British Columbia replaced its provincial sales tax (PST) with a harmonized sales tax (HST) in 2010, but then reverted to the PST in 2013. B.C.’s shadow economy – consisting of hidden and unreported economic activities, both legal and illegal – has surged since then. Shadow economic activities range from unreported business income or rent, off-the-books employment and undeclared tips, to illegal activities such as drug trafficking, unlicensed gambling and money laundering. Since by its design the PST encourages rather than discourages hidden transactions, its return may have contributed to B.C.’s shadow economy boom.
