A few years back I was doing a minor alteration on the family home. One of the builders who I got in to do a quote gave me his price, and then said “but if you can pay cash it will be $X” (a figure about 13% lower than his first quote). I didn’t hire him, even though I could have saved a nice chunk of change. I figured that if he was dishonest enough to defraud the government, what would stop him from trying to do the dirty on me as well. And with no records of the transaction I would have nothing to fall back on.
The behavior described above is very prevalent in Canada – especially amongst Tradespeople. It goes by many names: “cash jobs”, “under the table” – but no matter what you call it the practice is illegal and can get you in hot water and even jail.
I have a client who is a builder and he tells me that people often ask him for a “cash” price. We all know what that means – “knock off the HST and I’ll pay cash so that you don’t have to report it.” My advice to him was to respond like this: “I don’t mind how you pay – cash at the end of the day is just fine if you prefer, but my price is the same. I’m sure that you want a builder who acts with complete integrity and honesty. There are lots of guys who will cut corners to save a penny – but it’s always the homeowner that loses out. You deserve better than that, don’t you?” The customer doesn’t always accept that response, but it speaks to their character and morality more than the builders. He still sleeps soundly at night!
CRA have declared war on the “underground economy” and are heavily auditing industries where cash is common (such as in the food industry, building, etc.). As an accountant my job is to help you pay as little tax as legally required, but I can lose my license if I file a false return or knowingly allow a return to be filed that contains false information.
Here are some tips to keep you (and me) out of hot water:

  • Document all your sales, even if it is paid for in cash. That means ringing it through the till or writing out an invoice, even if the customer doesn’t want it.
  • Bank everything into the business account first.
  • If it doesn’t feel honest – just don’t do it!
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