Paying cash to contractor to avoid tax?
His contractor let him know that he can pay up to 50% cash and save the tax on that amount. There is a signed contract with payment schedule. Contractor says they will provide receipt should my friend choose to pay cash.
I should note that the 50% cash is not to be paid upfront. It follows the original payment schedule of equal amounts every week until the job is finished.
How can that be? Doesn't his contractor have to pay tax on materials/labour? Is there a downside to this?