The CRA is coming after the underground economy

It is not a surprise that there are a lot of businesses who are not reporting their fair share of income taxes. These businesses operate in what is referred to as the underground economy. The underground economy is a business activity that is unreported or under reported for tax purposes. Common participants are in cash intensive industries such as home renovations, restaurants and retail. I am sure some of you have heard of the phrase "no tax if you pay with cash". In 2011 Statistics Canada estimated the size of the underground economy is $41 Billion or 2.3% of Canada's GDP.

The Canada Revenue Agency has created a strategy to go after those participants in the underground economy. The strategy details can be found here: http://www.cra-arc.gc.ca/gncy/lrt/strtgy-eng.html

Key highlights include:

* CRA is working with other departments and organizations to reduce the social acceptability of participating in the underground economy.

* CRA put into place new penalties and criminal offences for businesses using electronic suppression of sales software which hides or deletes sales records.

* The creation of underground economy specialized audit teams

* Creating point of sales audit teams to combat the use of electronic suppression software

* Information sharing arrangments

* Using automated systems to match information slips and business numbers to help identify non filers

As you can see the message is clear that CRA has a serious interest to come after those in the underground economy. If you have under reported or under reported income CRA gives you an opportunity to come clean using their voluntary disclosure program. CRA could waive your penalties through this program however in many cases you will still to be responsible for the taxes and interest owed.

For more details on the voluntary disclosure program please get in touch with me or leave me a message.