Life underground

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Dec 01, 2016

On December 1, 2016, CPA Canada released an article by Yan Barcelo, a journalist in Montreal, that discusses the shadow economy. Nobody knows the actual size, and estimates vary widely. But what’s certain is that it is a form of tax evasion.

In the article, Mr. Barcelo writes that housecleaning, though deeply embedded in the underground economy (UE), is but a small fraction of the UE whole. The major sectors are residential construction (28% of the total UE in 2012), finance, insurance, real estate, rental, leasing and holding companies (or FIRE, 13%), retail trade (13%) and accommodation and food services (12%).

How big is the UE? No one seems to agree on a number, and evaluations vary widely — if not wildly. The basic evaluation is from StatsCan, which places it at $45.6 billion in 2013, or about 2.4% of GDP (approximately $1.8 trillion). Other studies throw in higher numbers. Analyzing retrospectively the years 1998 and 2004, a 2010 Bank of Canada study rates the amount of underreported income at between 14% and 19% of GDP.

Review the article on the CPA Canada's website.

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