Every year, Canadians contribute to their communities by paying taxes.
Public tax dollars pay for critical investments in our schools and hospitals and for a host of other benefits for both the elderly and our children.
The money we pay builds the neighbourhoods we live in and takes care of the people around us. However, every year many construction contractors and builders selfishly and criminally refuse to pay their fair share. Does that seem right to you?
According to the Ontario Construction Secretariat, our governments lose up to $3.1 billion in revenue due to construction contractors not paying 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 Tax, $119 million in employment insurance, $340 million in WSIB payments and $832 million in HST revenues.
For governments at every level, finding the required financial resources is key to our ongoing ability to deliver much-needed health care, education and infrastructure investments. Stamping out tax fraud in construction is a crucial tool in enabling us to collect such financial resources. Just think of the services and investments which could be paid for with the “extra” $3.1 billion that would be available each and 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 lower the general contractor’s income and payroll tax responsibilities and allows them to avoid tax and CPP/EI/WSIB contributions. This goes on with every trade across the entire industry, including floor covering installers, tile setters, painters and decorators and carpenters. Unfortunately, the underground economy is growing.
It is sometimes assumed that practices like paying cash or misclassifying workers are “victimless crimes” but workers vanishing into the “grey economy” has led, in the worst cases, to human trafficking and serious disregard for the basic health and safety of workers, resulting in deaths in some cases.
We have seen examples of all of these phenomena in recent years and, in fact, one of the biggest human trafficking cases in Canadian history, the Domotor Case, was a result of these practices right here in Ontario.
We at the Carpenters’ Union are determined to do something about this.
Construction companies engaging in tax fraud, such as by not classifying their workers properly to avoid their tax obligations, result in two severe consequences, economic inequity and worker vulnerability.
Economic inequity results from the unfair advantage gained by employers who do not play by the rules by improperly avoiding taxes. This hurts industry competitors but it also hurts the general public as well.
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 the construction companies.
This means that as spending increases with our economy bouncing back from the COVID-19 pandemic, honest and hardworking taxpayers are hurt the most.
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 jeopardizes basic safety standards on jobsites.
Workers can often be cheated out of their pay and forced to work long hours, under horrendous conditions, at jobsites that simply are not safe.
This can include, not being paid overtime or other required premiums or not even being paid at all in the worst cases. These are just a few examples of what is going on in Ontario right now.
This underground economy is large in size and broad in scope.
However, whether someone is being paid “under the table” to paint the inside of a house or human trafficking is taking place, both are crimes and should not be tolerated in Ontario’s construction industry. Quite simply, all forms of tax fraud are theft and when contractors engage in tax fraud they are stealing from the rest of us.
While tax fraud is not an issue that can be resolved overnight, there are tangible steps that can be taken to begin eliminating these toxic practices on our jobsites.
The implementation and enforcement of a “fair wage” policy by both the Ontario and the federal government needs to happen now and these policies need to be applied universally to all builders.
This is a solution that the City of Toronto adopted over 100 years ago to ensure their workers were not discriminated against by contractors failing to pay fair hourly wages, vacation and holiday pay, 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 fair wage office.
If the federal and provincial governments adopted these practices it would greatly reduce the employment vulnerability that many workers face and help eliminate unfair competition between contractors. We need to take a stand against tax fraud and show our support for those who build our province.
The Carpenters’ District Council of Ontario is leading the way against tax fraud in the construction industry and will be promoting Tax Fraud Days of Action from April 11 to 16, as seen on our website www.notaxfraud.com.
With a long economic recovery and large 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 makes a strong comeback.
For more information also see www.stoptaxfraud.net.
Mike Yorke is president of the Carpenters’ District Council of Ontario. Send Industry Perspectives comments and column ideas to firstname.lastname@example.org.