Tax Tip: The Underground Economy

CRA recently quoted and discussed an April 29, 2015, Statistics Canada release with regards to new underground economy that included estimates for Canada for the 1992 through 2012 period. Some figures included:

  • from 2007 to 2012 underground economy activity increased 14%, compared to a 17% increase in GDP; and,
  • four sectors accounted for 66% of the total estimated underground activities – residential construction (28%); finance, insurance, real estate, rental, leasing and holding companies (14%); retail trade (12%); and accommodation and food services (12%).

CRA noted that they will analyze the results of this study to develop targeted strategies. Budget 2015 proposed to provide an additional $118 million over 5 years to enhance CRA’s underground economy audit efforts.

CRA audit and review in the industries listed above will most likely increase in the upcoming months and years.

Action Item: If operating in these industries, be prepared for a higher chance of audit or review.