Construction industry tax fraud costing Alberta billions

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Today, the Alberta Regional Council of Carpenters and Allied Workers announced its participation in the second-annual Tax Fraud Days of Action, an initiative of the United Brotherhood of Carpenters to raise awareness about construction industry tax fraud. Tax Fraud Days of Action runs in Canada and the U.S. from April 14-17, 2021.

“Construction industry tax fraud hurts workers, their families, legitimate contractors, taxpayers and our economy. Alberta taxpayers are getting a raw deal,” says Derrick Schulte, Executive Secretary Treasurer, Alberta Regional Council of Carpenters and Allied Workers. “When construction firms resort to corrupt business practices, our community loses out on funding for essential programs and infrastructure. It’s past time for government and law enforcement to treat this issue seriously and take action.”

“The underground economy is thriving in Canada and especially in the construction industry, stealing billions of dollars every year. Tax fraud is robbing honest and hardworking Canadians and their families of the services they have worked for and deserve,” says Jason Rowe, Vice President, United Brotherhood of Carpenters Canadian District. “It is time for Canadians to stand up against tax fraud and fight corruption in the underground economy so we can have the programs and services required in our communities.”

The Tax Fraud Days of Action grew out of widespread outrage about construction industry tax fraud, a range of practices where unscrupulous employers evade their tax responsibilities in a number of ways. Often, they intentionally misclassify workers as independent contractors or pay workers in cash-only arrangements, thus ensuring that these workers do not appear on official employer payroll records. As a result, these businesses significantly reduce their income tax and payroll tax responsibilities and skirt their obligations to cover benefits like unemployment insurance and workers’ compensation.

The prevalence of construction industry tax fraud has a devastating impact on the lives of individual workers, the construction industry as a whole, and national, provincial and municipal economies. When employers shift their tax burden onto their employees, the employees must then pay their employer’s employment taxes out of their pockets, which places a huge financial burden on working families.

Construction industry tax fraud also punishes good, fair-minded construction firms that cannot compete with the labour costs of fraudulent businesses. Ultimately, failing to properly report employment income and the withholding of income taxes can lead to severe shortfalls in tax revenue.

According to Statistics Canada, nationwide the underground economy accounted for $61.2 billion in economic activity in 2018. The largest slice of Canada’s underground economy activity in 2018 came from the residential construction industry (26.2 per cent or $16 billion).

In Alberta, the underground economy, which includes residential construction, retail trade, and accommodation and food services, is estimated to be worth $5.8 billion. That’s billions of dollars in lost tax revenue that could be used to repair roads, bridges, and schools; care for veterans; and fund other essential public programs.

The United Brotherhood of Carpenters’ regional councils across the U.S. and Canada are working with honest contractors and community stakeholders to level the playing field by shining a bright spotlight on the underground economy and those who engage in this illegal activity. The UBC is also engaging government and law enforcement across Canada and the U.S. to take action.

For more information, visit albertacarpenters.com/taxfraud.

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