Unit 2: Underground Economy Flashcards
Underground economy
The underground economy: any activity that is unreported or under-reported for tax and HST purposes
Often called “moonlighting” or “working under the table”
Underground economy activities include:
- Bartering
- Failing to file tax returns
- Omitting an entire business activity from your tax return
“skimming “ a portion of business income from what you report on your taxes - Not reporting a portion of employment income (tips and gratuities)
Underdeveloped countries tend to have more _____ underground economies and lower GDP and more developed countries are the opposite
Developed underground economies and lower GDP (because most is unaccounted for)
What are the costs and benefits of the underground economy for consumers?
Costs: Consumer has unlimited liability, open to lawsuits, no warranties, no receipts for defective products/services, no health insurance (working under table), work safety compromised, dangeorus working conditions
Benefits: Avoid gov. taxes, particpate in bartering, skimming financial reporting=short-term gain, workers without legal documents may find jobs more easily
What impact does the underground economy have on government revenues?
Underground economy causes taxes and other economic activity to be unreported to the government, which in result decreases government revenues. This results in a significantly decreased amount of money the government is able to spend on city services and citizens. The government having less money to spend can cause an increase in taxes. Workers that are paid under the table don’t pay income tax, causing revenue to fall further.
How can this affect the citizens of a country?
The underground economy lessens government revenue to be used on city and citizens services. Less government revenue to spend on healthcare, childcare, employment, insurance, and other social services for citizens. Citizens can have less access to efficient necessary services such as public transportation and longer waiting times for things like passport renewals and surgeries. Poorer living and working conditions for vulnerable citizens. Increase in taxes.
Sharing economy
An economic system in which assets or services are shared privately between individuals, either free or for a fee, typically by means of the internet
- Interactions are peer-to-peer, facilitated by a community-based online platform
Examples of ride-sharing
Ridesharing (Uber, Lyft)
Carsharing (Turo, Zipcar)
Apartment/House Renting (Airbnb, Vrbo, HomeExchange)
Knowledge and Talent-Sharing (Taskrabbit, Zaarly, Fiverr, Upwork)
Reselling (Craigslist, Vragesale, Facebook Marketplace)
Peer-to-Peer Lending (Lending Club, Prosper, SoFi)
Crowdfunding (Kickstarter, Indiegogo)
Identify and explain the different problems that come with referring to the ‘sharing economy’ as the ‘sharing economy.’
Referring to the sharing economy with its current terminology endorses the business practice of those in that space. Without qualifying that terminology, the term is being reinforced. This reinforced the public relation efforts of companies like Uber and Airbnb. The sharing economy brings altruism to mind, 40% of people described the term in ways that emphasized sharing, mutual help, or charity.
What does the article suggest as more accurate names for the ‘sharing economy’?
The “on-demand service economy” is a more accurate term for the sharing economy. The public recognition of the term “sharing economy” is why Statistics Canada uses it as well. Other terms: “the digital economy”, “the peer–to-peer economy.”
According to Raph Assaf, what is the reality of what an Uber driver makes compared to what is promoted by the company?
Uber is promoting paying $20, $30, while fares are extremely low. The driver calculated that over the past two weeks, he’s worked 40 hours, picked up 130 fares, and made a little over $500. After car payments and gas, he’s been working for less than $8.
Do you think Uber actually cares about their drivers? Explain why or why not, referring to evidence from the article.
Uber doesn’t care about their drivers. Uber is a business model that has strong advertising to attract people. But, drivers are responsible for maintenance, upkeep, insurance, and safety of their car that shifts the liability from the company to the worker. Uber also discourages customers from tipping drivers, so they can’t make additional money than what Uber gives them from their fares. There isn’t a fixed minimum wage, and drivers almost always make below minimum wage. Uber only prioritizes their customers by ensuring low ride prices.
What impact has Airbnb had on the housing market in Canada’s three largest cities: Toronto, Montreal, and Vancouver? Use evidence from the article and your understanding of supply and demand in your response.
Airbnb has caused a decreased housing supply in Canada causing a housing shortage and crisis. In Montreal, new research says a small number of property owners are most successful on Airbnb, and are eating up Canada’s housing supply in the three largest cities. Urban planners from McGill looked at Airbnb trends in Montreal, Vancouver, and Toronto. They noted a 50% increase in the number of short-term rental properties every year.
Based on the information provided in the article, would you consider Airbnb correctly named as part of the ‘sharing economy’? Explain why or why not, referring to evidence from the article.
- Not sharing economy
As mentioned there are a small set number of hosts that account for the majority of the Airbnb revenue across three cities. The Airbnb industry is reserved to an exclusive group of individuals that have the assets and money to buy and rent out extra properties. Airbnb is NOT an example of the sharing economy because it’s a group of individuals that are using their properties to create revenue through short-time rentals. Because the properties are being used temporarily by different people, there are no permanent residents, which is decreasing the supply for permanent residence properties rapidly, because of the increase in demand in temporary accommodations.
More developed nations have
Higher GDPS and not developed underground economies and vice versa
