The underground economy is a big problem in the residential construction sector that can lead to liability issues for homeowners and lost tax revenue for government.
Doing deals under the table or “cash deals” is often a sign that the person you are dealing with is evading taxes. Often these business owners aren’t paying worker protection or liability insurance either, which puts homeowners at risk.
This type of illegal business practice is not only found in the residential construction industry, but across many industries in Ontario and Canada. According to Statistics Canada, the nation’s underground economy accounts for $42.4 billion in annual economic activity – 2.3 per cent of the GDP – and in Ontario alone illegitimate transactions amount to an estimated $15.3 billion.
In the residential construction sector it’s unprofessional contractors, renovators, suppliers and illegal home builders who are responsible for 30 per cent of that activity – an estimated $4.5 billion in annual underground economic activity.
A few weeks ago, the provincial government launched an initiative to look at ways to combat the underground economy. MPP Laura Albanese, Parliamentary Assistant to Ontario’s Minister of Finance held her first consultation meeting with the construction industry. She said the province is looking to level the playing field and enhance the competitiveness of legitimate contractors while restoring revenue integrity.
BILD has long been leaders in fighting the underground economy in the home building and renovation industry. In 2001, BILD created the RenoMark program to help consumers identify professional renovators. The program has grown from coast to coast and now RenoMark renovators can be found in nine provinces and in more than 40 regions across the nation. In the GTA, there are close to 300 RenoMark renovators and trade contractors.
These professionals are members of their local home builders’ association, and they abide by a renovation-specific Code of Conduct and a Code of Ethics. By participating in this program, they also agree to provide a written detailed contract, carry applicable licenses and permits, have a minimum of $2 million liability insurance and offer a minimum two-year warranty for all work done.
At the meeting, in addition to recommending the government build on the programs that already exist, RenoMark members suggested a number of other initiatives to Parliamentary Assistant Albanese. These include creating a public campaign to warn homeowners about the risks of working with fly-by-night business owners and a permanent home renovation tax credit, which is proven money well spent as consumers are protected and professional renovators are supported.
A few years ago, the federal stimulus home renovation tax credit generated $4.3 billion in additional registered economic activity in return for an average $700 tax rebate given to homeowners through the program.