Claiming the Taxes on Illegal Activity: Good, Bad, or Ridiculous

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Recently this article was published and it got me thinking: what is wrong with our government? The person in question was found guilty of tax evasion for working with a prostitution company in the 1980's. Who in their right mind would believe that people would openly and willingly admit that they are earning money illegally and that they should pay their taxes on it? The whole point about doing illegal activities is to make more money in a shorter amount of time. Things like drug or weapon selling, money laundering, and prostitution do not typically show up on income tax papers. The person in this article was found by a judge to have evaded tax and is required to pay back all that is owed, including penalties.

Let's face it; if anyone one of us were making a living off of doing an illegal activity, we sure as heck would not think about claiming that on our taxes. It doesn't seem right to, for example, issue a cheque for $200,000 in taxes we perceive as owed to the government from our activities while submitting our T4's from Indigo and asking for a tax credit on renovations we made on our homes. It just doesn't make sense. So, in an effort to see the good and bad in a situation like this, comparisons will be made between the two sides.

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The Good:

1) More tax money - If people pay the taxes on illegal activities, more money will go to the government and (hopefully) help pay for whatever the government needs. This could include creating more initiatives, helping with infrastructure, or simply paying down debt.

2) No tax evasion - One of the greatest mob bosses in the history of the Mob was Al Capone, who was brought down on tax evasion charges. If taxes are paid, then that at least is one less worry off of the mind of those invested in some illegal activities.

3) Fairness and keeping people away from crime - According to the Canadian Revenue Agency (CRA), the taxing of illegal activities is to help lead people away from engaging in criminal activity and to make it fair that all Canadians pay their taxes.

The Bad

1) More tax money- This is a repeat because it could really go either way. If more people give money to the government, they could also then swindle more away from the people, making themselves richer in the process. Want proof of corrupt politicians? Quebec. Enough said.

2) Openly admitting guilt - Once payment is sent for taxes perceived as owed from a 'side project,' the government will now know about said activity. Unless it has a solid cover story or some kind of front like the Mob, it will be caught and shut down eventually. While apparently a separate entity from the rest of the government, the information it gathers is not as restrictive as it states.

3) Seriously, why? - Let's be honest; starting an illegal operation is a way to get as much money as possible as fast as possible. Why would anyone even think about taxes on an illegal operation?

Trying to make sense of what the Canadian government is doing is honestly head scratching. The facts page on the CRA website clearly shows that there is something being done about it, which is great for all the straight shooters out there, but they clearly are hoping for too much.

Think about it; in provinces like Quebec, where Montreal mayors change almost as fast as the lights on St. Catherine Street, the OQLF are funded heavily yet only ever amounted to creating the biggest joke in Western society today, and construction companies consistently draining taxpayers' money, do criminals really care about tax evasion? Let's go a step further.

Politicians are people that help fight for the people around them or in their sector by creating laws, bylaws, and regulations that help everyone. Some of these politicians have lands, properties, or companies that can be affected by said laws, bylaws, and regulations.

If we take, for example, Pierre Karl Peladeau, the current front runner for the leadership of the PQ party, things can start to get interesting. He was the president of Videotron and Quebecor media, two of the largest telecommunications companies in Quebec, as well as CEO of Hydro Quebec. Now, how many times have those large communications companies fought and mostly won against the government to not allow new communications companies into Quebec? If he were to come into power, imagine what kinds of things he would change simply so he can use politics to fill his pockets while bankrupting others, but still be legal because he helps make the laws.

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While there may be some contempt for the PQ government in the above words, it is true that laws can effectively be changed by those in charge anywhere. Therefore, if laws can be changed, why not change them for the better?

So, instead of legalizing the act of prostitution but not the selling of it in Quebec, either ban or allow it entirely. If it is completely criminalized, then once a prostitution worker is caught you can seize all assets associated with the money earned illegally. If it is legalized, the government can watch the organization more closely as well as properly tax its earnings.

Personally, allowing it and making it a legitimate business seems more profitable and easier than the reverse for Quebec. Obviously it needs to be properly instituted and created, but with strict regulations it could potentially generate a lot more for the government than is currently being seized.

At any rate, it is silly to attempt to sway criminals away from illegal activities by instituting penalties and jail time for tax evasion. Criminals who are caught aren't going to worry about their taxes as much as what their business partners may do now.

Photo Credits: Eric Draper - The Diet; Mark Gstohl - Police Costumers; Samounet - Photo de Pierre Karl Péladeau

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