Article: Lawyers.comSM Survey Finds Wealthiest Canadians Most Likely to Purchase Products or Services for Cash Without Paying GST
“The underground economy is booming, thanks to the 40 per cent of Canadians who, at some point, according to a new survey by lawyers.comSM, have not paid tax on goods or services bought with cash.”
It is well known that people hate paying taxes, but when the numbers (percentage of Canadians who have avoided paying taxes on sales) are shown, the amount of money lost in the underground economy is evidently quite high. In fact, British Columbia (at forty five percent) has the highest percentage of people who have avoided paying sales taxes. Recently on a survey conducted by Lawyers.com (an online directory of lawyers and law firms in Canada), it is shown that wealthy Canadians are more likely to make purchases without paying taxes. The survey also showed that men take advantage of the underground economy more so than women. Despite the punishments involved with not paying taxes, two-fifths of the population has violated that crime without being detected. Some of these punishments, if the person is caught, can be as serious as serving two years in prison, and receiving a $10000 dollar fine. Even though these punishments exist, we rarely see them being put into effect.
Relation to Chapter 4
From the three different kinds of tax systems that exist, (progressive, proportional and regressive) as mentioned in the textbook, Canada uses the progressive tax system where a person basically pays the a percentage of their income according to how much he or she earns. With all that is happening in the article mentioned above, it sort of defeats the purpose of having a progressive tax system in the first place because the people who are supposed to be paying the most taxes (the rich people) are the ones who aren’t paying it. The textbook describes taxes as being “imposed in order to provide revenue for government, and also to influence economic conditions.” The problem is, most of this “revenue” for the government, is being provided by lower income individuals. “The main objective of any tax is that it be equitable or fair”, but that is a very hard concept to achieve considering the amount of tax revenue lost in the underground economy. Things like Hospitality, Bartering, and Contracting work, are all a part of the Underground Economy that digests a large portion of the tax money.
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3 comments:
I like the point you brought up about how rich people not paying for tax "defeats the purpose of having a progressive tax system in the first place." There is a small percentage of the population with a high income, but because of their income, they pay the largest amount of tax. It'd be possible to try to fix this problem by tracking down a list of transactions made by people, but I think a good way would be to increase random audits on people who are statistically shown to be more likely to cheat on taxes. This would not solve the problem entirely though, but as long as there are taxes, there will be people who try to find ways around paying them.
Hello, you make a good point about how rich people are avoiding taxes. It is true that because of the underground economy the progressive tax system we use will become useless. Rich people have a better chance at avoiding taxes since they have more resources to do so. many people probably feel like it wouldn't matter if they do it, but they dont realize that a large portion of the population also does it at the same time. All of this adds up, costing the government millions in revenue. There is no way to stop this illegal act since these transaction are pretty much untracable. Unless there are no taxes or people just miraculously become more honest about their income, the problem will continue to exist.
I agree with your point about how the progressive tax system doesn't work especiallly with the underground economy. In my opinion, this is the only time I would think the regressive tax system would work whereas the underground profiters would actually shed some dough to the government LEGALLY without any tax invasion and maybe the proportional tax would work just as well. If it was my decision, I would hire tons of people to do spot checks and investigate the people who work the professions who are likely to invade taxes the most. On another note, I must say if i was the consumer I wouldn't mind paying cash to save a little bit of money unless I'm super worrieda bout the quality and gurantee of the work. Otherwise, when people like me, the consumers, who continue to agree to paying in cash and whatnot, will basically continue supporting the people who invade taxes.
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