Contractors evading taxes and employment fees are costing the province $308 million annually, according to a report commissioned by B.C. Building Trades, which represents about 40,000 unionized construction workers.
The study conducted by Prism Economics and Analysis based its conclusions on data from WorkSafeBC, Statistics Canada and BuildForce Canada. The estimate of losses represents the sum of unpaid income taxes, employment insurance, worker compensation premiums and Canada Pension Plan contributions.
A 2020 report from Statistics Canada estimated underground economic activity across the country totalled $61.2 billion in 2018, the most recent year such data was analyzed.
Residential construction accounted for 26.2 per cent of such economic activity and the underground economy accounted for 3.7 per cent of B.C.'s GDP in 2018 – the highest proportion among all provinces.
The pandemic has upended economic activity since then.
A survey released last week by the B.C. Construction Association estimated the total value of construction in the province is up 79 per cent over five years to reach $134 billion. And since the pandemic, it’s grown 17 per cent compared with pre-COVID levels.
The average yearly wage has also increased 14 per cent over five years to $66,591 annually.
The Prism report notes that the average earnings for a construction worker over the course of 47 weeks would have been $58,500 in 2019, with the tax obligation adding up to $14,455.
“If income is under-reported by 30 per cent, the tax obligation falls to around $8,820. This represents an illegitimate savings on income tax, CPP and EI of around $5,635 – equal to approximately $3 per hour,” the report stated.
“Contractors that deliberately misclassify workers as independent operators enjoy an illegitimate and unfair labour cost savings of 20 per cent. This is sufficient to skew many competitively bid jobs away from legitimate contractors in favour of cheaters.”
B.C. Building Trades is urging the province to form joint compliance teams comprising of officers from the Ministry of Labour, WorkSafeBC, the Employment Standards Branch and the Canada Revenue Agency to carry out spot checks and ensure compliance.
