Tax Evasion in Canada’s Sharing Economy

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Canada’s sharing economy is booming. According to Statistics Canada, almost 3 million Canadians spent over CAD 1.3 billion participated in the sharing economy [1]. Companies like Uber and Airbnb are revolutionizing their respective industries. And with Uber set to enter into British Columbia by the end of this year [2], the impact of the sharing economy will only grow.

However, there is a major problem that tax collectors are starting to find – Canadians aren’t reporting income generated from the sharing economy. According to an article from the CBC, the misconception occurs because many people are new to self-employment[3].

Uber has solved the problem for sales taxes, though. Since it doesn’t add in the cost of taxes to the amount the rider pays, what Uber does is take the money straight from the consumer to Uber itself, and then pays the rider with taxes deducted. So, essentially the driver is getting paid less than what the consumer pays. Unfortunately, this isn’t as simple to do with income tax, as it is far more complex than sales taxes.

To counter some of these problems Airbnb is sending out reminder emails letting  hosts know to declare their income. Meanwhile, Uber and Airbnb both are partnering with different tax preparing companies, like TurboTax and H&R Block, to help their users get the taxes right [4].

As the sharing economy continues to explode, it will be interesting to see how tax collectors respond, to ensure tax evasion doesn’t continue to grow with it. Thus far it still largely remains an underground sharing economy unknown to tax authorities.

 

References

[1] http://www.cbc.ca/news/business/statistics-canada-sharing-economy-1.4004993
[2] http://www.huffingtonpost.ca/2017/03/07/bc-taxi-industry-uber_n_15223560.html
[3] http://www.cbc.ca/news/business/taxes/tax-time-2016-uber-drivers-1.3462006
[4]http://globalnews.ca/news/3305907/canadians-in-the-sharing-economy-are-running-out-of-excuses-not-to-pay-taxes/

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