An income problem, not a tax problem

A Canada Revenue Agency report released last week — apparently all but pried from a cabinet minister’s cold, dead hands — tells us very little that’s new about the underground economy in the food service industry. But it’s quite enlightening as to how the federal government operates in this age of openness and transparency.

A Canada Revenue Agency report released last week — apparently all but pried from a cabinet minister’s cold, dead hands — tells us very little that’s new about the underground economy in the food service industry. But it’s quite enlightening as to how the federal government operates in this age of openness and transparency.

In 2010, Canada Revenue Agency did an audit blitz of waiters and waitresses in St. Catharines, Ont. Workers were warned about the consequences of not fully declaring their income from tips, and later, the auditors descended.

What did they find? Nothing much surprising, except for a good reporting of the numbers. Audits found that almost none of the workers declared every penny of tips they earned. Well, duh . . . .

But you may be surprised to know the extent of the tax cheating going on: almost $1,000 per month per person. The total of undeclared income in St. Catharines came to about $1.7 million, and if you extrapolate it across the country, that adds up to an estimated $1.3 billion a year in undeclared income in the food service industry — in 2008 figures supplied by Canada Revenue Agency. That’s out of Canada’s total underground economy thought to be around $36 billion.

What are the taxes owed on $1.3 billion of undeclared tips from the people who serve you restaurant dinners? In relative terms, bloody little. Probably not enough to pay for an audit.

The report says waitresses mostly live on their tips, and that a very large portion of serving staff are students who pay little or no income tax. Again . . . duh. In fact, that paltry $1,000 a month was in many cases as much as double their wages. These people don’t have a tax problem, they have an income problem.

Yet Canada Revenue Agency put wait staff in St. Catharines on the front line of a government war on the underground economy. In 2010. With no intention of ever telling Canadians about it.

The Canadian Press learned of the report, and asked for a copy under the Access to Information Act. They were stonewalled — illegally, it must be added — for 18 months, and even then the copy they received was heavily censored.

That’s why we’re only hearing about this now.

It’s certainly true, unreported income is theft. It’s stealing from all the rest of us who fill out our tax forms honestly every year.

It’s stealing from the federal budget, because the lost revenue is reflected in the interest payments on the federal debt.

All the above is true.

But they decided to go after waiters and waitresses, whose earnings generally raise their profiles to “working poor” status. For lost taxes?

The 145 audits collected an average of $1,533 in extra tax payments. A good number collected no extra taxes at all, not because those returns were so scrupulously honest, but because the income figures were so small.

That’s maybe two jobs for a plumber or electrician — the kind who offer you two bills for a home repair: one on the invoice, or one for much less, paid in cash, no paperwork involved, wink, wink. The waste for the taxpayer in this report is obvious. Government could pass a law requiring restaurants to include service fees in all restaurants — as is done in many countries around the world. Living wages could be mandated for wait staff, so they don’t have to scrape for tips, or go home with no pay at all on days when some cheapskate didn’t tip at all. (Not tipping is also a form of theft.)

You can wait for that day for as long as you can wait for the federal government to embrace perestroika.

Greg Neiman is an Advocate editor.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Red Deer Rebels goalie Chase Coward tries to find a loose puck during WHL action at the Centrium earlier this season. (Photo by ROB WALLATOR/Red Deer Rebels)
Changes on the horizon for Red Deer Rebels next season

New coach, roster adjustments among top priorities for Sutter this offseason

Renovations and construction have begun at Red Deer Dream Centre. (Photo contributed)
Renovations underway at Red Deer Dream Centre

Christian-based addictions treatment centre

Red Deer County's municipal planning commission gave approval for a new directional sign for a business located near Elnora.
(Image from Red Deer County)
Red Deer County garden centre and winery gets sign approved

Delidais Estate Winery and DA Gardens is located near Elnora

(Advocate file photo)
Red Deer County approves home-based hair salon

Salon would be located in rural residential area just west of Innisfail

Alberta Premier Jason Kenney. THE CANADIAN PRESS/Jason Franson
Here is a list of latest COVID-19 restrictions in effect in Alberta

New mandatory health restrictions are now in effect in Alberta. Additional restrictions… Continue reading

In this Thursday, May 14, 2020 photo, a doctor holds his stethoscope during a patient visit in Blackburn, England, amid the coronavirus pandemic. Doctors in British Columbia are being warned they could face investigation or penalties from their regulatory body if they contradict public health orders or guidance about COVID-19. THE CANADIAN PRESS/Hannah McKay/Pool Photo via AP
B.C. doctors could face penalty for veering from COVID-19 health guidelines: college

B.C. doctors could face penalty for veering from COVID-19 health guidelines: college

A vial of the  AstraZeneca COVID-19 vaccine is shown at a facility in Milton, Ont., on Wednesday, March 3, 2021. Alberta says it won't give out more first doses of the Oxford-AstraZeneca vaccine for the time being.THE CANADIAN PRESS/Carlos Osorio - POOL
Hope for a good summer with one dose in arms, if we ‘crush’ COVID-19: Trudeau

Hope for a good summer with one dose in arms, if we ‘crush’ COVID-19: Trudeau

FILE-In this Wednesday, March 17, 2021 file photo, A make-shift memorial is seen outside a business where a multiple fatal shooting occurred on Tuesday, in Acworth, Ga. Robert Aaron Long, 22, accused of killing eight people, six of them women of Asian descent, in shootings at three Atlanta-area massage businesses was indicted Tuesday, May 11, 2021, on murder charges, and a prosecutor filed notice that she'll also seek hate crime charges and the death penalty. (AP Photo/Mike Stewart, File)
Prosecutor plans to seek death penalty in spa shootings

Prosecutor plans to seek death penalty in spa shootings

Labour Minister Harry Bains arrives at B.C. Legislature in Victoria, B.C., on Monday, June 26, 2017. THE CANADIAN PRESS/Chad Hipolito
B.C. pledges to introduce permanent paid sick leave program in January

B.C. pledges to introduce permanent paid sick leave program in January

In this June 8, 2017, file photo, fresh nuts, bolts and fittings are ready to be added to the east leg of the pipeline near St. Ignace, Mich., as Enbridge prepares to test the east and west sides of the Line 5 pipeline under the Straits of Mackinac in Mackinaw City, Mich. THE CANADIAN PRESS/AP-Dale G Young/Detroit News via AP, File
‘Massive and potentially permanent disruption’: Canada’s bleak view of Line 5 closure

‘Massive and potentially permanent disruption’: Canada’s bleak view of Line 5 closure

A Suncor logo is shown at the company's annual meeting in Calgary, Thursday, May 2, 2019.THE CANADIAN PRESS/Jeff McIntosh
Oilsands producer Suncor and utility Atco to pursue ‘world-class’ hydrogen project

Oilsands producer Suncor and utility Atco to pursue ‘world-class’ hydrogen project

A street sign along Bay Street in Toronto's financial district is shown on Tuesday, January 12, 2021. THE CANADIAN PRESS/Nathan Denette
North American stock markets rally to pare early losses over inflation concerns

North American stock markets rally to pare early losses over inflation concerns

This photo provided by World Food Prize shows Shakuntala Haraksingh Thilsted.  On Tuesday, May 11, 2021, Thilsted was named this year's recipient of the $250,000 World Food Prize, which was created by Nobel Peace Prize laureate Norman Borlaug in 1986 to recognize researchers who have improved the quality and availability of food. (Finn Thilsted/World Food Prize via AP)
World Food Prize goes to nutrition expert for fish research

World Food Prize goes to nutrition expert for fish research

Most Read