Chapter 4

http://www.canada.com/windsorstar/news/story.html?id=bb40786a-f19a-41f1-ab71-13eabba1c32f

The link above discusses the issue about Canada’s underground economies and tax evasion. The article is about two local businessmen in Windsor, Ontario being accused of tax evasion. Michael Doyscher was accused of making false documents with three companies, while John Tamasovics and his family-owned business, J.F.J. Mold Processors was charged for five counts of tax evasion. However, the case was dropped by a Superior Court judge after it was dragged on since 1999. Lawyers of the two businessmen applied to the court to stop the case because of abuse and unreasonable delay. Under the Income Tax Act and the Excise Tax Act, they were charged with attempting to evade $1.2 million in corporate income taxes and GST in the 1990’s. It took eight years to schedule to begin the trial after the charges were laid out, which is way too long to wait, so the charges were dropped.

So, what was the whole article above about? It was about the Canadian government’s failure to catch criminals who are finding ways to avoid paying taxes. There was an eight year interval between charging the two businessmen and planning a trial date. In my opinion, that is way too long. As sad as it is, this is not the only case of tax evasion. This is just one of many companies who evade taxes. Yes, evading taxes might benefit the company, but does it really in the long run? The government needs the tax money to keep our economy running smoothly. The government needs money more than ever now that Canada is attracting more tourists with large events such as the 2010 Olympics. Under Wagner’s law of increasing state activity, our government expenses are growing at a faster rate than the total output of our goods and services. Since the government is spending more, it needs more money; and we, as citizens should not participate in such underground economies, which will deprive the government of money they need. For example, in 2005, BC alone has about $25 billion unreported activity – a lot of money.

Our economy is based on a progressive tax system (recessive and proportional being the other two), which might be one main reason companies are evading taxes. The more money a company makes, the more in taxes their profit is lost. However, the progressive tax system is the best system out of the three possible systems and companies will just have to find a way to make profit without breaking the law. As funny as it may seem, the Canadian government will have to spend more time and money in finding ways to crack down on underground economies in order to get the money it is losing. However, although there are many ways to catch such acts like tax evasion, underground economies are happening everywhere, even as you read this. So, the government may crack down and catch some offenders, but sadly, underground economies will continue to take place for as long as we have businesses striving for money. The Canadian government will just have to find more efficient ways to do the best they can in catching more lawbreakers who are hurting not themselves, but the entire economy.