CRA combating underground economy with Home Depot purchase records

The Canada Revenue Agency (CRA) is trying to use information from Home Depot customers to crack down on the underground economy.

The company sent out letters to customers who have a commercial credit card account, notifying them Home Depot would be handing over information like business names, addresses and purchases between 2013 and 2016 to the agency.

One tax lawyer told Global News the additional information could help the CRA crackdown on contractors getting paid under the table.

“Rather than having to contact individual taxpayers, they can go after one broad source and this will allow the CRA to detect who they think they should be auditing,” Cuelenaere LLP’s Lane Zabolotney said.

The CRA can’t retrieve third-party information without a court order.

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The Home Depot fought the order over the summer but is complying with the judge’s decision.

In an emailed statement the company said, “multiple home improvement retailers received requests for customer information from the CRA, and when The Home Depot Canada received such a request for information, it not only disagreed with but pushed back on the CRA request for over three years.

“Following the ruling of the courts affirming the right of the CRA to require such information from retailers, The Home Depot Canada complied with the Federal Court order and the law.”

Zabolotney added the CRA will look for patterns in suspect tax returns.

“They will look at someone in a certain industry and they will look at their spending habits and they will say, ‘Hey. This person’s spending habit, it differs from what most people are doing. And their revenue and their expenses don’t line up.’ And they’re going to investigate it further and do an audit,” he said.

A Statistics Canada report found the underground economy accounted for $51.6 billion in 2016 with 26.6 per cent of that coming from residential construction.

The Saskatoon & Region Home Builders’ Association said a number of their members have raised concerns about contractors taking payment under the table.

“How do you compete with that when you have a company who is just undercutting the price? Maybe not providing a lot of information on their quote. And that looks attractive to a homeowner,” CEO Chris Guérette said.

In an emailed statement, the CRA told Global News the information it retrieves from third parties allows the agency to make sure people and corporations are fully in line with their tax obligations under the Income Tax Act and Excise Tax Act.

“The CRA has also considerably increased efforts to identify individuals and businesses that do not file returns and resolve their cases. If it is not controlled, the underground economy results in lost jobs and hinders economic growth,” read the statement.