Skimming through the internet recently, I came across this quote from comedian Fred Allen An income tax form is like a laundry list – either way you lose your shirt. Allen, who died in 1956 expressed a sentiment that is long standing. Most of us can feel the pain of writing a cheque to the government or seeing our pay cheque considerably reduced. Undoubtedly it got many laughs, but is there any more to it than humour
Probably several times a year each of us will be offered an opportunity to pay less for some service or product. Statistics Canada estimates the underground economy in Canada to be $35 million. Does it make sense to concern ourselves if we can save a few dollars by paying someone less Let’s look at a few examples.
Several years ago a young fellow took his car in for some body work. The amount he had saved was about $240 (PST and GST) as the quote was similar to another of about $2,000. Within six months the poor work became apparent with rust coming through the paint. No cheque and no invoice meant no means to sue for poor service. Another situation involved a handyman doing yard work while collecting social assistance. Not only was he not contributing to paying his share but he was benefitting unfairly from everyone else who were contributing to a civil society.
Often, it seems, we can have little effect. As well, we know there are wealthy people taking advantage of sometimes complicated schemes to avoid or even evade paying a fair share of taxes. We know some citizens have hidden money off shore and adequate measures are not being taken to find and prosecute. We see banks too big to go bankrupt almost destroying the economies of countries but paying bonuses to the very people who caused the problems and without any sense of remorse or even embarrassment. We know there are currently proposed amendments to the income tax act that will benefit very few people and it will be those in Canada who are the most well off and privileged.
Does any of this justify either joining the underground economy or supporting it Can we rationalize our cheating on income tax I will argue “no”, for not only legal and ethical reasons but also for self-interest. The self-interest comes from several directions. Preparing for retirement will be more difficult as you cannot contribute to pension funds with undeclared income or education plans for your children. Even having a bank account may be a bad idea if you don’t wish to come to the intention of the CRA. Or if you need to get a bank loan, just try applying if you have no declared income.
But it doesn’t stop there! If we support the underground economy, we actually increase our liability as tax payers. We have to pay more carry the costs of government plus we have to pay for the deadbeats who misuse the system during their working years and who also need assistance in their retirement because they don’t have the means to prepare for their own security in old age.
What should we do We should pressure our government to make the system fairer and to chase down and punish the cheaters, not only the small cheater but also the large cheaters hiding their assets and income off shore. We should also demand a fairer tax system.
The humour is fine, but I prefer the quote from Oliver Wendell Holmes Jr. Taxes are the price we pay for civilization.
On that note, I wish all of you the best for the holidays and the New Year and that you be able to earn enough to pay lots of taxes.
Terry Robert B.A., C.M.A., C.G.A.
Please note that this column deals with details and circumstances in a general way and comments are meant solely as a guide. For your protection, a professional accountant is recommended and should be consulted before making any decisions regarding anything discussed in this column.