WATCH: The home construction industry accounts for more than 28 per cent of Canada’s underground economy. As Ted Chernecki reports, that’s a lot of money going untaxed.
Prime Minister Stephen Harper has delivered the first big-budget promise of the Conservative election campaign: a permanent home-renovation tax credit that will cost taxpayers $1.5 billion a year once implemented.
The new tax credit won’t help everyone paying for a home renovation as many British Columbians pay for their renos under the table.
“B.C’s underground economy is certainly larger than the Canadian average, although we don’t have a precise number for exactly how big it is,” said Jock Finlayson of the Business Council of B.C.
Stats Canada pegs the national underground economy at $42.4 billion, or 2.3 per cent of the gross domestic product. Aside from the illicit drug trade, the most money moving under the table is in residential construction at 28.3 per cent.
WATCH: Home renovation tax credit
Home renovations are a large part of B.C’s underground economy as homeowners aim to protect their assets in Canada’s hottest real estate market.
People paying under the table costs everyone else something. If enough people stop paying taxes, things can quickly get out of control. In Greece, tax dodging is a national pastime, costing the state billions of euros in revenue.
An estimated 10 billion euros in taxes never makes it into government coffers annually – a significant factor in the country’s inability to pay its roughly 320 billion euros in national debt.
“One of the characteristics of a country like Greece, though, is that it has a very, very large hidden economy,” said Finlayson. “People don’t pay taxes. The public tax collection systems don’t work very well. We’re not in that position.”
In 2007, the World Bank estimated Greece’s underground economy at 30 per cent while Canada came out at 15.7 per cent of GDP, much higher than Stats Canada’s calculation.
-with files from Ted Chernecki, Canadian Press and Associated Press
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