Contract Payment Reporting for Federal Departments, Agencies, and Crown Corporations

Fact Sheet

• Introduction
• New requirement for contract payments
• Promoting voluntary compliance
• What payments have to be reported?
• Who is a contractor?
• What information is reported?

The Canada Revenue Agency (CRA) is committed to maintaining public confidence in the fairness and integrity of Canada's revenue system. In combating the underground economy, the CRA has worked with the provinces and the private sector to foster voluntary compliance with Canada's tax laws and to ensure that honest taxpayers are not disadvantaged by those who do not comply with the law.

In recent years, there has been a shift away from the traditional employer-employee relationship to contracting for employee services. The absence of reporting and the lack of a withholding of tax under the contract relationship has contributed to an increase in non-compliance. The requirement for federal departments, agencies, and Crown corporations to report on payments for service contracts will help level the playing field so that businesses can compete on an equal footing. It is our view that it will have a significant impact on compliance with Canada's tax laws, as has been the case in other countries with similar systems.

New requirement for contract payments

In the February 24, 1998 federal budget, the Government of Canada announced a new requirement for contract payment reporting. This requires all federal departments, agencies (effective January 1, 1998), and Crown corporations (effective January 1, 1999) to issue information slips for payments for service contracts that cost more than $500 annually.

Contractors must provide proper identification information as a requirement of contracting with departments, agencies, and Crown corporations.

Promoting voluntary compliance

Information about contract payments will be given to the CRA. Also, information on contractors who do not give required identification will be given to the CRA. The CRA will use the information to identify contractors who do not:

• file returns or report their full income;
• register for goods and services tax/harmonized sales tax (GST/HST); or
• report total sales and GST/HST remittances.

The CRA is committed to maintaining public confidence in the fairness and integrity of Canada's revenue system. The new requirement for all federal departments, agencies, and Crown corporations to issue information slips for payments for service contracts is an important part of the CRA's strategy to combat the underground economy. Issuing information slips to contractors will also send a positive message to honest contractors who have felt unfair competitive pressure from those in the underground economy.

What payments have to be reported?

All payments for service that cost more than $500 annually have to be reported. Payments for goods only do not have to be reported. All payments relating to the provision of mixed goods and services will be reported where there is an identifiable service component.

Who is a contractor?

A contractor is an non-registered individual, partnership, small business, or corporation that provides goods or services under contract. This need not be a formal signed contract but may be an understanding in which services are provided for payment.

What information is reported?

For more information, call the Business Enquiries line at 1-800-959-5525.