The underground economy in Canada costs taxpayers billions in foregone revenue annually. The Canadian District of the United Brotherhood of Carpenters is calling on governments to take steps to tackle construction industry tax fraud and labour trafficking.

This call for legislative support is part of Tax Fraud Days of Action, a United Brotherhood of Carpenters  (UBC) campaign focused on raising awareness of, and taking action to address, illegal business practices in the construction industry. Tax Fraud Days of Action runs from April 12—18, 2023.

All levels of government have a role to play in helping to address construction industry tax fraud – be they federal, provincial, municipal, or even incoming. With Alberta’s provincial election taking place on May 29, the UBC Canadian District is paying close attention to the campaign pledges of the United Conservative Party government and the Alberta New Democratic Party opposition.

The UBC Canadian District’s call for partnership to address construction industry tax fraud extends to governments and other skilled trades across the country. No jurisdiction nor trade is immune to the negative impacts of the underground economy, which accounts for $65.8 billion in economic activity annually according to Statistics Canada. The largest slice of Canada’s underground economy activity comes from the residential construction sector (35.0 percent or $23.9 billion).

Construction industry tax fraud occurs when construction companies engage in corrupt business practices to boost profits and reduce costs. This often includes their intentional misclassification of workers as “independent contractors,” which enables the general contractor to reduce their payroll responsibilities and avoid rightfully paying for benefits like worker protections, pension, health care and unemployment insurance.

It has become so common that, for many businesses, misclassifications and skirting obligations are part of their business model involving players at all levels: owners, developers, general contractors, subcontractors, and labour brokers. It’s all at the expense of workers, taxpayers, and law-abiding businesses. 

“We routinely see this issue and its human cost in the residential construction industry,” says Jason Rowe, Vice-President, UBC Canadian District. “Workers who are part of the underground economy often don’t realize they are being cheated because unscrupulous contractors avoid paying for things like CPP, WCB and EI. This same grey space in the economy can also lead to human trafficking and serious disregard for the health and safety of workers; long hours and horrendous conditions are not uncommon at such jobsites. Industry and government need to do more to protect workers.”

The UBC Canadian District Office is seeking to partner with the federal government and take steps towards eliminating construction industry tax fraud. These steps include: 

• Enacting general contractor liability legislation to deter tax fraud committed by subcontractors.
• Representation on the Canada Revenue Agency’s (CRA) Underground Economy Advisory Committee.
• The assignment of auditors to work with the UBC to help identify contractor tax fraud via reported leads on suspected tax or benefit cheating submitted to the CRA.

The UBC Canadian District is also inviting its members, members of other skilled trades unions, and all Canadians to join the fight by visiting the UBC’s campaign website. On the site, members can send a letter to their Member of Parliament asking them to take action against construction industry tax fraud. Visit StopTaxFraud.ca.