According to a story in the Province, a blitz by Canada Revenue Agency auditors on an unfortunate group of waiters and waitresses in one Ontario community has exposed “very surprising” amounts of unreported tips and gratuities.
The pilot project targeted 145 servers working in just four restaurants in St. Catharines, Ont., a blue-collar city on the Niagara Peninsula, south of Toronto.
Auditors reviewed two years’ worth of income and found that every individual had hidden some portion of their tips from the taxman, with about half reporting no tips whatsoever.
In the end, the blitz flushed out $1.7 million in unreported tips and gratuities — almost $12,000 for each person.
“Industry insiders often tell servers that they only need to report 10 per cent of their … wages as tip income,” says an internal report on the project.
I have also heard the 10% reporting of tips but this is not right.
An interesting stat from the article shows that many serving staff likely would not have to pay any taxes, even were they forced to declare more tip income, because they fall under tax-free thresholds and can access tax credits.
“A lot of them aren’t making a heck of a lot of money,” said Garth Whyte, president of the Canadian Restaurant and Foodservices Association.
I dislike that these workers are avoiding paying their fair shares of taxes.
Many other industries like hair dressers, and contractors are also known for the “underground economy”.
Can you name any other notorious industries for tax avoidance?