its willingness to collaborate with Restaurants Canada on finding solutions.

A number of suggestions were made following the presentation:

  • Liaison Officers could be deployed in reaching out to restaurant owners.
  • Need to show Canadians that the CRA is ensuring fairness for all – there is no tax-free income for anyone.
  • A cultural shift is needed to effect change.

5. CRA’s UE ad campaign and public opinion research

The CRA presented on its recent ad campaign aimed at educating Canadians on the nature and extent of the UE, and the negative effects the UE has on communities, businesses, and social programs. The CRA also tested messaging on the UE and attitudes towards cryptocurrencies as part of its Annual Corporate Research, and shared key results with members.

Members provided the following feedback:

  • Need to take a long-term view to expecting change.
  • Develop relatable/more tangible messaging to help Canadians better understand the implications of the size of the UE (e.g., how many hospitals could be built with the money lost to the UE).

6. Update on UE Strategy

The CRA presented its 2018-2021 Underground Economy Strategy.

7. Closing remarks

The Minister of National Revenue thanked members for their engagement and active discussions during the meeting, stressing the importance of collaboration and of long-term efforts to affect cultural change. She reiterated that the UE is harmful for small businesses, and that there is much work to be done to encourage awareness of the UE and help entrepreneurs and business owners comply with their tax obligations.

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