Mr. Speaker, I commend the member for Mississauga South for bringing an important issue before the House which demands the attention of members on both sides. The seriousness of the underground economy cannot be understated.
I am sure other members have talked to constituents about how difficult it can be to compete with those who deal in the underground economy and who insist on being paid cash. The greater the activity in the underground economy, the less revenue there is for government.
Underground economy activities create unfair competition for honest businesses. Jobs are lost and honest taxpayers are forced to pay more than their fair share. The government is committed to ensuring fairness in the tax system and has a strategy in place for ensuring compliance with the law. In November 1993 the Minister of National Revenue announced a series of measures to address non-compliance underground economic activity and tax evasion. The department has strengthened its ties with the private sector and the provinces.
During the past year Revenue Canada has consulted with more than 240 groups, which has helped the department to define its strategies, identify areas of non-compliance and explore measures for improving compliance.
Co-operation arrangements are in place with all the provinces. This has led to joint audits with the provinces, the sharing of audit strategies, training material and expertise. The department has strengthened its ability to identify non-filers and non-registrants and has increased and targeted its audits to focus on areas of high non-compliance.
The construction and home renovation sectors are being paid special attention. Revenue Canada officials in their consultations with industry and trade representatives have been told how revenues and jobs are being lost. Consumers lose out. They forfeit any guarantees of a quality product backed by a reputable firm. Workers seeking steady, secure employment are also cheated.
The government has taken steps to respond to the needs of an industry battling under the table entrepreneurs. The reason is straightforward. No business that plays by the rules should have to face unfair competition from those that do not. The honest taxpayer should not be disadvantaged by those who are cheating.
Revenue Canada has put special audit teams in place to look into transactions. The department examines the classified ads and visits construction sites in search of information that will help identify non-filers and non-registrants. With information from the financial records of lumber yards and building supply companies Revenue Canada can verify that the people who purchase construction materials are paying the tax they should on the work they perform.
There is also follow-up on leads from private citizens which often include individuals who are unhappy with the work they paid for and who could not get their cash contractor to respond to their complaint.
Revenue Canada has been working with the Ontario Association of Lumber and Building Supply Dealers. The association has agreed to display in its member stores a flyer which emphasizes the pitfalls for consumers when dealing under the table.
The department is involved in ongoing consultations with the Canadian Home Builders Association. Specifically Revenue Canada and the CHBA have established a working group to co-ordinate efforts to address the underground economy in the home renovation business. The working group considers how the CHBA and its local associations can assist Revenue Canada to identify those businesses involved in under the table activity. The CHBA and Revenue Canada can work together to ensure Canadians are aware of the risks associated with dealing in the underground economy. Consultations between the department and CHBA are taking place at the local and national levels.
The February budget measure for a reporting system for payments to subcontractors in the construction industry is a direct result of consultations with representatives of the construction industry. The measure and others in the budget reinforce the government's commitment to a fair tax system and a level playing field for businesses.
Revenue Canada is now discussing with representatives of the industry and trade associations as well as professional accounting and legal associations how the reporting system should operate and what other measures might be taken. The government wants to improve compliance in a way that does not increase the burden and cost of compliance for business.
The motion of the member for Mississauga South contains a proposal for a tax credit for home improvements and renovations as a way to create a paper trail. I support the intent of this proposal. It is something the government might wish to look at but it must be recognized that there would be a cost associated with its implementation.
Revenue Canada already reviews records of GST rebates paid out for substantial renovations along with provincial sales tax credits to ensure that proper deductions and claims have been made by taxpayers. This paper trail is very helpful.
I thank the member for putting forward the motion allowing us to debate an issue of key concern to Canadians.