Underground Economies And Its Effects On Canada

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This paper looks into the different types of underground economies and its effects on Canada, and argues that underground economy is destructive to the society and should be eliminated as much as possible. With evidence from Statistics Canada, it shows the percentage of how much the black market is affecting the GDP. It also discusses the main causes as to why some sellers choose to be in the underground economy and how they could benefit from it temporarily. Underground economies in a long run are invisible actions that creates very visible consequences, including the vicious cycle of low tax revenue, less quality and quantity in public goods, discourage in money circulation, drawbacks to GDP, lowered employment rate and a society that…show more content…
All kinds of goods and services are available in an underground economy. The most commonly traded goods and services are goods and services that are available in the official market, but at a lower cost in the black market; or goods and services that has a limited supply in the official market, but are sold at an elevated price in the Black market. Despite the trade being illegal, as long as both the seller and buyer comes to an agreement on the price, they trade privately with cash to avoid being detected. Although many sellers get away with this, at the end of the day underground economy is a continued cycle of affecting the country and its citizens, including sellers and buyers in the black market, mostly its tax revenues will be affected, then the GDP, and finally its citizens. All Black market trades are done in the shadows, but if the root causes of the continued growth in the underground economy are known, things could be done to eliminate the number of black market trades as much as possible. Underground economy is disruptive to the society, to avoid these negative effects; it should be eliminated as much as possible. The unreported economy causes tax evasion and that affects everybody in Canada. There are various negative effects regarding the black market; doubtful the most significant one is the effect it has on tax revenues- the unreported economy. Tax revenue is the sum of all different kinds of taxes collected
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