The Canada Revenue Agency is targeting the underground economy and one of its targets was those who work in the restaurant industry. The study found that waiters only report between five and 10 percent of their tips to the taxman.
It seems waiters are making the headlines in Ontario again. One month after the Ontario New Democratic Party proposed legislation that would ban restaurant owners from taking a portion of tips meant for the waiters, the Canadian Revenue Agency (CRA) produced a report that suggest servers are only reporting five to 10 percent of their tips on their taxes.
According to a report obtained by the Canadian Press that took nearly two years to receive because the CRA reportedly violated legislated deadlines, servers are not being honest with the tax collector.
CRA auditors went on a blitz in St. Catharines, a city in the Niagara Peninsula, which targeted 145 waiters and waitresses working in four restaurants. They underwent a review of two years worth of income and concluded that each individual had hidden some portion of his or her tips from the tax agency, while half of those targeted did not report any tips on their forms.
“Industry insiders often tell servers that they only need to report 10 per cent of wages as tip income,” the internal report stated. “Our results indicate that tips are more likely to be 100 per cent to 200 per cent of wages. In essence, they are only reporting five per cent to 10 per cent of earned tips/gratuities. The amount of unreported income was very surprising.”
In the end, the investigation found that there was more than $1.7 million in unreported gratuities and tips, which equalled to approximately $12,000 per person. The study did not indicate the restaurants or the waitstaff.
This was one of many research pilot endeavors that targeted the underground economy that is worth approximately $36 billion, according to a 2008 Statistics Canada report for the nation’s revenue agency.
Servers in Ontario earn an hourly wage of $8.90. The statistics agency reported approximately 190,000 servers in the country that earn on average $20,000 per year. Most waiters are young and students and often leave the industry after a couple of years.