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THE CATCH IN CASH DEALS

By Frances McGuckin

"I'll give you a great price if you pay cash," is a phrase many people have heard as they shop for a service or product. The consumer has also been heard to say: "What will it cost if I pay cash?" Many consumers think that if they offer to pay cash, they will obtain a cheap price-which in some cases is exactly what happens. But what are the ramifications of these "cash deals"?

When you are looking for a service or product, it pays to look ahead past the immediate dollar cost. For example, services such as home renovations are costly items that usually have a long life and are a serious investment. You pay for what you get, so it is a wiser decision to find a company that has been in business for a few years, can supply you not only with references, but also with guarantees.

By asking a company to supply you on a cash-deal basis, in some cases, this income is not reported through their business. If they appear eager to trade on a cash basis, they are no doubt avoiding income tax by not recording the sale and the appropriate taxes. These businesses will ultimately suffer-either they will go broke or Revenue Canada will catch up with them.

Many of the small service industries practice cash trading. The money is put into pockets instead of the bank account and it becomes an invisible transaction. If something goes wrong, the consumer is faced with the reply that "Well, it was a cash deal and we did give you a very good price, what do you expect?"

The same principal applies to hiring casual labour. Some people offer to work part-time at a lower rate of pay if they can be paid "under the table". Many of these people are also receiving welfare or employment insurance income.

Two principles apply here: firstly, if a company agrees to hire someone for "cash under the table", then they are agreeing not to report the expense. All cash generated through a business must be reported through the accounting system. If under the table cash is paid out and no bills or invoices are received from the subcontractor, the money should come out of the owner's pocket. This means that the true cost of doing business is not reported, the business pays a higher tax rate, and the owner is supporting welfare or employment insurance fraud.


This weekly 'Business Concerns' column is available for Syndication. Please phone or e-mail inquires to contact@smallbizpro.com
 

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Tel: 604-740-0602 Fax: 604-740-0702

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