Bill C-241

An Act to amend the Income Tax Act (deduction of travel expenses for tradespersons)

This enactment amends the Income Tax Act to allow tradespersons and indentured apprentices to deduct from their income amounts expended for travelling where they were employed in a construction activity at a job site that is located at least 120 km away from their ordinary place of residence.

[Mark Maxson]

This is again a place where the CRA would have to ultimately interpret the language, but one possible implication is that the language under the existing deduction is explicitly intended to say that you moved closer to the work site. You found temporary lodging that was closer to the work site than your home was. In Bill C-241, if the work site is at least 120 km away from where you live, travel to and from the work site is deductible.

It's unclear to me whether this means that, if you have lodging near the work site, you can deduct your commuting expenses back and forth from your temporary lodging to that work site. That might be 15 kilometres, because that work site is 120 km away from your home. I don't know if that's the intention or not, but that would be one possible difference. The existing deduction is only for travel between your home and the work site.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

It is possible that the CRA could adopt the same regulation as is identified in Bill C-19 as a way of interpreting what's in Bill C-241.

In terms of minimum required distance, I think that one's pretty straightforward. There is a slight difference in the distance, but we're talking about a 30-kilometre difference.

Another main characteristic is the distance calculation method. In the table, it says that, under the existing law, it's calculated on the one hand between the ordinary residence and each temporary work location or, on the other hand, between each temporary lodging and each temporary work location, whereas in Bill C-241 it's calculated between the ordinary place of residence and the job site.

Are there any practical implications for those differences?

[Mark Maxson]

I guess I can give a first answer, but others may wish to jump in.

In terms of practical differences, it's challenging to lay out the concrete implications. One of the difficulties in terms of lacking some definitions is that essentially it means that the Canada Revenue Agency will be required to put forward interpretation and guidance as to what the different terms mean, and that's not something that we can do ourselves.

As an example, Bill C-19 defines “construction activities” and Bill C-241 does not, so in the case of Bill C-241, the CRA would have to put forward guidance in terms of exactly what that means. Whether it ends up being different in certain cases is hard for us to say, and that would be true of certain other undefined terms as well. That's a potential confusion for the taxpayer question—

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much, Mr. Chair.

I don't think there's a lot to say that hasn't already been said, but I do think that one of our tasks here is to try to appreciate the differences between what was passed in Bill C-19 and what's proposed in Bill C-241.

Thank you to our committee analysts, who prepared a pretty decent table that lays them side by side. I want to walk through that table while we have the government's own tax experts here so they can give us a sense of what these differences in the table will mean practically for folks who are filling out a tax return.

In terms of characteristics to compare between the two acts, first in the table are conditions related to the taxpayer. In the Bill C-19 version, you have to be an eligible tradesperson—earn employment income as a tradesperson or apprentice in the construction activities referred to—and then there's a regulation that defines that. In Bill C-241, you have to be employed as a qualified tradesperson or an indentured apprentice for construction activities at a job site.

Is there any real practical difference in those two definitions that the committee should be aware of?

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Mr. Leblanc, Mr. Maxson and Ms. Gwyer, thank you for being here to answer our questions.

Mr. Leblanc, thank you for your preamble, first of all. I thank all three of you for all the information that you have subsequently provided to the committee.

The purpose of a committee's work is to improve bills, to make sure they meet their objective and to amend them as necessary to make them the best they can be in the end.

So I was a little surprised when you said at the beginning of your presentation, Mr. Leblanc, that the bill referred to several terms that were not defined. Obviously, in our role as legislators, we work with a team of legal experts. So if these terms are not already defined in the Income Tax Act, for example, it would be preferable that they be defined in the bill. If senior officials feel that there are problems with the definitions, it would be important for your team to provide the committee with the technical details in writing, such as the terms that would benefit from being defined and the definitions that could be proposed. In this way, we could propose amendments as needed to improve and clarify the bill.

I also have a message for the government party. It is important in the culture of committee work to take bills from members of the opposition parties seriously. I think it is best to assume that if the bill goes to committee, it can just as easily be sent back to the House afterwards. If the government party finds that a bill has problems in its technical aspect or its applicability, it is in committee that negotiations should take place with a view to amending and improving it. This is why work on bills is done in different stages in the House of Commons.

It would be nice if Mr. Leblanc could clarify in writing to this committee what major problems the Department of Finance sees with the technical aspects and applicability of this bill, as well as provide definitions that could be added. Then, between meetings, all parties could consult on whether or not Mr. Lewis and colleagues think it is worthwhile to adopt such clarifying amendments. That would make for a better bill and quicker passage.

Also, Mr. Leblanc and other colleagues have raised the issue of double deductions. Of course, when Mr. Lewis introduced his bill in the House, the budget implementation legislation had not yet been introduced. Obviously, work could have been done in parallel. It is a collateral effect if you end up with two competing pieces of legislation where the deductions can add up. I am sure that is not the purpose of this bill, given that it was tabled in the House before the budget implementation legislation was introduced.

In that regard, it would help us if Mr. Leblanc and his team could formulate an amendment for us that we could introduce to ensure that, if Bill C‑241 comes into force, there will be no possible double-dipping, given the measure contained in the budget implementation legislation.

I know that I have made many comments and that my statement also contained many requests, but I now have a technical question, which is not easy to answer.

I imagine that this is not the first time in the House of Commons that two similar bills have been passed in a reasonably short time that open the door to a double deduction, when that was not the intention in the first place. To your knowledge, has this ever happened in the past? If so, what solutions have been provided by the House or its committees to remedy it?

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

As policy-makers we try to have every safeguard possible for the individuals we're talking about, and those are the construction workers. At the end of the day, we talk about our labour market, and we even talked a little bit about education, the lack thereof in K to 12 and the trades' being incorporated into the education system. Your answer obviously puts a flag up to ask how we can eliminate those possibilities, and there are many other cases with this bill. I think it's great that we brought this forth and we're moving in this direction, but no cap on the amount of expenses is a very interesting thing. If you travel on Prince Edward Island, the 120 kilometres pretty nearly takes you from one end of the island to the other.

Are there any additional safeguards with Bill C-19's labour mobility deduction that aren't included in Bill C-241, and could you elaborate on those? Could you give us a list of those items that you're aware of that could present challenges?

[Mark Maxson]

Maybe I can take this question.

As my colleague was indicating, there is a general rule in the tax system in Canada that limits deductions for employees to a greater extent than for self-employed workers. Part of the rationale behind that is that there is an expectation that employers are generally going to provide employees the tools necessary to do their jobs and are going to take on some of those costs on behalf of their employees in many cases. Certainly in this context, we've understood from stakeholders that these are often workers who are not employed by a specific employer, but who are rather perhaps moving from a region where they normally work with one or more employers and then taking on a job with a new employer in a different region. In that circumstance, that new employer may not necessarily be providing reimbursements of travel expenses. They may or may not, depending on what they feel they need to do in order to attract the workforce necessary.

The bill doesn't specifically place any constraints on whether employers do or do not provide that assistance, but both Bill C-241 and the deductions that are currently in law do prevent someone from receiving an allowance for travel and also claiming the deduction. The existing deduction passed through Bill C-19 also includes a restriction that there can't be any reimbursement that is, in law, different from an allowance. Bill C-241 doesn't include that language, but it would be a question of interpretation for Canada Revenue Agency to work through what would happen in that type of situation.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

This is a very interesting discussion and an interesting bill to hear about. Coming from a small island, I know that travel for work is really important. I think it's important for all parties, as it was put in the BIA, which is extremely important. I was very glad to see that.

I want to continue on somewhat with what Mr. Lawrence said with regard to the larger corporations or the employers. Maybe I'll go to Mr. Leblanc.

In your opening remarks, you spoke about the differences between Bill C-241 and the existing labour mobility deduction that was implemented through Bill C-19. One area that I'm particularly concerned about is the lack of protections that would prevent possible double-dipping by those corporations, by receiving compensation through an employer and via the tax credit. I guess my concern—in line with Mr. Lawrence's on the opposite side—in particular is that employers may choose to cut back on their compensation pre-emptively on the assumption that workers will access this benefit as well.

Am I understanding the legislation correctly? If so, could you elaborate?

[Pierre Leblanc]

Thank you for the question.

I think there are differences between the bills, and I think you've been talking about some of them over the last hour. In what is currently law, there is a $4,000 limit, which was considered reasonable by the government, versus there being no limit proposed. We think the safeguards that are in current law will allow for a more solid measure.

The other thing I'd reiterate is that if Bill C-241 passes, you will then have two deductions in law. That will raise issues.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you. I just wanted to clarify the statement that it was a tax credit. That was in fact incorrect with respect to Bill C-241.

I'm sharing my time with Mr. Lawrence. Thank you.

[Lindsay Gwyer, Director General, Legislation, Tax Legislation Division, Tax Policy Branch, Department of Finance]

Both the existing labour mobility deduction that was implemented through the Budget Implementation Act and this deduction in Bill C-241 are deductions, so they're both amounts that an employee deducts from income and not tax credits.

[Pierre Leblanc]

Thank you for the question.

I'll turn it over to one of my colleagues, but I also want to emphasize that what we have in the tax system currently is a deduction. It's not a credit, if we are reflecting back on the last hour. Just as Bill C-241 is proposing a deduction—

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

I have just one quick question. I don't see in Bill C-241 where it says that it's a tax credit. In fact, it adds proposed paragraph (q.1) to subsection 8(1), which specifically says that the deduction is permissible as long as the claimant does not claim those expenses as an income deduction or a tax credit for the year under any other provision of the act.

I just want to see if you want to clarify that remark, because this is not a tax credit. This would be a tax deduction under this act.

[Pierre Leblanc]

Thank you, Mr. Chair.

Thank you to all members of the committee for inviting us to be with you today on this very important topic.

It was really interesting to hear the debate and the discussion over the last hour. I think it underscores the importance of this policy issue, certainly, in the current labour market context and the value of the member's contribution in bringing this bill forward.

Maybe I can just start by reiterating what the current law of the land is. The current tax system has a labour mobility deduction for tradespeople.

In Budget 2022, the government proposed a labour mobility deduction for tradespeople, similar in form and intent to the measure that Bill C‑241 seeks to introduce.

On June 23, 2022, Parliament passed Bill C‑19, which included amendments to the Income Tax Act to create tradespeople's mobility deductions, as proposed in Budget 2022.

Again, it's part of the current tax system. In fact, the Canada Revenue Agency is currently finalizing forms and administrative procedures, including guidance, to allow taxpayers to claim the labour mobility deduction for the 2022 tax year this coming spring. This is the time of year when the CRA is getting everything together so we can be ready for filing season.

Compared with the deduction that would be enacted by the bill you are considering today, Bill C-241, the labour mobility deduction that is already in law provides greater clarity on the definitions of some concepts and includes safeguards that contain its scope and cost. For example, Bill C-241 doesn't define travelling expenses or construction activity and uses the term “tax credit”, which is not a defined term in law. The bill also requires no minimum period of relocation, places no limit on the number of trips or the amount of expenses that could be deducted in the year and makes no allowance for trips that might span multiple tax years.

If Bill C‑241 were enacted, taxpayers would be using two substantially similar deductions that serve the same purpose. This would likely cause administrative difficulties for the Canada Revenue Agency and create confusion for tax filers, especially since the 2022 tax filing season will soon begin.

Once again, thank you. We will be happy to answer any questions that members may have on this or other elements of Bill C‑241.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chatel.

We want to thank you, MP Lewis, for coming to the finance committee and for bringing your bill to us, Bill C-241. Thank you for your testimony and for your answers to the many questions here today. Thank you very much.

Members, we're going to suspend now before we move into panel two.