Since 1999, the federal government has required contractors to report all the payments they make to sub-contractors, in an effort to flush out underground operators.
An internal report for the Canada Revenue Agency says that in the last four years, Ottawa has identified about $650 million in taxes owed as a direct result of the program...
(T)he report...found numerous gaps in the program, which floods the agency with about 83,000 information slips from contractors each year.
The agency:
-Rarely imposes penalties, up to $2,500, for a contractor's failure to notify the government of payments to subcontractors.
-Lacks the resources to verify the information in 32,000 information slips each year.
-Allows too many contractors to escape scrutiny because of a program rule that excludes companies for which construction is less than 50 per cent of their business, including big retailers such as Home Depot and Sears that offer home renovations.
The last of these dodges should be the easiest and most important to clear up. Even if there is to be a level at which the CRA avoids scrutinizing companies, it would make far more sense to set that out based on total construction income; the percentage standard obviously favours large businesses with other revenue sources, while comparatively punishing smaller ones.
The other two reflect some failure to make sure that the intent of the new program is put into effect. Good intent doesn't get very far without enough resources to back it up. Sadly, this program like so many others seems to have plenty of the former and little of the latter - meaning that smaller construction businesses who have made the effort to comply have been comparatively worse off than those who have ignored their obligations so far. Needless to say, that situation needs to change.
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