Canada Revenue Agency's Ad Campaign Against Underground Economy Flops

Canada Tax Ad Campaign

First Posted: 08/23/11 07:25 PM ET Updated: 10/24/11 06:12 AM ET

OTTAWA - An advertising campaign last summer warning Atlantic Canadians against paying "under the table" for home renovations was a big flop.

The ads from the Canada Revenue Agency were designed to change attitudes in the region about participating in the underground economy to avoid paying taxes.

But a new survey suggests Atlantic Canadians were unimpressed.

The agency commissioned a telephone poll of about 1,800 homeowners in the region both before and after the campaign — and reported there was no change in attitudes.

"Neither the likelihood of participating in the underground economy, nor perceptions of whether the risks are worth it, was significantly affected by the campaign," says a July 2011 report by Corporate Research Associates Inc.

The Halifax-based polling firm conducted interviews between February and April last year, before the ad campaign was launched. The homeowners were located in seven large communities in the four Atlantic provinces: St. John's, N.L.; Charlottetown; Halifax and Sydney, N.S.; and three New Brunswick cities, Moncton, Saint John and Fredericton.

Another round of interviews in the same cities took place between November 2010 and April this year. Corporate Research also interviewed people in non-Atlantic communities as a control group.

Most recalled seeing the Canada Revenue Agency ads on TV, radio, print and the Internet, as well as brochures distributed at key retailers.

The survey report's only positive finding was that people were better informed about how widespread the underground economy is in the region.

But "the advertising campaign did not have a statistically significant impact on consideration of hiring someone 'under the table' for a job valued at either $100 or $10,000," the pollster found.

Then-revenue minister Keith Ashfield launched the campaign in Fredericton on May 18 last year, saying "the simple fact is that paying 'under the table' is no deal — it is risky, and it is wrong.

"It leaves homeowners with no warranty, no recourse for poor workmanship and no liability insurance if an injury takes place on their property" — themes repeated in the ads.

The ad campaign, which ran until October, cost about $750,000. Corporate Research Associates was paid $113,000 for the polling.

"By focusing on a smaller area, the CRA conducted the campaign as a pilot project, at a lower cost to taxpayers," spokesman Noel Carisse said Tuesday to explain why it was confined to Atlantic Canada.

"Once the campaign has been thoroughly evaluated, the CRA will decide whether to expand it nationally in some form based on information obtained from the study."

Carisse said changing attitudes takes time, comparing the project to anti-smoking campaigns.

In June, Statistics Canada estimated the size of Canada's underground economy at up to $36 billion in 2008, or more than two per cent of GDP. The construction sector is the worst offender. About $1.3 billion of the estimate was undeclared restaurant tips.

Comparable figures for Atlantic Canada are varied but usually calculated at hundreds of millions of dollars, whether because of lobster sold dockside for cash, or roofers doing jobs without receipts.

An internal tax agency document predicted an increase in underground activity because of the global meltdown that began in 2008, and because of the new HST in two provinces.

"We are anticipating an increase in certain areas of non-compliance — most particularly payment of overdue taxes and the underground economy," says a ministerial briefing note from 2010.

"As formerly employed Canadians start their own small businesses, we also anticipate a growth in the underground economy, potentially spurred on by the introduction of harmonized sales taxes in both Ontario and British Columbia. ...

"Non-compliance continues at unacceptably high levels and is spreading to segments of the taxpayer population that have historically tended to be compliant."

The document was obtained by The Canadian Press under the Access to Information Act.

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On the web, one of the Atlantic video ads: www.cra-arc.gc.ca/ndrgrnd/wtchvd-eng.html

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Filed by Daniel Tencer  |