A summary of the article
- This article raises concerns regarding the growth of the underground economy that are disrupting the legal economy. For instance, Handy and Uber are tech companies that claim to operate as platforms meant to connect consumers and service providers in this age of technological advancement.
- Whether these companies are following the rules is still a debatable matter in the Canadian economy. According to these tech companies, service providers operate as independent contractors and not employees. Consequently, they are not entitled to substantial employer contributions such as, for example, the Canada Pension Plan. It could be that, higher taxes are driving new enterprises to venture into the underground economy as explained by Hipkins (Lu, 2015).
- The new companies venturing into the underground economy tend to disrupt the profit model of companies operating in the legal economy. While tax should be considered as a moral responsibility, the high taxes could be driving new companies into the underground economy.
- Most companies that venture into the underground economy lack a strong capital base compared to large companies in the legal economy. At the moment, confusion exists within the Canadian government regarding how to classify the business model of new tech companies such as Hand and Uber. This is because new technologies are emerging, and startups continue to look for capital investors. As such, the government needs to look at ways of targeting the thriving underground economy as a way of leveling the tax across all sectors that generate income to the Canadian economy (Lu, 2015).
The sharing economy
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- This model in the economy denotes the sharing of, for example, human or physical resources. Similarly, the model adopted by Hand and Uber can be categorized under, the shared economy. The challenge of the shared economy is that it could lead to price increases and market volatility as evident in the complaint launched by Molly Maid against new tech companies such as Handy.
- The platform offered by Handy, for instance, is more flexibility and meets the needs of clients in a rapidly changing dynamics related to the delivery of services compared to the traditional methods. In essence, the model in the economy appears to satisfy customer needs. Clients today are attracted to services that enhance cost saving and convenience (Lu, 2015).
- Advancement in technology makes it easier for companies such as Handy and Uber to thrive in the sharing economy. However, as companies thrive in the sharing economy, other firms operating in the legal economy are disrupted in terms of their profit model.
- There are a number of reasons why the underground economy seems to attract new companies and capital investors. This is because, the startup is not involving compared to operating in a legal economy. In addition, the increase in the unemployment rate also creates an avenue for new tech companies to thrive in the underground economy.
- It is upon the Canadian government to come up with modalities of creating a level playing field, so that other firms in the legal economy do not feel shortchanged. For instance, by introducing tax breaks, companies in the underground will start embracing the model for doing business in a legal economy (Lu, 2015).
- The tax break plays a role in creating employment opportunity and prevents the resurgence of companies shifting to the sharing economy. While tax break is a burden to the government, it can be funded by increasing collection of tax as the legal economy continues to grow (Lu, 2015).
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