Q: I had a question pertaining to taxes with reference to an earlier fatwa published on your website: http://alqalam.org.uk/fatawa/can-i-be-held-liable-for-the-tax-evasion-of-my-employers/
In Canada, the Canada Revenue Agency(CRA) warns about what is called the Underground Economy (UE) [http://www.cra-arc.gc.ca/undergroundeconomy/]. In light of thi
1) Is it permissible for Muslims to avail of services where the service provider(such as a carpenter, car mechanic etc.) settles for cash alone for jobs done?
2) There have been instances in the past where I got my car fixed by a car mechanic and got repairs done to my home by a handyman etc. and paid cash only for the job to them. Should I now repent and return this money back to the CRA? What if this was done unknowingly in the past? What if I fear punitive measures from the CRA?
3) As per the information contained in the websiste above, the CRA advises individuals to report tax evasion. What is my responsibility in this case as a Muslim? Am I expected to tell on such businesses? What about businesses that I have dealt with in the past and for businesses/individuals that I come across in the future.
الجواب حامدا ومصليا ومنه الصدق والصواب
A: According to the information available on the website at the link provided:
- It is not illegal to pay for services in cash. Rather, the service provider needs to file a return to inform the CRA of the amount earned so the appropriate tax may be calculated and collected. Therefore, it is permissible for Muslims to avail of services where the service provider(such as a carpenter, car mechanic, etc.) settles for cash alone for jobs. The service provider then needs to file a tax return. Additionally, one should not assume by default that one who settles for cash is trying to avoid tax.
- There is no reason for you to repent. Nor do you owe any money to the CRA. If anything, it is the car mechanic and the handyman who need to account for their earnings.
- As mentioned, you should not automatically assume that one who takes payment in cash is trying to avoid tax. Rather, one should hold good opinions of another. If one strongly suspects that another is avoiding and there is some indication in this regard one should offer good counsel to pay the tax. If one knows with absolute certainty that another is avoiding the paying of tax then it is arguably a duty to inform the CRA. However, one should not be actively seeking to identify who is and who isn’t paying tax.
Mufti Muhammad Zubair Butt
Al Qalam Shar’iah Panel