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Underground Contractors

The Ontario government is cracking down on the underground construction industry, saying unregistered home builders who work on the sly, undercharging legitimate contractors, are costing the economy up to $2-billion in lost taxes each year.

Ontario Labour Minister Steve Peters said Monday the government will share information with Tarion Warranty Corp. in order to ferret out unregistered home-building sites and make sure that contractors comply with provincial laws.

The government will let Tarion know about potential violators and Tarion will send one of its inspectors to investigate. A ministry inspector would then take over the case.

“The information sharing agreement we are signing today will help enforcement efforts to clamp down on unregistered builders who may be working in the underground economy, help safeguard construction workers, level the playing field for legitimate contractors and protect the home-buying public and our economy,” said Mr. Peters.

Tarion is a non-profit company that acts as a guarantor of builders' warranties for new homes. It registers new home builders and vendors and investigates illegal building practises. All residential builders in Ontario must be registered with Tarion.

According to the government's press release, the so-called “underground economy” is costing the construction sector between $1-billion and $2-billion annually in lost sales through unpaid taxes, premiums, and other fees that legitimate businesses pay to all levels of government.

Unregistered contractors are builders who work under the table, often for cash, don't pay insurance, employment or pension premiums, as well as federal or provincial taxes. Because they work under the table, they charge significantly less money for building a deck or fixing a roof than a regular home builder or contractor would.

The demand for contractors has gone through the roof in recent years, as the boom in Canada's housing market fuelled a frenzy of home renovations. Canadian residential renovation spending jumped 8.7 per cent to $32-billion in 2006, according to Statistics Canada.

And although housing starts and sales activity are showing signs of easing, interest rates are still low and Canadians are expected to keep pushing forward with their home renovation projects this year and next. Home builders in cities across the country have complained of a shortage of skilled labour, saying there is not enough manpower to meet demand.

Economists estimate that the average amount Canadians spend on their home renovations is $12,000. The most popular rooms to renovate are the kitchen, bathroom, and basement.

- from Canadian Press



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