Majority of Canadians would pay under the table cash to avoid sales tax: survey

OTTAWA - The vast majority of Canadians pay taxes each year, but a new survey suggests they are prepared to cheat at the margins if they think they can get away with it.

The survey for H&R Block Canada found 55 per cent of respondents saying that when dealing with a contractor, they would opt to pay cash to avoid sales taxes.

And they are not feeling overly guilty about it either. Only 30 per cent said they thought the avoidance wrong. Among young Canadians aged 18-34, only 17 per cent said it was wrong to avoid paying the sales tax.

The findings don't seem to be related specifically to sales taxes, which range from a low of five per cent in Alberta to a high of 15.5 per cent in Prince Edward Island.

A majority of Canadians believe they shouldn't have to declare bartered transactions, nor do they feel workers in the service industry like waiters and bartenders should need to declare tips as income.

"I think it boils down to people feeling they pay enough tax, that they shouldn't have to pay anymore," said Cleo Hamel, a senior tax analyst with H&R Block.

Another factor may have to do with the recent introduction of the HST combining federal and provincial sales taxes in Ontario and Quebec, which increased the number of services subject to higher combined tax rates.

But she said Canadians should be wary of cheating the tax man. If caught, they are liable not just for the tax, but also penalties that can double the amount owing. The government also has the option of prosecuting tax cheats.

"If you don't report and the CRA (Canada Revenue Agency) tracks you down, you only end up hurting yourself," she said. "Not only do you have to pay the tax plus the penalty, you now are a compliance issue with the CRA, so you are putting yourself in a position where you are under scrutiny."

Last year, Statistics Canada estimated the underground economy amounted to about $36 billion in 2008, with personal spending on unreported goods and services comprising about $24 billion of the total.

The agency said underground activities were most prevalent in the construction industry, retail trade and accommodation and food services.

The good news is that as a percentage of the economy, the agency said evidence suggests underground activities declined from 2.7 per cent of gross domestic product in 1992 to 2.2 per cent in 2008.

While tracking the underground economy is difficult, the agency report stated that "identifying and addressing sectors of the economy where the (it) has become widespread, such as construction, home renovation, and hospitality, continues to be a priority for the CRA."

The online survey of adult 1,500 Canadians was conducted by Leger Marketing over three days between July 30 and Aug. 1.