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Underground truths

We must deal with the underground cash economy, but it's not all our responsibility


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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.


Robert Koci

Robert Koci

Rob Koci is the publisher of Canadian Contractor magazine. rkoci@canadiancontractor.ca Tel. 647-407-0754
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1 Comment » for Underground truths
  1. Robert Koci for Darren Onyshko says:

    The following is an edited version of a letter from a reader sent to my email:

    We are taxed to death and now we will pay an unfunded liability that the WSIB created with its mismanagement of funds over the years: Lavish trips, car rentals, its employee healthcare and pension fund and senior management salaries of $100,000.00 or more. Meanwhile, small business owners have no pension funds because they don’t work for the government.

    The general public doesn’t understand how hard it is to make ends meet in small business. They don’t understand that we don’t have pensions nor extended health care unless we include it in our price. But what should we add for it? Six per cent or maybe 12 per cent? Then hope for the best? Most don’t want to pay our prices because they know they can pay cash. Shame on them.

    What next? Do we revolt, or take a government job?

    There are better ways of fixing the unfunded liability without having to put the burden on us, starting with an improved permit process and tax rebates on home renovations. Let’s cut the crap and red tape and start streamlining the approvals process. It will be better for everyone.

    Yours truly,

    Pissed off,
    aka: Darren Onyshko
    General Manager
    D.O. Construction Inc.
    Burlington, Ont.