Ontario cracks down on underground economy, goes after tax cheats
TheStar.com – Business – Government to create teams of specialized auditors to root out tax cheats, and will target electronic sales suppression ‘zappers.’
Feb 25 2016. By: Vanessa Lu, Business reporter
The Ontario government says it will be cracking down on the underground economy by creating teams of specialized auditors to root out tax cheats.
In the budget, released Thursday, Ontario boasted that since 2013-14 it has collected $930 million, $330 million of which was collected in the past year, thanks to enhanced measures, including working with the Canada Revenue Agency.
About $300 million was revenue owed to the province, while $630 million was due to the federal government.
Statistics Canada estimated that in 2012 the total underground activity in Canada was $42.4 billion, or 2.3 per cent.
Since 2014, in a special pilot project, the province has targeted the residential roofing sector, due to health and safety concerns and underreporting of income. Any home owner could be potentially liable if roofers were to fall or injure themselves.
Last summer, it dispatched inspectors after hours and on weekends, and issued more than 1,700 orders for compliance and initiated almost 250 prosecutions.
The provincial government is eager to maximize revenues from retail sales.
The Liberals also promised to target electronic sales suppression devices or software, known as zappers, that were made illegal in last year’s budget.
“When some businesses use sophisticated technology or software to hide sales, they take an unfair advantage over others by underreporting business income, paying less tax to government and retaining taxes paid by consumers,” said Scott Blodgett, a finance ministry spokesman in an email.
The Canada Revenue Agency said in the past five years it has successfully prosecuted 12 files related to the use of zapper software, which accounted for $835,000 in federal tax evaded.
The provincial government introduced tougher penalties, with fines of $5,000 for the first infraction for using or possessing such devices, and up to $500,000 and jail terms of up to two years for manufacturing or selling such devices.
However, to date, no one has been convicted, although the Ontario government said it never anticipated immediate results.
In 2011, Quebec mandated that all restaurants install modules to record transactions, which the government said brought in $160 million in its first year. It expects that the total for revenues recovered will be $2.1 billion by 2018-19.
James Rilett, Ontario vice-president of Restaurants Canada, argued that Quebec’s figures are skewed because many businesses were not licensed in Quebec when the government introduced the new program, so the additional revenues are not linked solely to use of “zappers.”
“I don’t think it’s a prevalent as some make it out to be,” he said. “The places that invest in point-of-sale terminals are doing it because they want to be good corporate citizens.”
Rilett worries about the hospitality industry being singled out. He notes that the likelihood of under-the-table transactions would be no different than other industries.
His group worries about unnecessary paperwork, including onerous requirements, such as producing a paper receipt for every transaction — for example, coffee or donut shops handling small purchases — as is required in Quebec.
< http://www.thestar.com/business/2016/02/25/ontario-cracks-down-on-underground-economy-goes-after-tax-cheats.html >
Tags: budget, economy, ideology
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