OTTAWA - The vast majority of Canadians pay taxes each year, but a new survey suggests they are prepared to cheat at the margins if they think they can get away with it.

The survey for H&R Block Canada found 55 per cent of respondents saying that when dealing with a contractor, they would opt to pay cash to avoid sales taxes.

And they are not feeling overly guilty about it either. Only 30 per cent said they thought the avoidance wrong. Among young Canadians aged 18-34, only 17 per cent said it was wrong to avoid paying the sales tax.

The findings don't seem to be related specifically to sales taxes, which range from a low of five per cent in Alberta to a high of 15.5 per cent in Prince Edward Island.

A majority of Canadians believe they shouldn't have to declare bartered transactions, nor do they feel workers in the service industry like waiters and bartenders should need to declare tips as income.

"I think it boils down to people feeling they pay enough tax, that they shouldn't have to pay anymore," said Cleo Hamel, a senior tax analyst with H&R Block.

Another factor may have to do with the recent introduction of the HST combining federal and provincial sales taxes in Ontario and Quebec, which increased the number of services subject to higher combined tax rates.

But she said Canadians should be wary of cheating the tax man. If caught, they are liable not just for the tax, but also penalties that can double the amount owing. The government also has the option of prosecuting tax cheats.

"If you don't report and the CRA (Canada Revenue Agency) tracks you down, you only end up hurting yourself," she said. "Not only do you have to pay the tax plus the penalty, you now are a compliance issue with the CRA, so you are putting yourself in a position where you are under scrutiny."

Last year, Statistics Canada estimated the underground economy amounted to about $36 billion in 2008, with personal spending on unreported goods and services comprising about $24 billion of the total.

The agency said underground activities were most prevalent in the construction industry, retail trade and accommodation and food services.

The good news is that as a percentage of the economy, the agency said evidence suggests underground activities declined from 2.7 per cent of gross domestic product in 1992 to 2.2 per cent in 2008.

While tracking the underground economy is difficult, the agency report stated that "identifying and addressing sectors of the economy where the (it) has become widespread, such as construction, home renovation, and hospitality, continues to be a priority for the CRA."

The online survey of adult 1,500 Canadians was conducted by Leger Marketing over three days between July 30 and Aug. 1.

Earlier on HuffPost:

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  • 9 Tax Filing Tips That Will Save You Money

  • 9. Unemployed? File Anyway

    Some low- or zero-income earners still think there's no need to file a return. This misunderstanding can cost thousands of dollars in lost benefits and credits like the GST/HST credit and the Canada Child Tax Benefit. More and more benefits are being distributed through the tax system these days. So if no return is filed ... no benefits get sent. For some benefits, like the Guaranteed Income Supplement and the Working Income Tax Benefit, recipients need to apply every year. Provinces also offer sales tax credits and property tax credits for low income earners. But again - no tax return, no credit. Teenagers who earn a few thousand dollars should also consider filing. That creates RRSP room that can be carried forward indefinitely to use at a time when they will owe tax.

  • 8. Take Advantage Of Income Splitting

    It's possible for Canadians to split Canada Pension Plan (CPP) retirement income if both partners are 60 or over. Those 65 and over can split several other kinds of pension income, such as life annuity payments from a company pension plan, RRIF payments and annuity payments from an RRSP or deferred profit sharing plan. Income-splitting can save thousands of dollars in tax as income is shifted from someone in a higher tax bracket to someone in a lower bracket. Sometimes, splitting can succeed in reducing or eliminating the clawback on Old Age Security payments or the age credit for the higher-income spouse. Pension income splitting can also allow both partners to claim the $2,000 pension income tax credit. Income splitting goes well beyond pensions. Spousal RRSPs, income-splitting loans that can be made at just one per cent interest, and employing spouses and kids if you're a business owner are several other ways to minimize a family's tax bill.

  • 7. Transfer Unused Credits

    A variety of tax credits - such as the Child Tax Credit - can be transferred between spouses. Several credits for students - such as the tuition, education and textbook credits - can be transferred to a spouse, a parent, or even a grandparent once the credits are used to reduce the student's tax payable to zero. The credits can also be carried forward indefinitely so the student can use them later when he or she starts earning money.

  • 6. Know Limits Of Tax Software

    Once you tell most of the well-known tax software programs that you're a student, or a senior, or a parent, or have medical expenses, or have a spouse or equivalent, they'll prompt you with relevant questions and automatically make sure you end up applying for any relevant credits. You can also avoid those pesky math errors. Many of these programs will also offer suggestions to transfer credits and optimize deductions between spouses and family members. They're also great for performing some of those "what-if" scenarios. But for those with a more complicated tax life, such as those with rental properties or self-employment income, it may be a good idea to call in a pro.

  • 5. Claim Medical Expenses

    Tax experts say missed medical expenses are one of the most overlooked tax breaks. Many people don't bother to add everything up because of the income-related threshold: only expenses that exceed the lesser of $2,052 or three per cent of net income can be claimed. But what they don't realize is that there's a long list of expenses that qualify, so it's often not too difficult to reach that threshold. Travel expenses even qualify when people need to go more than 40 kilometres to get medical treatment that isn't available closer to home. Medical expenses can be claimed by either spouse or partner.

  • 4. Take Advantage Of New Credits

    Last year's federal budget introduced several new tax credits. A new non-refundable children's arts tax credit was rolled out to complement an existing tax credit that went to parents who enrolled their kids in sports programs. This new arts credit is provided on the first $500 parents spend on artistic, cultural and recreational activities for their children. With a 15 per cent federal tax credit, the maximum claim is worth $75 per child. Volunteer firefighters who perform at least 200 hours of service a year also get a break, courtesy of a new volunteer firefighter tax credit. It's worth a maximum of $450. There's also a new family caregiver tax credit that's worth $300. But it doesn't apply until the 2012 tax year so it can't be claimed on the 2011 return.

  • 3. Keep Good Records

    Receipts are necessary to claim medical expenses or to file for a wide range of other tax credits. While they don't need to be sent along if a taxpayer is netfiling, the paperwork must be kept for at least six years. For a small business owner, good receipts are an absolute necessity. Be aware, too, that the Canada Revenue Agency carries out spot checks on tax returns. Extraordinary child care expense or moving expense claims can be red flags for CRA auditors. So can big interest deduction claims. If you're not hiring a pro to do your taxes, know what you can and can't deduct.

  • 2. Be Proactive With Your Taxes

    The experts point out that there's only so much you can do to minimize taxes once you're actually at the point of filing your return. Once you've made your tax-related transactions, it's not easy to revisit them at tax time. So now's the time to plan strategically if you're thinking of selling or acquiring investments or exercising stock options in 2012.

  • 1. Report All T-Slips

    Here's a possible scenario: You file your 2011 return and later discover that you've failed to include a T-slip reporting income or a dividend payment. No problem, you think, because you know the slip's issuer also sends the same information to the Canada Revenue Agency. You think you don't need to bother forwarding this late slip to the tax department because the CRA will know about it. That turns out to be a big mistake. If you fail to report income in 2011 and also failed to report income just once in any of the three previous years, you can be nailed with what's called a "repeated failure to report income penalty." The penalty, which is automatically generated by the CRA's computers, is 20 per cent of the amount you fail to report in 2011.