Canada's Underground Economy Is More Stable Than Many Sectors: StatsCan

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Oil is in flux. Manufacturing has slumped. And real estate markets in Toronto and Vancouver can't seem to stop their upward trajectory.

But there's one segment of Canada's economy you can count on to stay exactly the same: the black market.

Statistics Canada released a report Monday showing that the country's underground economy totalled about $45.6 billion in untaxed activity, or 2.4 per cent of GDP in 2013 — a level it has remained at since 2002.

underground economy

The agency defined the underground economy as "market-based economic activities, whether legal or illegal, that escape measurement because of their hidden, illegal or informal nature."

It did not include certain illegal activities such as the drug trade or prostitution.

Statistics Canada found that three industries made up most of the underground economy value added in 2013: home construction took up 27.8 per cent, retail trade 12.5 per cent and food services and accommodation 11.7 per cent.

In other words, "home construction" would include renovations by contractors who don't charge taxes to their clients, or else don't remit the appropriate moneys back to the government, according to Canadian Business.

underground expenditures

Each household was estimated to have spent an average of $2,156 on underground economic activities in 2013.

Most of that money went to food and beverage services ($461 per household), followed by housing rentals ($406), tobacco ($211), alcohol ($160) and operating transport vehicles ($117).

Most income earned as part of the underground economy went to employees (46.9 per cent), while corporations took 28.3 per cent and unincorporated businesses 24.8 per cent.

In total, people made $21.4 billion through the underground economy — equivalent to 2.2 per cent of employee compensation GDP in 2013.

quebec gdp

Among provinces and territories, Quebec's underground economy made up the highest percentage of its provincial GDP at 3.1 per cent.

It was followed by Prince Edward Island with three per cent and 2.8 per cent in British Columbia.

As Canadian Business pointed out, the $45.6 billion spent on the underground economy represents untaxed services and transactions — and that much less money going to the government.

It's leading to a disproportionate tax burden, making some, and not others, pay for expenses like health care, public transportation and other government services.

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