Fast facts about Canada's underground economy

• All Canadians are affected by the underground economy (UE). Taking cash to avoid paying tax is cheating. It's cheating Canadians who do pay their taxes, businesses that have to compete with lower prices, and customers and workers who may not be covered if disaster strikes.

• Certain sectors are more vulnerable to underground activity such as construction or hospitality.

• The Canada Revenue Agency (CRA) is taking action against the UE. It has over 1,000 employees dedicated specifically to catching underground operators.

• The CRA works closely with the provinces, territories, and other federal government departments and agencies to identify and catch cheaters.

• The CRA uses a mix of outreach, education, communication, and compliance actions to combat the UE. For example, the CRA has a Record Keeping Initiative where an auditor will visit a business to ensure that proper books and records are being maintained and kept.

• CRA officers also conduct community visits to businesses as part of its outreach program. The purpose of these visits is to provide businesses with the latest information and answer their questions.

• And of course, the CRA audits businesses and people!

• It's a myth that taking cash and keeping no records makes you immune to taxes. If your lifestyle is not in line with the income you report, and you cannot explain the difference, your taxes will be assessed based on an estimate of your income. In addition to the tax, you will have to pay interest and any penalties. You could also be prosecuted and even face jail time.

• Last year, the CRA completed some 17,000 audits related to the underground economy, resulting in about $575 million in unreported income and $150 million in taxes assessed.

• The CRA has a special program called the Voluntary Disclosures Program that allows people to come forward and correct their tax situation, without penalty or prosecution. If you make a full disclosure before the CRA starts any action or investigation against you, you may only have to pay the taxes owing plus interest.

• If you want to check out the CRA's Voluntary Disclosures Program, go to www.cra.gc.ca/voluntarydisclosures, or call the CRA's toll-free number at 1-800-959-8281. You can also refer to provincial Web sites for information on provincial voluntary disclosures programs.

Source: www.newscanada.com
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