Ontario Government Set to Tackle Underground Economy
- Amy Gilpin
- Apr 17, 2018
- 3 min read
Revenue Integrity Act, 2018
Change is always difficult. This situation is no different. There has been very little, if any coverage of a new Act, buried deep in an Ontario Budget bill, Bill 31 – A Plan for Care and Opportunity Act (Budget Measures), which is currently at the Second Reading Debate stage. The Act is called the Revenue Integrity Act, and is established under Schedule 30 of the budget bill.
It is not yet law, however, given that it is included in a budget bill, there is little chance that it will not come into effect. So, that means we as home based and small business owners really need to understand what it means for us and how it will affect how we do business in Ontario.
Please understand that I am NOT providing legal advice in this article. I am simply providing you with the information contained in the new Act so that you are aware of what is happening. I highly recommend that you consult a lawyer if you are at all concerned with how this will affect you.
There are several terms applied to the Act that need to be understood:
Electronic cash register: As defined in the Act, means a device that keeps a register or supporting documents through the means of an electronic device or computer system designed to record transaction data or any other electronic point-of-sale system.
Prescribed business: as defined in the Act, means any business prescribed by the regulations
Regulations: as defined in the Act, means the regulations made under this Act
At present, there are no regulations made under this Act. The Minister has the power to make regulations after it comes into effect.
As I read through the proposed Act, I can see where this will be a significant cause for concern for many home-based and small business owners. Several of my own clients keep their records in a file, or yes – in a shoebox – and bring it to me at the end of the year. Under the new Act, those affected will now be required to:
Record his, her or its sales transaction information in an electronic cash register that meets the prescribed requirements; AND
Report its sales transaction information to the Minister within the prescribed time and manner and in such form as may be prescribed.
Let’s look at this a little bit. By the Act’s definition, an electronic cash register includes a computer system designed to record transaction data. Their stated purpose in enacting this is to combat the ‘underground economy’ and reduce unreported income. They propose to issue government standards that all accounting software and ePOS systems would have to meet. This would then include accounting software such as QuickBooks and applications such as Square.
Here’s the problem though: Many of my home-based and small business clients don’t record their own information in accounting software. They keep their receipts and sales data in a folder and bring it to me at the end of the year so I can do their taxes. So, how do we address this?
Most high-quality accounting software developers have already created a version that would be appropriate for both home-based and small business owners. They will ensure compliance with any government regulations for the software, in turn, ensuring that the business owner is compliant with the proposed legislation. Depending on the reporting period set out by the Minister, information will be collected, processed and reported according to the set deadlines for reporting.
The proposed Act goes on to say that the Minister has certain powers for using the information that is reported including the disclosure of sales transaction information to the Canada Revenue Agency for administration and enforcement of the Income Tax Act (Canada) and the Excise Tax Act (Canada).
So, here’s my take-away from the proposed changes: If and when the legislation is enacted, small business owners will do what we always do. We’ll work within the law and figure out other ways to save time and money. Change is always difficult, but we’ll weather this storm too. The legislation may be designed to address the underground economy but it will definitely effect the way small businesses in Ontario operate in the future.
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