IN MY OPINION: Stepping to the taxation tango
According to The Canada Revenue Agency (CRA), the value of Canada’s underground economy is in excess of $45.6 billion; about 2.4 per cent of our gross domestic product (GDP).
Just three industries account for more than half the total value of the underground economy, according to Statistics Canada. They are:
• Residential construction (27.8 per cent).
• Retail trade (12.5 per cent).
• Accommodation and food services (11.7 per cent).
Many are happy to pay cash to someone (say, a contractor), if they can save the 15 per cent harmonized sales tax (HST). No contract, no receipt. On a transaction of say, $500, that amounts to $75. So, why would a normally honest consumer participate in this illegal act? Their logic is they already paid income tax on the $500. So, why should they pay the government more tax when they spend it?
What most consumers who participate in this action don’t realize is that, now the contractor who appears to be doing them a big favour by helping them save (steal) $75, doesn’t claim the $500 on their income tax, saving him or herself $125 (assuming they would be in at least a 25 per cent tax bracket). The government is now out $200 on this transaction. I hear you, the government wants 40 per cent of the transaction, not to mention that you already paid 25 per cent tax when you earned the $500. That’s a total of about 55 per cent tax altogether. That’s not including the gas taxes and the new carbon taxes. I know, that was a big part of the incentive to cheat in the first place. That set aside: If, you are going to participate in these things, at least go after some of the $125 tax the contractor is saving for yourself. Say, at least $25. What’s he going to say? (my way of joking). But, really, who is cheating who here?
A retired CRA friend of mine (OK, acquaintance), once boasted to me over a few too many beers that he had a $3,500 deck built and paid cash to avoid the sales tax. He felt it was only fair as the government didn’t pay him enough and never really appreciated him. After all, he worked almost 32 of the 40 hours a week they were paying him for. When I explained to him how he let the contractor walk away with the 25 per cent ($875) when he could of at least got 100 or two of it, he sobered up immediately.
No contract, no receipt really means: no written statement of work to be performed and no written warranty regarding material or workmanship. What if you’re not happy with the work in the end? Yes, you could take them to court and admit that while you both were trying to cheat the government, you agreed not to have a paper trail and used cash to get around it. That’s why you don’t have anything in writing. Surly, the judge would understand and appreciate that.
Using the $45 billion of underground funds, the 40 per cent taxes — not paid — would be about $18 billion. There are several things the government could do with that extra money. Besides taking the whole family on a trip to a private island to relax in the sun with a big financial supporter, they could put it into our healthcare system, twin our highways, lower the overall tax rates — or all three. I know, the suggestion of lowering the tax rate was one I just tried to slip in there. But, you get the idea.
So, what is the answer? Blockchain technology is it. In the not-too-distant future, the government will be forced to switch to its own digital currency. This technology is hack-free and encrypted and has been confirmed by at least four independent systems. Everything is accounted for. No printing of notes, no minting of coins, no counterfeiting, no thefts, no cheating. Of course, there will always be fraud and extorsion. But at least then there will be a trail to follow. Taxes can be deducted and collected at the transaction time and come down to a range of around 10 per cent (the tithe rate). All CRA staff can be let go and left to fend for themselves like the rest of us. Accountants, bookkeepers, tax lawyers, tax judges, tax collectors and tax courts can be eliminated. Then, everyone will not only pay their fair share of taxes, they will be very happy to do so.
I can’t wait!
You have my opinion. Do you have one?