Mr. Speaker, it is with great pleasure that I address the House today on Motion No. 382 introduced by the member for Mississauga South. My hon. colleague has done a great deal of study on the underground economy and I acknowledge all the work he has put into this.
I have given this matter considerable thought because many of my constituents have been directly affected by the underground economy. They are people who operate legitimate businesses. They have told me how their businesses are being hurt by the so-called under the table entrepreneurs. They want the government to do something about the problem before it is too late. These so-called under the table entrepreneurs are not the entrepreneurs I grew up with and started businesses with.
The greater the activity in the underground economy, the less revenue there is available to governments. Underground economic activity creates unfair competition for honest businesses. Jobs are lost and honest taxpayers are forced to pay more than their fair share of taxes. For many individuals and businesses the underground economy has become a convenient way to avoid paying taxes, to not pay their fair share.
When these people take their financial transactions underground they are failing to meet their contribution in support of Canada's social and economic programs. These people do not pay for the services they use. Instead other Canadians are forced to pay more.
I ask all members, as well as all other Canadians, to consider the real cost of underground economic activity. The cost is large. I believe it is phenomenally large. It shows up in reduced essential services, taxes being higher than they should be, unfair competition, and a reduced standard of living for the honest taxpayer. If every Canadian paid their fair share everyone would pay less. We have heard this before and we have to think about it to realize how we can all gain in this situation.
How does the underground economy affect the competitiveness of legitimate businesses? Many groups have talked to us. A major group is the Canadian Home Builders' Association. It is very concerned. Home renovators who evade taxes have an unfair advantage over honest contractors. Many small legitimate businesses in my riding of Hastings-Frontenac-Lennox and Addington are being threatened by others operating underground.
Right from the start honest businesses are at a competitive disadvantage because they cannot offer a customer the same deal as offered by someone who will do the work but not collect the taxes. The end result is that the legitimate businesses face unfair competition and many jobs are lost.
My hon. colleague for Mississauga South has put forward new specific approaches in the motion to address the underground economy. He is offering a limited amnesty on interest and penalties when a taxpayer voluntarily comes forward in an effort to crack down by engaging more investigators on a contract or commission basis. People will hear that this message is for real and people will come forward.
This phase will continue as long as there is a favourable payback. We have to let the public know that when they patronize the supplier with a cash price without an invoice they are actually condoning fraud, and that by refusing to do business with those who do not give invoices they also help the business of honest taxpayers.
Turning to an input tax credit, this offer for GST to be paid on home renovations would be required in a very simple process. The taxpayer would submit the original invoice either as part of his or her tax return or by separate filing. The objective is to create a real paper trail. We all know about this area of abuse and it is time we recognized it.
A tax credit would be a good vehicle through which to educate the public on the crime and to discourage under the table action. A taxpayer would help to support honest businesses that are prepared to provide invoices.
Revenue Canada's voluntary disclosure policy allows individuals, partnerships, corporations, trusts, and non-profit, charitable or other organizations to come forward to correct any deficiencies in any reporting to the department. The policy operates on a simple premise: When a disclosure is made voluntarily before the department has started an audit or other enforcement action, no penalties or other sanctions such as a prosecution for tax evasion will be imposed.
The taxpayer will only have to pay the amount, either taxes or duties owing, plus interest. This is fair since the interest reflects the true value of the money and the fact that those who have not paid their taxes on time have had the use of these funds.
Revenue Canada under its voluntary disclosure policy generally takes a responsible approach to collections. Arrangements can be worked out so that taxes owing to government are paid in a manner which does not cause undue hardship for the taxpayer.
Persons can make a voluntary disclosure by contacting any Revenue Canada office directly or by having their accountants or lawyers do it for them. A disclosure will be considered voluntary as long as it is made before Revenue Canada has started an audit or other enforcement action.
In my experience we get what we pay for. When we go underground to provide services or when customers accept underground services, we can expect lower quality work and lower quality materials because those businesses do not have to comply and will not comply with industry regulations.
As well and most important, consumers do not get the protection and the guarantees they would otherwise have if they had an authorized purchase order and/or an invoice. When the customer goes underground as well he or she has no recourse and no protection.
A little over a year go an elderly woman in a village near my home was visited one day by three gentlemen in a pickup truck. They knocked on her door and said they knew that the winter had been severe. They wanted to check out her home in case they could do any little touch-up jobs for her and save her a lot of money. They spent half an hour wandering around her home in a village originally called Rogues Hollow, no pun intended.
They knocked on the door after they inspected the home and said: "The winter was very severe. There are a lot of problems with your back wall. Bricks are coming loose. Your chimney is ready to fall down. We have an estimate here for you; it is $6,200. If you pay us in cash, I have these professional men available who will do the work now. We can do the job for you today for $3,100". It is a true story. They did $300, $400, $500 or $600 worth work that morning and she paid them the $3,100.
She was sick the next day. She phoned me at home. What can I do? It was in cash. Do we have to get hurt time after time, especially seniors, to see that these are not business people but crooks?
Hon. members opposite spoke about the most hated tax in Canadian history and how it has added greatly to the underground economy. I agree that when the GST arrived on the scene the underground economy exploded. Small businesses such as the retail business my wife Rita and I operated face the burden of more paper jungles. Our ministers have told us that when they change the GST there will be less involvement, less paper and less work for small businesses. I eagerly await that and will gladly remind my ministers.
My colleagues opposite have spoken of the GST. Small businesses are finally being recognized by the government. The Liberal government recognizes that jobs will come from small businesses. Recently the Minister of Industry announced micro-loans of less than $5,000 for small businesses. They will make a great difference. We can encourage businesses to come out of the closet and become legal or legitimate businesses.
The motion before the House suggests the government educate the public and encourage its participation in addressing the problem. I agree that Canadians need to know the facts about the seriousness of the underground economy and what can be done to reduce it. I applaud the member for Mississauga South for his efforts to stimulate decision on the issue. I urge members of the House to carry the message back to their constituents and I will to mine. I urge members to talk with their constituents about the underground economy, its seriousness, and how it can be reduced.
I also agree that governments cannot solve the problem alone. We must all do our part and fulfil our responsibilities. I urge all members to support Motion No. 382.