“You can pay me Cash, otherwise I have to add the taxes. This is the kind of phrase we’re likely to hear more and more as inflation hits a 30-year high while the informal economy is already approaching the $20 billion mark in size.
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“As part of the 2022-2023 budget, the Treasury Department estimated the size of Quebec’s informal economy at $16.8 billion for 2019 and the resulting tax losses for the state of Quebec at $2.8 billion.” Details in the Journal Jacques Delorme, spokesman for the Ministry of Finance.
With inflation at 7.3% last month after peaking at 8% in June, working below the table is becoming a lot more enticing, according to experts consulted by Le Journal.
“If there are companies that can easily compete on the black market, one day it will hurt those who don’t. It will make their recruitment more difficult. It scares me,” warns Richard Gaudreault, a partner in Lavery’s labor rights group.
“Inflation could lead companies to go in that direction. So the government has to be vigilant,” he adds.
“Inflation is likely to encourage undeclared work to increase,” agrees Bernard Cliche, Morency’s industrial relations attorney emeritus.
Excellent employment law attorney
A real magnet
For Jean-Claude Bernatchez, Associate Professor of Industrial Relations at the University of Quebec at Trois-Rivières (UQTR), undeclared work is a real magnet.
“The higher the labor costs [salaire et charges sociales]the more tempting it is for an employer to turn to undeclared work,” he says.
“Because the tax is progressive and even exponential, it can be tempting for workers,” stresses the director of the Industrial Relations Observatory.
For his part, Bernard Fortin, economics professor at the University of Laval, recalls that the phenomenon remains very difficult to measure.
The man who wrote an extensive study on the subject 20 years ago thinks that the opposite could happen in times of high inflation.
“We are in a very competitive situation that tends to bring down the informal economy,” he analyses.
“Undeclared work is widespread among the self-employed,” he continues.
According to him, the black worker resembles the figure of the “free rider”.
“While it often adapts very well to the public services it consumes, it does not participate fairly in funding them. At the societal level, the generalization of the phenomenon can lead to a loss of trust in the law and to a weakening of democracy,” says his study, which has hardly aged.
In the auto repair world, François Paradis, who runs jobs site Mécanicien.ca, notes that inflation is a killjoy.
“Of course there will be more. Everyone tries to save as much as possible. Everything’s gone up, so no 15 percent tax on $1,000, it’s $150,” he blurts out.
At the Association of Construction and Housing Professionals of Quebec (APCHQ), we claim to want to fight undeclared work.
“Among the sectors of informal economy activity in Quebec and Canada, housing construction ranks first,” according to a 2018 study by the group.
According to APCHQ, it is an encouraging fact that if between 2011 and 2016 GDP, informal economy and renovation investment had increased by 15%, 10% and 18%, underground housing construction would have fallen by 3%.
►APCHQ estimates that the introduction of renovation tax credits since 2013 has reduced the use of undeclared work.
“At least a quarter of self-employed people” in Quebec give in to temptation and thwart the tax authorities
Photo Martin Alari
Caroline Bédard, CEO of TAQ, calls for the “$30,000 rule” to be scrapped. She explains that lowering this limit to zero would drastically reduce undeclared work and increase the credibility of the self-employed.
One association is lifting the taboo on undeclared work among the self-employed by daring to say out loud that many of them are thwarting the tax authorities by ignoring the “$30,000 rule”.
“That is tempting for a self-employed person. We understand each other,” admits Caroline Bédard, CEO of Autonomous Workers Quebec (TAQ), calmly.
“At least a quarter of the 565,000 self-employed people do that,” says the chairman of a 200-strong association that wants to urge the state to recognize the status of the self-employed once and for all.
“Hairdressers, beauticians, masseurs, manicurists… are often paid either in cash or by bank transfer, which is sometimes easier,” explains Caroline Bédard bluntly.
While Omerta rules in the middle of the self-employed, Ms. Bédard does not move: you have to burst the abscess for something to happen.
The $30,000 Rule
“When someone makes websites it’s harder because the customer wants an invoice, but when it comes to quick services like dog grooming it can be easier to get it right. black,” she continued.
“Someone who makes less than $30,000 [par année] doesn’t have to calculate GST and QST, so it’s very easy to mention you’re making $28,000,” explains the woman, writing for local media.
In their opinion, lowering this ceiling to zero would make it possible to melt undeclared work like snow in the sun and increase the credibility of the self-employed.
“Sometimes a self-employed person has trouble going to the bank to buy a house because it’s more difficult to retain sales. That would help,” explains Caroline Bédard.
For Gervais Bisson, President of the Quebec Professional Association of Hairdressing Employers (APECQ), Ms. Bédard hits the mark.
“We are losing our employees asking us for black. The government knows. When it comes to chair rentals, more than 99% of landlords and renters are illegal,” he argues.
►In a brief in the House of Commons, TAQ goes so far as to say that not recognizing self-employed status amounts to outright “discrimination”.
Not immune to fans of the “sharing economy”.
Airbnb, Uber, Lyft… Workers in new “sharing economy” businesses also have tax obligations, says the Canada Revenue Agency (CRA).
“As a participant in the platform economy, you could be viewed as a self-employed entrepreneur. In this case, your tax obligations are different than if you were an employee,” emphasizes the federal body.
A self-employed person must declare income, pay applicable taxes, contribute to the Quebec Pension Plan, and maintain an accounting register.
If reporting less than $30,000 in annual income, the “small supplier” does not need To for the GST and QST files.
Subscriptions, advertising, sponsorships, sales of goods, products, clothing, trips and other gifts…
On social media, influencers engage in commercial activities when they “have an element of profit and are carried out in a sufficiently organized and commercial manner”.
THE 4 TYPES OF PLATFORM ECONOMY
1. sharing economy
Using or sharing personal property to generate income (Airbnb, Uber, Lyft, DoorDash, etc.).
2. Economy on demand
Working on a freelance basis or in the form of a short-term contract (Clickworker, Crowdsource, Fiverr, etc.).
3. peer to peer (P2P)
Selling goods from one person or party directly to another (through Etsy, eBay, Amazon, etc.).
4. Social media influencers
Revenue generated from social media from advertising revenue, subscriptions, product placement, product promotion, etc. (YouTube, Instagram, Facebook, TikTok, etc.).
Source: Canada Revenue Agency
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