Hidden Economy Hurts Taxpayers
By Dale Madill, Provincial Reporter
Nova Scotia’s underground economy costs — taxpayers $83 million annually in lost revenues says Finance Minister Bernie Boudreau who intends to. cut down on tax cheats in 1995.
“In the end someone has to pay, and there is only one taxpayer,” says Mr. Boudreau.
“Those who don’t pay are’ simply increasing the burden on the honest taxpayers, they are cheating their colleagues and neighbours."
A study of the underground economy by the provincial tax, commission shows consumers have had to cope with increased workloads and resources that have remained static or decreased over most of the 1990s.
This has spurred steady growth in the underground economy. The result is legitimate businesses face unfair competition, and reduced profit margins and revenues. People are also hit with higher taxes to compensate for lost government revenue.
Mr. Boudreau admits the government must bear part of the responsibility for the burgeoning underground economy.
“Particularly during the recession, there developed an attitude that the government wasn’t spending tax dollars wisely,” he says. “A lot of taxpayers, who were being asked to pay higher and higher taxes... arrived at the belief they could spend the money as wisely as the government.”
But the finance minister says with Nova Scotia’s first balanced budget in almost 20 years expected in 1996, the province is trying to restore confidence in the taxpayer, a move that should help cut into the underground economy.
“We also have to accept the fact that we have, in my personal opinion, reached a, point of saturation in taxes, new taxes will simply spur the underground economy and encourage more and more people to avoid paying.”
According to the Finance Department study, the underground economy in Nova Scotia now represents 3.5 to 4.5 percent of gross domestic product, roughly representing more than 140 per cent of the provinces total revenues from tobacco taxes.
When goods are bought or ordered from outside of Nova Scotia, residents are expected to forward the hospital taxes to the province, but in many instances compliance is basically dependent on the honor system.
Recently Ontario and Quebec firms have been selling computers, software, and other business and office supplies in Nova Scotia and are not charging provincial taxes. Purchasers are not forwarding the taxes either.”
“It’s putting legitimate businesses at a disadvantage and we will be making a major compliance effort in 1995,” said Mr. Boudreau. “If harmonization of the taxes doesn’t work, then we will take bilateral action with provinces like Ontario and Quebec.”
On the local scene, where businesses that operate with numerous small cash transactions, the province will be stepping up enforcement, which can result in heavy financial penalties for companies or individuals caught failing to remit taxes.
“I can assure anyone that while it may seem worthwhile at the time, it won’t be if you get caught. In the future, you can expect to see more and more people getting caught as we increase the compliance efforts,” said Mr. Boudreau.
He identified tobacco and alcohol sales, used car sales and repairs, and home construction and alteration as areas where the underground economy is thriving and where the province will be increasing its vigilance.
By Dale Madill, Provincial Reporter
Nova Scotia’s underground economy costs — taxpayers $83 million annually in lost revenues says Finance Minister Bernie Boudreau who intends to. cut down on tax cheats in 1995.
“In the end someone has to pay, and there is only one taxpayer,” says Mr. Boudreau.
“Those who don’t pay are’ simply increasing the burden on the honest taxpayers, they are cheating their colleagues and neighbours."
A study of the underground economy by the provincial tax, commission shows consumers have had to cope with increased workloads and resources that have remained static or decreased over most of the 1990s.
This has spurred steady growth in the underground economy. The result is legitimate businesses face unfair competition, and reduced profit margins and revenues. People are also hit with higher taxes to compensate for lost government revenue.
Mr. Boudreau admits the government must bear part of the responsibility for the burgeoning underground economy.
“Particularly during the recession, there developed an attitude that the government wasn’t spending tax dollars wisely,” he says. “A lot of taxpayers, who were being asked to pay higher and higher taxes... arrived at the belief they could spend the money as wisely as the government.”
But the finance minister says with Nova Scotia’s first balanced budget in almost 20 years expected in 1996, the province is trying to restore confidence in the taxpayer, a move that should help cut into the underground economy.
“We also have to accept the fact that we have, in my personal opinion, reached a, point of saturation in taxes, new taxes will simply spur the underground economy and encourage more and more people to avoid paying.”
According to the Finance Department study, the underground economy in Nova Scotia now represents 3.5 to 4.5 percent of gross domestic product, roughly representing more than 140 per cent of the provinces total revenues from tobacco taxes.
When goods are bought or ordered from outside of Nova Scotia, residents are expected to forward the hospital taxes to the province, but in many instances compliance is basically dependent on the honor system.
Recently Ontario and Quebec firms have been selling computers, software, and other business and office supplies in Nova Scotia and are not charging provincial taxes. Purchasers are not forwarding the taxes either.”
“It’s putting legitimate businesses at a disadvantage and we will be making a major compliance effort in 1995,” said Mr. Boudreau. “If harmonization of the taxes doesn’t work, then we will take bilateral action with provinces like Ontario and Quebec.”
On the local scene, where businesses that operate with numerous small cash transactions, the province will be stepping up enforcement, which can result in heavy financial penalties for companies or individuals caught failing to remit taxes.
“I can assure anyone that while it may seem worthwhile at the time, it won’t be if you get caught. In the future, you can expect to see more and more people getting caught as we increase the compliance efforts,” said Mr. Boudreau.
He identified tobacco and alcohol sales, used car sales and repairs, and home construction and alteration as areas where the underground economy is thriving and where the province will be increasing its vigilance.
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