We must deal with the underground cash economy, but it's not all our responsibility
December 26, 2011 by Robert Koci
What’s wrong with Greece? For one thing, its taxpayers owe about a third more in taxes than they pay. The underground is so culturally acceptable there that what they don’t pay in taxes represents about the difference between going into default, as the country is now, and having a balanced budget.
I have always contended that the cash economy in our industry is at least a third of its overall value. You and I know how easy it is to get cash work done on your house and how easy it is to make undeclared income.
There are actually good reasons for the cash economy in housing to exist. It allows the poor to get otherwise unaffordable work done on their homes. It allows the poor to enjoy otherwise unattainable employment. Having a cash economy waiting in the wings to supply goods and services to disenfranchised voters is a constant message to government to keep taxes at reasonable levels. It ensure important repairs get done on building that need it despite public service red tape.
But cash economies do bad things. They put undue burdens on those who play by the rules and pay their taxes. It ghettoizes workers who do cash work so they never enjoy the experience of being full, contributing members of society. If a cash economy takes a cultural foothold in a nation, as it has in Greece, it erodes the rule of law, a key pillar of healthy democracies.
I did my share of cash work when I was a renovator. I hired subs for cash. I’ve had work done on my house for cash. I can only admit that because I know how common it is. (My favourite story as a writer is of an interview I conducted with a prominent figure in the tax collection sector. The story was on the underground economy. At the end of the interview in which he decried cash work, I no sooner turned off the tape recorder when he excitedly told me about the beautiful deck he had done on his house by a firefighter for cash!!)
The cash renovation economy will never go completely away and I credit it with a limited, useful roll. But when I see Greece today, and realize the kind of collective economic pain its citizens will have to endure to get back to prosperity and fiscal health, I have to admit that the less of it we have the better, for contractors individually and for Canada.
Keeping the cash economy under control has to be the commitment of this industry, but it is not exclusively its responsibility. The Federal and Provincial governments must keep small business taxes low. Enforcement of tax law, safety regulation and building codes must be free of corruption. Government must encourage and support small business with very low barriers to both entry and growth. Red tape barriers to building must be eliminated. Governments must realize that, for the poor, cash work is sometimes critical to keeping a roof over their heads.
We must hold our government’s feet to the fire. We must let them know that we are willing to do our part to the extent that they are will to do theirs. If they can’t appreciate the importance of their roll and think it is all up to us, we only have Greece to look forward to.