Underground Economy

What would you do with $84.7 million?

If you were the B.C. government, you could use it to fund the New Westminster and Powell River school districts for an entire year. Or you could buy 17 MRI machines for public hospitals. You could even help the Ride to Conquer Cancer double all the money donated for cancer research over the past nine years.

Instead, $84.7 million is the estimated cost to taxpayers of the underground economy in the residential construction sector – in 2001 dollars. No, that’s not a typo –those are 2001 dollars. That’s because 2001 was the last time a joint compliance team of representatives from the B.C. Ministry of Labour, Human Resources Development Canada, and the Canada Customs and Revenue Agency looked at this economic epidemic. Back then, it was estimated the B.C . government was losing $44.5 million annually in unpaid taxes, and WorkSafeBC was losing $40.2 million in unpaid premiums.

The underground economy has other costs, too. Legitimate businesses have a difficult time competing with unscrupulous contractors whose prices don’t include the requisite payroll deductions and other required taxes.

Those working for these small and large contractors also lose out. They are often purposely and inaccurately categorized as independent contractors themselves, even though they are employees. As a result, they aren’t covered by workers’ compensation and are more vulnerable to injury and unemployment. In addition, basic employment standards around pay, hours of work, and working conditions are often ignored.

Consumers who participate in the underground economy are another at-risk group. For example, they can’t remedy a shoddy job without admitting their own part in the illegal exchange.

Then there is the cost to greater society, arguably the biggest victim in this sad affair. Unpaid taxes mean less money for vital programs such as health care, education, child care, employment insurance, and pensions. These programs support kids, seniors, and other vulnerable populations.

To ignore the underground economy is to ignore the practices of tax evasion, money laundering, and human trafficking.

The underground economy has no place in a fair and just society.

Resources

• Business Council of B.C.: The Underground Economy
• Statistics Canada Study on the Underground Economy in Canada, 1992-2012
• The Underground Economy: Be Part of the Solution