Finance Committee on Nov. 2nd, 2022

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

Thank you.

You still didn't point to any significant issues. The double relief can certain be taken care of. That's not a really relevant issue and certainly can be resolved easily by the government. We would certainly support the government's passing of such legislation to resolve that quickly.

With respect to that, can you tell me the difference between $3,999 and $4,001? What makes it so that the $4,001 shouldn't be deductible, but $3,999...? What is the possible relevance of this?

I'll let you answer.

[Mark Maxson, Director, Employment and Education, Personal Income Tax Division, Tax Policy Branch, Department of Finance]

Thank you for the question.

Certainly there is not a substantive difference between the $4,000 and the next dollar. It is common in tax law for different provisions to contain maximum amounts. It's a typical practice when it comes to tax measures. It's not universal. As Pierre mentioned, this particular amount is something that was deemed reasonable not just by Parliament, I guess, in passing Bill C-19, but it was the amount that was put forward by the CBTU in terms of their financial projections as a typical amount. We think it's a reasonable amount to cover most circumstances.

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

Thank you.

We believe that for a hard-working tradesperson it should be limited at $4,000. What about for a multi-million dollar business owner or billionaire? What's their limit?

[Lindsay Gwyer]

I guess you're talking about situations where someone is carrying on a business. In those situations, it's a question of what's reasonable in the circumstances.

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

Just to be clear—let's not try to play games—there is no limit. Is that correct?

[Lindsay Gwyer]

There's no dollar limit in general for business expenses. It depends on what's appropriate.

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

If a hard-working skilled tradesperson is going from coast to coast and building infrastructure, helping businesses get started or, as we heard, helping to construct housing or long-term care facilities, they'll be capped out at $4,000 because it's an arbitrary number. Whereas if that's a business, and they're trying to deduct those same expenses for a worker who worked for them, they would not be capped. Why are we giving millionaires and billionaires a pass when we're hammering skilled trades workers?

[Lindsay Gwyer]

The tax system is set up in such a way that people are limited in what deductions they can make with respect to employment income in general. Most expenses related to employment income are not deductible unless they're specifically enumerated exceptions in the Income Tax Act, whereas business is more of a bigger picture of what expenses are relevant to computing the profit of a business, and that builds off accounting principles. It's really a difference in the way the system is set up. Deductions like this one, the deduction that was in Bill C-19, are really exceptions to the general rule that employees are not able to claim deductions against their employment income.

[Mark Maxson]

Just to build on Lindsay's comment—

[The Chair, Liberal, Peter Fonseca]

I'm sorry. That's the time. We're well over time.

Thank you, Mr. Lawrence.

We now are moving to the Liberals. I have MP MacDonald for six minutes, please.

[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?

[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.

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]

Sure. Thank you for the question.

As you mentioned, there is a $4,000 cap in the existing deduction. There is also a restriction that effectively says you can't deduct more than half of the income you earned from the job. The idea there is essentially that we recognize that people travel for a variety of reasons all the time, and I think we would all think it reasonable that people who are choosing to incur expenses to earn income aren't going to travel just to earn income if they're going to spend more on the travel and the expenses to get there. This provides a simple catch to make sure that the income this person would earn from the travel would actually be significant relative to the expenses they incurred.

There's also a restriction in the existing deduction that limits it to a minimum travel of 36 hours, which speaks to what we heard from stakeholders in terms of being able to move for temporary jobs and projects away from where they normally live as opposed to just ordinary commuting. All employees may have commuting expenses and some people may live far from where they work, but those aren't typically deductable by most taxpayers and that's not really the gap that this provision was meant to address.

Finally, I would flag that there's a provision that says the deduction is available for travel to a work site in a city where the individual isn't normally working. Again, this was getting at the sense that this is about travelling away for temporary jobs, and it's not about commuting to your day-to-day job that you normally work at. That latter provision was modelled after an existing rule in the tax recognition for the U.S.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Maxson and MP MacDonald.

Now to the Bloc, MP Ste-Marie, please, for six minutes.

[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?

[Pierre Leblanc]

No such case comes to mind at present.

I don't know if my colleagues are aware of any such situation that has occurred in the past, but I can let them answer.

[Lindsay Gwyer]

I can't, offhand, think of a specific example. It might be important to clarify that. Both of the deductions provide that expenses that are deducted under one cannot be deducted under the other, so the same expense couldn't be deducted twice under the two different deductions.

The concern is more that there are two different deductions in the Income Tax Act that have very similar purposes and apply in many of the same situations and very similar situations. From an administrative perspective and from a public confusion perspective, that's the concern.

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

Thank you for the response.

So, I think the committee will have to clarify these kinds of things.

Is my time up, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

You have 30 seconds.

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

In that case, I'll stop now and pick this up in the next round.

Thanks again to the witnesses.

[The Chair, Liberal, Peter Fonseca]

All right. Thank you, Mr. Ste-Marie.

We're moving to your partner next to you, NDP member MP Blaikie.

[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?

[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]

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?