According to records, the Canada Revenue Agency (CRA) requested accountants report small businesses that don't pay their taxes.
The report, titled Underground Economy In Today’s Post-Pandemic Environment, said "very few were interested."
A portion of the report reads:
Very few were interested in the establishment of a system by which tax intermediaries or business owners and operators would report to the Canada Revenue Agency on those they believed might be participating in the underground economy.
It was felt it was primarily the responsibility of individual businesses to properly report their income and most did not wish to involve themselves in the affairs of other businesses.
According to Blacklock's Reporter, researchers wrote "a small number reiterated" they do not see the underground economy as a specific problem and do not want the agency to devote additional resources to addressing this issue. They also added some individuals believed Canadians reporting on one another would be quite unlikely.
Research conducted by The Strategic Counsel was funded by the agency with $122,345 in spending. Results came from surveys given to tax preparers, accountants, and small- and medium-sized business owners.
According to the agency, the underground economy generates more than $61 billion annually, and according to a survey of business owners, the issue with the government is a lack of tax compliance.
"The major criticism or concern regarding the Agency’s current set of measures to address underground economic activity in Canada was the targeting of small businesses over larger corporations," said Underground Economy.
According to Blacklock’s, researchers also wrote:
Tax compliance was not necessarily viewed as a moral obligation but rather a requirement under the law which if breached could result in interest or penalties and possibly legal action.
Enterprises and tax intermediaries noted the main motivation for filing accurately and on time was to avoid negative consequences.
The report said that many "participants, enterprises and tax intermediaries alike, commented the Agency’s efforts might be better spent focusing on larger corporations which they felt are more able to take advantage of tax loopholes."
The Underground Economy report also concluded that large corporations in Canada can find ways to significantly reduce their overall tax burden.
"This was viewed as a 'demotivator' for smaller businesses particularly from the perspective of any arguments which purport that small and medium sized enterprises should pay taxes out of a moral or social obligation," researchers noted.