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February 7, 2006

Politicians to face lobby

COCA declares war on underground economy

War on the underground economy has been declared by the Council of Ontario Construction Associations (COCA).

The province has lost “hundreds of millions of dollars” to the construction underground economy each year for well over a decade, the council said in a pre-budget submission to the standing committee on finance and economic affairs.

The Ministry of Finance should launch a “full-scale investigation and attack” on the underground economy, starting with the construction sector, the council recommends.

“In fact, one of our business plan deliverables for 2006 is to have the finance minister commit to addressing the underground economy in the budget,” said Doug DeRabbie, COCA’s vice-president of policy and government relations.”We are doing everything we can to make sure that happens.”

Doug DeRabbie

In its 13-page brief, COCA said contributing factors include the “huge gaps” in Workplace Safety and Insurance Board (WSIB) coverage in the industry. According to Statistics Canada, there are almost 100,000 companies engaged in construction in the province. But WSIB has records for only about 45,000.

“The problem ... is the incredibly large number of workers who call themselves, or are called by their employers, independent contractors, who are not required to pay into WSIB coffers,” COCA said.

“It is not at all clear how much income these so-called independent operators declare for tax purposes but it is clear that Ontario loses. Ontario also loses employers’ health tax revenue.”

COCA said companies in the underground economy have “a huge economic advantage” over law-abiding contractors.

“These companies can achieve savings of more than 40 per cent in terms of bidding,” the council said. “These companies are therefore able to have higher profits, giving them the ability to out-bid contractors who are in compliance.

“This in turn encourages others to join the underground economy. Re-establishing equity in the construction industry will have the added effect of restoring lost income to the province’s coffers.”

The recommendation was one of five made by COCA, which represents close to 40 associations from across the province. The council also said the Ontario government should:

Introduce legislation that would make WSIB coverage mandatory for all persons working on a construction site.

Amend the Construction Lien Act to facilitate conduct of business in Ontario.

Carry infrastructure planning far beyond the $30 billion announced in the 2005 budget.

Concentrate on removing frustrations and impediments to business and economic growth, examine ways to stabilize spending and work towards balancing the budget as soon as possible.

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