Underground Economy Initiative Information
The UE Initiative is a national compliance strategy created in 1993 to focus effort on concerns with the UE. Typically, this involves commercial activity that is unreported for tax purposes. It is of concern to the CRA, as well as all provincial, territorial and municipal jurisdictions, and all law-abiding businesses and individuals across the country.
The CRA uses a mix of outreach, education, communication, and compliance actions in combating the UE. For example, the CRA has a Record Keeping Initiative whereby an auditor will visit a business to ensure that proper books and records are being maintained and kept. In addition, CRA officers conduct community visits to businesses as part of the Agency's outreach program. The purpose of these visits is to provide businesses with the latest information and answer their questions.
The CRA is taking actions against the underground economy. Over 1000 employees are working full time on its identification, audit, and enforcement programs addressing the underground economy. The Agency also works with the provinces, territories, and other federal government departments and agencies to better identify those participating in the underground economy.
For fiscal year 2007-2008, a total of 17,273 audits related to the underground economy were completed, resulting in approximately $575 million in unreported income and $150 million in taxes assessed. Cases with gross negligence penalties totaled 2628 and referrals to Enforcement and Disclosures Directorate numbered 415. There were 81 criminal convictions resulting from UE audits files in 2007-2008. Outreach was also a focus, with CRA contacting over 10,000 taxpayers, conducting 149 community or wharf visits, and participating in 22 home shows.
The UE Initiative is only one of many tactics the CRA employs to address the UE. The following internal audit was performed to assess the implementation of the 2004 UE Initiative, to assess the management controls in place to identify sectors, projects and taxpayers, and to determine whether the audit process used was appropriate. The CRA welcomes the findings of this audit and is taking actions to address matters raised in the report. The CRA routinely conducts audits to assess the effectiveness of its systems of internal control and the performance of its services. They are an integral part of how we monitor and improve the management and delivery of our programs.
For additional information on the Underground Economy, why it is harmful to all Canadians, and what actions the CRA is taking against the Underground Economy, visit the following Website: www.cra-arc.gc.ca/gncy/lrt/ndrgrnd-eng.html.
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