Home Builders fear HST hike may lead to more under-the-table work

The coming HST increase in Newfoundland and Labrador could mean millions in lost revenue for the home construction industry.  

• Budget 2015: $1.1B deficit, tax hikes, job cuts 
• 3 ways you'll notice the HST increase on big ticket items 

The potential loss was a big item at the Canadian Home Builders Association (CHBA) conference in St. John's on Tuesday.  

Some at the conference are worried that the two-per cent tax hike will drive people to use under-the-table contractors to try and save money on what is — for many, the biggest investment they will ever make.

Steve Porter, past president of the CHBA, said for people building a home, the tax increase is going to be a hard pill to swallow when it comes into effect in January 2015.

"Right now, what that two-per cent increase has done is immediately put an extra $5,500 or $6,000 on the price of an entry level home."

Randy Oram of Karwood Contracting in Paradise said there are two possibilities of how people will react to the impending HST increase.

"Is it going to get people to jump right away to get in before this tax hike?" he said. "Or is it going to impact our business in the future?"

The impact Oram was referring to is the possibility that people looking to save money may hire contractors willing to work for cash under the table.

Trying to warn people of the risks of cash deals

CHBA Director of Communications David Foster thinks there may indeed be increased demand for cash deals that skirt the tax altogether.

"Folks who already feel that are somehow justified in evading taxes by paying cash, obviously they'll feel more justified in evading more taxes," he said.

"The problem is they're not really seeing the risks involved in what they're doing."

In Newfoundland and Labrador, about $640 million is spent in the underground economy every year. Of that, $180 million is spent on under-the-table construction jobs, which means almost one in every $3 spent illegally in the province.

The Home Builders Association says cash deals may be getting cheaper by comparison, however Foster said people need to know that doing so comes with a certain degree of risk.

"Would you go to an unlicensed doctor because he could give you a better price on a knee replacement? Probably not," he said.  

"So you may be tempted to evade the tax, but you're evading a lot of other things, like assurance that what you agreed to pay for is what you're going to get at the end of the day."