Finance Committee on Nov. 2nd, 2022

[Julie Dzerowicz, Liberal, Davenport, ON]

That's debate.

[The Chair, Liberal, Peter Fonseca]

MP Masse, MP Chatel has the floor.

[Sophie Chatel, Liberal, Pontiac, QC]

I'm sorry, but you had the floor and I respected you, Monsieur Masse. Now I would like to be respected too.

Thank you.

My riding, like yours, Mr. Lewis, is rural. So it is very important to me that we invest in our tradespeople. In that regard, I fully support you. It's so important to address the labour shortages in the construction trades.

That is why I supported the labour mobility deduction, which is capped at $4,000. However, the deduction you propose would be unlimited. It could be up to $100,000 or whatever. As a tax practitioner who advocates prudent management of government spending, I believe that taxation must have safeguards and that it is crucial to protect its integrity.

I congratulate you anyway, because I fully share these values of protecting the rights of workers and allowing them to deduct these expenses from their salaries. However, as we say back home, the road to hell is paved with good intentions. As a tax professional, I have concerns.

You said earlier that Canadians who go to work in the United States only pay taxes in the United States. Excuse me, I'm going to put my tax hat on again to tell you that's not true. Article XV of the Convention between Canada and the United States of America allows Canadians to work in the United States and pay their taxes in Canada in certain circumstances.

In fact, your bill would allow Canadian workers to go to work on American job sites. This would mean that we would lose tradespeople for our own work sites here in Canada. Unfortunately, I find this to be a flaw in your bill that should be corrected.

I am also concerned that there would be an unlimited deduction in addition to the $4,000 deduction, which would allow workers to double dip. This is another flaw in your bill. You have to choose one of the two deductions; you can't choose both.

Actually, there's even a triple deduction. I know the Conservatives like triples. Indeed, the employer could reimburse the employee and deduct that expense from their own profits, which would be a third deduction. You offset the allowance, but not the expense reimbursement. This triple deduction is another flaw in your bill, which is absolutely well-intentioned, I repeat. I would support it if it were fiscally prudent, but it threatens the very integrity of our tax system by allowing very significant loopholes.

Do you have any comments on these three loopholes that concern me, as a tax professional, as well as the potential exodus of workers to U.S. construction sites?

[Chris Lewis, Conservative, Essex, ON]

Of course.

[The Chair, Liberal, Peter Fonseca]

Could we have a short answer?

[Chris Lewis, Conservative, Essex, ON]

I get a very short answer and that's good, because I was going to dive right into the weeds on the tax side of things too.

[Voices]

Oh, oh!

[Chris Lewis, Conservative, Essex, ON]

I'll answer your question. With regard to losing folks to the United States, I don't know, but I will tell you one thing. When I went to the States to work, every three years I had to get an L-1A visa. You can't go across the border and go to work just because you are a skilled trades folk. I think that is a non-starter of a concern. It's just not going to happen. You're going to get thrown in jail over there.

The second thing I would say is that we cannot live and make all decisions in fear of what might go on next. I drive a pickup truck. It doesn't mean that I couldn't speed or it doesn't mean that I couldn't drink. It doesn't mean any of these terrible things that I could do. No, I put my seat belt on, I drive the speed limit, I get to work and I come home. Just because there's an opportunity doesn't mean that people are going to do it.

Thank you, Chair.

[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.

[The Chair, Liberal, Peter Fonseca]

I call this meeting back to order.

I will just check with the clerks to confirm that all witnesses have been tested for today's meeting and that they have passed the test.

Have they?

[The Clerk of the Committee, Ms. Carine Grand-Jean]

Yes.

[The Chair, Liberal, Peter Fonseca]

Thank you, Carine and Alexandre.

With us today are witnesses from the Department of Finance. We have Lindsay Gwyer, who is director general, tax legislation division, tax policy branch. Also with us are Mark Maxson, who is the director of employment and education, personal income tax division, tax policy branch; and Pierre Leblanc, who is the director general, personal income tax division, tax policy branch.

Do the witnesses have opening remarks? Yes, okay.

We will start with Ms. Gwyer.

Go ahead with your opening remarks.

[Pierre Leblanc, Director General, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

Actually, Mr. Chair, I'll give the opening remarks if that's okay with you.

[The Chair, Liberal, Peter Fonseca]

I'm sorry, Mr. Leblanc.

Yes, for sure, definitely. I apologize. I just wasn't sure who would be making the opening remarks.

[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, Mr. Leblanc, for those opening remarks and to all the witnesses for being with us here today.

As you may have heard in our first panel—and it will be the same in our second panel—each of the parties has up to six minutes to ask questions to the witnesses. We're starting with the Conservatives. I have MP Morantz for six minutes.

Go ahead, please.

[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 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]

But to clarify, this—

[Pierre Leblanc]

—what was legislated in Bill C-19 is a credit.

On your question, let me turn to one of my colleagues.

[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.

[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.

[The Chair, Liberal, Peter Fonseca]

MP Lawrence, go ahead.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much. I appreciate everyone's being here today.

I failed to hear in your testimony any significant or substantial reason that would stop this legislation from helping workers. You brought up a couple of administrative challenges, but I didn't see anything that would absolutely stop this legislation from helping skilled trades workers, who desperately need this help.

[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.