A recent study commissioned by Revenue Canada on tax cheats confirmed my long-held suspicion that sound public policy development in Ottawa is as common as a four-leaf clover.

A company called Sage Research found that Canadians who are paying "under the table" for home renovations cost the federal treasury billions in lost tax revenues each year. Most Canadians involved in this "black market" had no qualms about doing so and felt morally justified in their actions.

What is so surprising is that such a study was conducted in the first place. What's next: Dropping apples to the ground just to reprove Newton's findings about gravity

In his book For Good and Evil, respected Canadian historian Charles Adams documented the impact of taxes on civilization for the last 5,000 years and drew up a list of 27 maxims when it comes to taxation such as:

# 8) Taxpayer discontent threatens the peace and prosperity of the social order, more so than misbehaving taxpayers do; consequently, the criminal arm of the tax system should be directed against oppressive tax agents rather than angry taxpayers.

# 12) Taxes have been, more often than not, the cause of revolution. People seldom rise up and revolt if their tax burdens are reasonable.

# 15) As taxes increase, evasion increases.

# 16) Once tax evasion is deep-rooted, it is almost impossible to root it out.

For $16.95, the braintrust at Revenue Canada could have bought Adams' book instead of contracting Sage Research to run 24 national focus groups for tens of thousands of dollars. Not a very "sage" decision on the part of Revenue Canada!

This study was a response to an earlier report from the Auditor General (AG) which estimated that the federal government loses $12 billion annually due to "underground" economic activity.

Revenue Canada's answer is to clamp down on tax evaders and undertake a communications campaign to persuade people not to evade taxes. Will it work Not a chance. Indeed one spokesman rhetorically asked "if everyone paid all the taxes they should pay, would the tax rates in Canada be as high they are "

Instead of trying to wring more from taxpayers and target the home renovation/construction industry for every last nickle, maybe Revenue Canada should learn the lessons of history and encourage its political masters (hello Paul Martin and Jean Chretien) to reduce taxes.

In 1987, Puerto Rico cut its high-end marginal tax rate from 67% to 41%.

In the first year of this cut, total tax revenues increased by 28% because that country's taxpayers declared 50% more income than they had the year before and the number of registered taxpayers went up by 30%.

Sadly, the merit in examples like Puerto Rico is ignored in Ottawa policy circles. Instead, the feds continue to investigate, audit and prosecute. They even have undercover agents "on the street." But this effort is utterly futile.

In a recent BCTV interview, the reporter asked a rogue (under the table) contractor who was interviewed in silhouette if he was worried that he would be caught. He cooly responded to the effect, "No, I'm doing under the table work for one of these Auditors right now."

Revenue Canada's approach to the underground economy is comically bass ackwards.