Restaurant staff reports only 5-10 per cent of tips as income

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?


4 thoughts on “Restaurant staff reports only 5-10 per cent of tips as income”

  1. I think any industry that accepts tips or does a lot of cash business is open to abuse. It is a little naive for restaurant staff to think they are in the clear though. I know I report all of my online income even though it comes from US companies that don’t have to report that income to the CRA.

  2. I wonder how much cash CRA could flush if it focused its finite resources on high income earners instead of the service class. As Willie Sutton replied when asked why he robbed banks: “Because that’s where the money is.”

  3. I’m not surprised.. but I also know I never kept track of my tips as a server =\ I spent it so fast I had NO IDEA how much I made when it came time to declare it at tax season. But I also never worked enough to come anywhere near being taxed since I was a student and only worked weekends.

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