An Act to amend the Income Tax Act (deductibility of expense of tools provided as a requirement of employment)

This bill was last introduced in the 37th Parliament, 1st Session, which ended in September 2002.

Sponsor

Lorne Nystrom  NDP

Introduced as a private member’s bill. (These don’t often become law.)

Status

Not active, as of Feb. 6, 2001
(This bill did not become law.)

Elsewhere

All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Tax On ToolsPrivate Members' Business

February 28th, 2001 / 5:45 p.m.
See context

Etobicoke North Ontario

Liberal

Roy Cullen LiberalParliamentary Secretary to Minister of Finance

Madam Speaker, I thank the member for Acadie—Bathurst for his initiative in bringing the motion before the House of Commons.

I also congratulate him on his good news.

Mechanics' tools and tools required for work seem to be a very topical debate right now. The motion proposes that the Excise Tax Act be amended to eliminate the application of the goods and services tax and the harmonized sales tax for employees in trades who are required as a condition of their employment to provide on the job tools.

Currently GST-HST relief is provided via a rebate mechanism for the GST-HST paid on those employee expenses that are deductible in computing an employee's income from employment for income tax purposes.

It is recognized that presently there are a number of private members' bills, as I mentioned before, Bill C-222, Bill C-244 and Bill C-225, before the House with respect to the income tax treatment of the tools of mechanics and others.

As the GST and the HST rules should be consistent with those for income tax purposes, it is prudent to await the outcome of the debates and the outcome of the discussions on these private members' bills. I am sure the hon. member would agree.

Nevertheless, it should be stated that any tax policy with respect to the matter of employee tools should be fair. In addition, any changes should also be relatively simple to administer and enforce for the Canada Customs and Revenue Agency, and easy to comply with for taxpayers. In this regard, any changes with respect to the tax treatment of employee provided tools should take into account a number of factors.

First, any measure in this regard should be targeted to extraordinary expenses. In other words, the cost of the tools in question should be beyond those that most employees must incur in the normal course of employment. The motion before the House today would provide GST and HST relief to all employees irrespective of the size of their expenditures instead of targeting relief to those who incur extraordinary expenses relative to their income.

For employees with tool expenses comparable to those incurred by other employees this would be unwarranted as tax relief for normal employment expenses is provided through the basic personal exemption amount. That is the case with apprentices. Perhaps a special case needs to be considered for those with low incomes and high tool costs.

Second, effective control mechanisms would have to be put in place. Under existing rules for income tax purposes the employer must certify certain expenses as eligible for deduction from employment income. This is important as many items provide a personal benefit even when they are required for work. One would need to ensure that any tax relief is provided only for items required as a condition of employment and not for those purchased for personal use.

This would be very difficult to do because many items could be purchased mostly for personal reasons even if they are used for work. For instance, the computers home based employees need to purchase are available outside working hours for personal use. In these circumstances providing full tax recognition and a GST-HST employee rebate would be unwarranted.

Finally, any new measures would have to both take into account the existing capital cost allowance provisions and appropriately deal with change of use and transfers to other arms length persons.

The provisions needed to address these issues would inevitably be very complex since they would need to account for the large variety of items for which tax relief may be claimed and the different work situations in which such items are used.

To understand this, let us consider the extensive provisions needed to ensure the equitable recognition of automotive expenses. Provisions governing the deductibility of employee equipment expenditures and corresponding GST-HST employee rebates would apply to hundreds of disparate items and numerous occupations.

As members can see, this is a complex issue with many aspects that need to be examined carefully. In particular, with respect to the GST-HST employee rebate, I hope the hon. members agree that it is essential to ensure that the GST-HST rules be consistent with those for income tax purposes.

As a result, I think members of the House would agree, given the number of other private members' bills dealing with the tools of mechanics and others, that it is prudent to wait for the outcome of the aforementioned private members' bills, for the deliberations of the House and for any government response that might deal with the issue of income tax deductions for employee tools.

Income Tax ActRoutine Proceedings

February 6th, 2001 / 10:05 a.m.
See context

NDP

Lorne Nystrom NDP Regina—Qu'Appelle, SK

moved for leave to introduce Bill C-225, an act to amend the Income Tax Act (deductibility of expense of tools provided as a requirement of employment).

Mr. Speaker, the bill would amend the Income Tax Act. It would provide for the very fair provision that mechanics should be able to deduct the cost of their tools when they have to purchase these tools for work purposes. Again, it is a bill that is based on equity for all Canadians.

(Motions deemed adopted, bill read the first time and printed)