Every year, Canadians contribute to their communities by paying taxes.
Public tax dollars pay for critical investments in our schools and hospitals and a host of other benefits for both seniors and our children.
The money we pay builds the neighborhoods we live in and cares for the people around us. Yet each year, many construction contractors and builders selfishly and criminally refuse to pay their fair share. Does this seem correct to you?
According to the Ontario Secretary of Construction, our governments lose up to $3.1 billion in revenue because construction contractors don’t pay their fair share of taxes. They lose an estimated $1.1 billion in general taxes, $656 million in CPP contributions, $18 million in employer health taxes, $119 million in employment insurance, $340 million in WSIB payments, and $832 million in HST income.
For governments at all levels, finding the necessary financial resources is key to our continued ability to deliver much-needed investments in infrastructure, education and health care. Ending tax fraud in construction is a crucial tool that allows us to raise these financial resources. Just think of the services and investments that could be paid for by the “extra” $3.1 billion that would be available every year if everyone paid their fair share.
Tax fraud within the construction industry takes many forms.
It can be as simple as people “paying cash” for home renovations or, as is extremely common now, the misclassification of workers as “independent contractors.”
These practices reduce the general contractor’s payroll and income tax liabilities and allow them to avoid tax and CPP/EI/WSIB contributions. This is true of all trades throughout the industry, including floor-covering installers, tile setters, painters, decorators, and carpenters. Unfortunately, the underground economy is growing.
Practices such as paying cash or misclassifying workers are sometimes assumed to be “victimless crimes”, but the disappearance of workers into the “black economy” has led, at worst, to human trafficking. and gross disregard for the basic health and safety of workers, resulting in fatalities in some cases.
We have seen examples of all of these phenomena in recent years, and in fact, one of the largest human trafficking cases in Canadian history, the Domotor Case, was the result of these practices right here in Ontario.
We at the Carpenters Union are determined to do something about it.
Construction companies that commit tax fraud, such as not properly classifying their workers to avoid their tax obligations, have two serious consequences: economic inequality and worker vulnerability.
Economic inequity results from the unfair advantage gained by employers who do not comply with the rules by inappropriately evading taxes. This hurts industry competitors, but it also hurts the general public.
Now, when governments collect taxes to pay for infrastructure or social security, the average citizen has to contribute more to make up for the amounts not contributed by construction companies.
This means that as spending increases with our economy recovering from the COVID-19 pandemic, honest and hard-working taxpayers bear the brunt.
Additionally, by committing tax fraud, contractors are putting the lives of their workers at risk. Paying construction workers “off the books” or as “independent contractors” makes employers less accountable and compromises basic workplace safety standards.
Workers can often be cheated out of their wages and forced to work long hours, in terrible conditions, in workplaces that are simply not safe.
This can include not being paid overtime or other required bonuses or even not being paid at all in the worst case. These are just a few examples of what is happening in Ontario right now.
This underground economy is large in size and wide in scope.
However, whether someone is being paid “under the table” to paint the interior of a house or whether it is people, both are crimes and should not be tolerated in the Ontario construction industry. Quite simply, all forms of tax fraud are theft, and when contractors commit tax fraud, they are stealing from the rest of us.
While tax fraud is not a problem that can be solved overnight, there are tangible steps that can be taken to begin to eliminate these toxic practices in our workplaces.
Implementation and enforcement of a “fair wage” policy by both the Ontario and federal governments must occur now and these policies must apply universally to all builders.
This is a solution that the City of Toronto adopted more than 100 years ago to ensure that its workers were not discriminated against by contractors who did not pay fair hourly wages, vacations and holidays, along with certain basic benefits.
Toronto’s Fair Wage Policy ensures the ethical treatment of workers and holds employers accountable through oversight and enforcement by the City’s Office of Fair Wages.
Adopting these practices by federal and provincial governments would greatly reduce the employment vulnerability faced by many workers and help eliminate unfair competition among contractors. We need to take a stand against tax fraud and show our support for those who build our province.
The Ontario District Council of Carpenters is leading the way against tax fraud in the construction industry and will promote Tax Fraud Days of Action from April 11-16, as seen on our website www.notaxfraud. com.
With a long economic recovery and high levels of uncertainty ahead, it is important that contractors pay their fair share, to ensure critical infrastructure can continue to be built and our economy recovers strongly.
For more information, see also www.stoptaxfraud.net.
Mike Yorke is president of the Ontario District Council of Carpenters. Send Industry Insights comments and column ideas to email@example.com.