"Off-the-books" economic activity in B.C.: Who's not paying their fair share?

Highlights

• British Columbia has the dubious honour of being home to Canada’s sketchiest economy. B.C. has by far the largest proportion of hidden and unreported market-based economic activities – both legal and illegal – among the provinces.

• “Off-the-books” transactions were worth around $11 billion in 2018, or 3.7% of provincial GDP. Although B.C. accounts for only 14% of Canada’s population and 13% of national official GDP, it represents an outsized 18% of nation-wide hidden transactions.

• B.C.’s vulnerabilities are concentrated among individual employees and unincorporated businesses, particularly those involved in residential construction, property rental, unlicensed cannabis, unlicensed tobacco, and food and beverage service.

• Hidden economic activities may be costing British Columbians an estimated $3.7 billion per annum in uncollected tax revenue. This includes $1.6 billion of lost federal revenue and $2.1 billion of lost provincial revenue.

• For comparison, $2.1 billion would pay for one-fifth of provincial-level personal taxes, half of provincial-level corporate taxes, one-quarter of B.C. sales taxes, two-thirds of property taxes, or any of B.C.’s fuel, carbon, or property transfer taxes.

• The deep COVID-19 recession is placing extraordinary stress on the finances of households, businesses, and governments. Now more than ever, governments should ensure everyone is paying their fair share. They should address the tax and regulatory design and compliance flaws that allow hidden and unreported transactions to flourish.