Chapter 4

The Vancouver Sun had an article about under reported taxable income on January 27, 2007. The underground economy is not only about drug deals and illegal affairs. It also includes the legal transactions that happens everyday.

Canada Revenue Agency has an eye on economic transactions, usually carried out in cash, that are not reported on an income tax return. Economists have estimated, the size of the underground economy in Canada to be approximately 15 percent of gross domestic product.

Ken Peacock, the director of economic research at the Business Council of B.C. said there could have been $25.2 billion worth of unreported activity in 2005 alone. B.C. probably has the largest underground economy in Canada, not only because of illegal deals, but also because of the high proportion of self-employed workers and the large service sector in B.C.

The people in the service industry has the greatest opportunity to under report his taxable income because there could be no paper trail of transaction when a service is delivered. For example, when you pay your hair stylists, how often do you receive a receipt?

In 2004 to 2005, the CRA convicted 211 people of tax evasion, raising an additional $11.6 million in tax revenues, plus $10.9 million in fines. Out of the 211 people, 21 was sent to jail, Bradley Alvarez, communications officer, said. He also said people who do not report income may be receiving government tax credits and rebates to which they are not entitled for.

Similar to the assignment we did at the beginning of the chapter, the report from Vancouver Sun and the articles from the assignment, both reminded us that ALL income from employment, business, property and other miscellaneous sources. Some examples might be tips from working, rental income, whether from an illegal or legal suite.

The underground economy obviously needs some clean up. Canada’s current tax system is self-reporting. Will it help if every T-4 has to undergo some kind of system by some government trustees or officials before they are officially submitted?

Why do these things happen? Don’t you know the services that the government provides, like health care, education , legal aid, all come from tax dollars? If people are under reporting, how are these services going to keep running? Under reporters are just going to take away services indirectly. The real sufferers are the honest tax payers who are probably going to pay more tax because others are not paying their own share.

So if you want to reduce your tax payable, try doing some charity donations instead. =D