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   "Alan Baggett"  wrote in message   
   news:f7960f2a-d0cb-41fc-97c4-3ae45951de97@d45g2000hsc.googlegroups.com...   
   Many Feel Tax Evasion 'Justifiable' : CRA SOTW   
      
      
   Restaurant, construction sector workers sympathize with smaller   
   evaders: study   
   Don Butler, The Ottawa Citizen   
   Published: Monday, September 01, 2008   
      
   A limited amount of tax evasion by otherwise honest business owners is   
   justifiable, say people who run companies in the construction and   
   restaurant sectors.   
      
   Their views are reported in a $133,000 study done for the Canada   
   Revenue Agency that examined why workers in those two sectors are   
   among the most frequent participants in Canada's multibillion-dollar   
   underground economy.   
      
   The study, done by Sage Research, is based on 20 focus groups held   
   last February with 163 owners and managers of small- and medium-sized   
   construction and restaurant, bar or catering businesses. It offers a   
   rare window into a thriving, but mostly uncharted, segment of the   
   economy.   
      
   The study found participants don't have a black-and-white view of   
   those who conceal income to avoid paying taxes.   
      
   Someone who evades a large amount of tax "is generally seen as   
   committing a crime and deserving to be punished," the study says.   
      
   But for smaller evaders, "some degree of evading tax is quite often   
   seen as justifiable," it reports. "Depending on the circumstances,   
   these 'small' tax evaders were not seen as being 'bad' people."   
      
   Concealing income may be acceptable, participants said, if done to   
   keep a basically legitimate, but struggling, business afloat.   
      
   Many also justify cheating because they think small business pays too   
   much tax, government wastes the money it collects anyway and small   
   business people deserve compensation for working long hours.   
      
   "I spend 150 hours every two weeks at work. I'm tired and sometimes I   
   don't get a day off," said one participant quoted in the study. "I   
   deserve some extra money."   
      
   Many also sympathized with wait staff who don't declare tip income,   
   noting they're not well paid and need all their tips to earn a   
   reasonable living.   
      
   Some participants described tax evasion as a "victimless crime," while   
   others called practices such as paying employees "off the books" or   
   doing cash jobs for customers as a "win-win" for both parties.   
      
   Estimates of the size of the underground economy vary widely, but a   
   2005 study by Lindsay Tedds of the University of Victoria put it at   
   15.3 per cent of gross domestic product. That equates to about $240   
   billion.   
      
   "That is our absolute best guess estimate," Ms. Tedds said in an   
   interview. "And it really is a guess."   
      
   The number includes money earned through illegal activities, which the   
   revenue agency doesn't count in its definition of the underground   
   economy.   
      
   Ms. Tedds said the problem has been ignored for far too long. "I just   
   don't think it has captured the policy focus at higher levels that it   
   should."   
      
   The issue is important because those in the underground economy aren't   
   paying their fair share of the tax burden, she said. As a result,   
   "we're paying higher taxes than we should be otherwise."   
      
   According to the study, paying short-term workers off the books --   
   with none of the requisite paperwork or deductions -- is quite common.   
   Completing the paperwork for workers who last only a few weeks is time-   
   consuming and costly, participants said.   
      
   Some who apply for jobs in the restaurant sector prefer to be paid off   
   the books, many said.   
      
   They include people receiving government benefits, newcomers who don't   
   have legal working status, people with student loans, divorced or   
   separated people who face alimony or child support payments, and those   
   with regular jobs looking to earn extra money.   
      
   As well, the study says, labour shortages can leave employers feeling   
   they have no choice but to hire a worker off the books.   
      
   Participants said some bars and restaurants use two cash registers --   
   one in the public area, where all sales are recorded, and one in the   
   back, where only some sales are recorded. Only the income from the   
   latter is reported.   
      
   In construction, the underground economy thrives in the home   
   renovation market. According to the focus groups, that's largely   
   driven by a preference for cash payment by homeowners, who assume   
   they'll save money.   
      
   "They're just trying to get the best deal," said Ms. Tedds. "They   
   don't view it as being an illegal activity."   
      
   The study says some in the home renovation sector work almost entirely   
   underground, especially shift workers such as firefighters, police and   
   teachers, who do construction work during their time off.   
      
   The same is true of caterers who work from home. Some are professional   
   chefs who cater private dinner parties on the side. "They call it   
   personal chef service," said one participant. "It's huge."   
      
   One thing that limits participation in the underground economy is "the   
   desire to be an honest, law-abiding person," the study says.   
      
   While the risk of getting caught is also a consideration, few focus   
   group participants knew of businesses in their sector being prosecuted   
   for tax-related underground economy activity in recent years.   
      
   As a result, many assume the risk of getting caught is relatively low.   
      
   Most participants felt that getting caught for tax evasion would have   
   no impact on a restaurant, bar, private caterer or home renovation   
   business.   
      
   "Private individuals are perceived to care about quality and price,   
   and to not care much about whether a business owner has been caught   
   for tax evasion -- unless the amount of tax evaded is very large," the   
   study says.   
      
   However, most thought commercial customers would react badly if a   
   contractor was caught evading taxes, partly because they're more   
   likely to have the attitude, "if you are cheating the government, you   
   might be cheating me."   
      
   Catherine Jolicoeur, spokeswoman for the Canada Revenue Agency, said   
   the study will help the agency inform and educate businesses about the   
   "risks and consequences" of participating in the underground economy   
   and refine its strategies for addressing the problem.   
      
   © The Ottawa Citizen 2008   
      
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