Loss Of Resources Because Of The Underground Economy

Macro economics by Kevin Dooley
Macro economics by Kevin Dooley

In its effort to stop tailgaters (people like fly-by-night renovators paid cash on the spot so they don’t have to pay taxes), the government is trying to interfere with the underground economy. Tailgaters have been causing worries to the Canadian Home Builders’ Association for a long time now.

“The underground economy is damaging to our country,” said federal Minister of National Revenue Keith Ashfield at a recent national conference of the association in Banff. Consumers are left unprotected if something goes wrong, with thousands of dollars worth of costs in repairing the shoddy work left behind. “We’re trying to educate people that the [tax] money that is lost to contractors is money that should go to health care, housing, education,” said Ashfield.

It is very beneficial for the government to get the underground economy under control since there are billions of dollars worth of revenue lost there; however, the cost to legitimate businesses through the industry is even higher than the one to the state. Tailgaters’ performance is limited to uncertified work and they do not need to heed any regulations, so their work often results in damaging the property of the consumer. The reputation of the whole industry is at stake and currently suffers greatly from the difficulties encountered when consumers deal with cash contractors. This could be prevented, for example, by changing the current administrative reporting system. The CHBA also has a “Get it in Writing” campaign aimed at the general public to reduce this phenomenon.

The crucial part of working with a legitimate contractor is a written contract that enumerates all the work to be done and the contractor’s responsibilities toward the consumer. It details expectations so there is no space for the contractor to avoid responsibility. “We have a pilot project in Atlantic Canada that has just wrapped up,” said Ashfield. "It is in conjunction with the CHBA’s Get it in Writing campaign and it makes people aware of the damages and risks to their home of working with underground contractors” he added. The federal government is now evaluating the pilot project to determine its next actions. “We want to measure the impact it has had on the general public,” said Ashfield.

If someone is to be hurt on the job, it is very likely to happen when you hire an illegitimate contractor because they are neither licensed nor experienced. They do not have any warranties.

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