A Liberal-appointed senator says rising costs in Canada are pushing more people into the cash economy, warning that tax evasion is becoming a routine part of everyday transactions.Blacklock's Reporter says Sen. Toni Varone, a former contractor from Ontario, told the Senate banking committee that what she described as a growing underground market is now influencing basic services across the country.“Living in Canada’s largest urban centre in Toronto, it is becoming more and more prevalent that every time I go to the hairdresser they ask if I pay cash or credit,” Varone said. “If I am paying cash, the till stays open so to speak. It’s not being reported.”He added that similar practices are becoming common in home renovation work, where pricing and scheduling often depend on how customers pay.“If I am calling for a painter to come and finish my basement, the answer is, are you paying cash or by cheque?” he said. “‘If it’s cash I can come tomorrow. If it’s by cheque, you’ve got to wait three weeks.’”Varone told senators she is increasingly concerned about the scale of the issue and its impact on the broader economy, asking at what point policymakers should recognize the growth of the informal market.The underground economy in Canada has been estimated at more than $68 billion annually, according to Statistics Canada data. A 2023 report found the sector had grown by roughly 50% over five years, with residential construction identified as a major driver. In 2021 alone, underground activity in that sector increased by 32.8%.Officials have not released more recent estimates..Separate internal research from the Canada Revenue Agency suggests public attitudes toward tax compliance are mixed, with many Canadians expressing skepticism about enforcement.According to CRA qualitative research, only 25% of respondents believed it was very likely tax evasion would be detected by the agency. The same research found 32% agreed that undeclared cash income would likely go unnoticed, while 19% said paying cash to avoid GST could be acceptable.The study also found that only 36% of respondents considered themselves tax cheats when paying cash for discounted home or vehicle repairs.Older Canadians, higher-income households and Canadian-born taxpayers were among those most likely to doubt the agency’s ability to detect undeclared income, according to the findings.
