Mr. Speaker, I am pleased to stand today to discuss the issue of whether the government should consider making employee provided transit passes an income tax benefit.
In my many years in municipal politics I supported this position. As the president of the Federation of Canadian Municipalities I lobbied the government on this very point.
My friend across the way talks about the support of the FCM and the Canadian Urban Transit Association. There is no question that the government should consider the motion proposed by my hon. colleague.
The House of Commons Standing Committee on the Environment and Sustainable Development has stated that it is incumbent on the government to ensure that environmental policy is not hampered by fiscal policy. It is unfortunate that at the moment Canada has not joined other industrialized countries such as the United States and several countries in western Europe in making employee provided transit passes a non-taxable benefit. Under current federal income tax policy, employer provided parking benefits are officially taxable, but most employees qualify for exemptions. Employer provided transit passes are fully taxed, providing an estimated $570 per year federal tax advantage to the average automobile commuter.
The value of an urban parking space and GST avoidance result in an average $1,726 annual financial incentive to commute by automobile rather than public transit.
For those of us who live in the greater Toronto area or the Vancouver area or in Montreal, we certainly know the impact of congestion of automobiles.
This proposal would assist in our Kyoto commitments. It has been estimated that as many as 300 million kilometres annually of urban automobile travel within 10 years would be eliminated if this proposal were adopted.
It has also been estimated that it would reduce by 35% the expected growth in peak period travel in our major urban centres. We would save billions of dollars in road construction costs as well.
It would also prevent tens of thousands of tonnes of greenhouse gas emission. Clearly the battle to deal with reducing C02 emissions is going to occur in our cities. Therefore this proposal will assist in that reduction to meet our commitments, those targets at Kyoto.
It would relieve traffic congestion, thereby reducing transportation costs. It would enhances economic efficiency. No doubt it would lead to a reduction in health costs and fewer respiratory related illnesses.
Current taxation policies favour the automobile over public transit. Let me elaborate. We could amend the Income Tax Act so that employer contributions toward employee transit commuting expenses are not treated as a taxable benefit. Alternatively, the same effect could be achieved by the Ministry of Finance at the administrative level publishing a statement of regulations in an interpretation bulletin. In either case employers could pay some or all of the cost of employee transit commuting expenses without listing them on employee T-4 tax forms as taxable benefits and employees would pay no income tax on them.
The proposal has the support of the Canadian Urban Transit Association, the Transportation Association of Canada, the House of Commons Standing Committee on the Environment and Sustainable Development and the national round table on the environment and the economy. I had the pleasure of participating in that round table when I was president of the FCM in November 1996. The climate change task group of the national air issues co-ordinating committee also supports it.
Making transit benefits tax exempt leverages a much greater value by giving employers an incentive to offer such benefits. A typical transit benefit would total $480 per year plus $182 in tax exemption for a total benefit of $662.
Experience in other countries such as the United States and western Europe indicates that many employers would offer transit benefits if they were tax exempt. This is an effective strategy for increasing transit commuting, particularly for communities that develop other incentives for transit use.
For this reason transit benefits are tax exempt in most other developed countries. Several European countries provide tax credits to employers or employees for transit pass purchases. U.S. income tax law exempts up to $65 worth of employee transit benefits per month, about $88 Canadian, although it would be a little higher now.
Transit benefits can take various forms. Employers could give free monthly transit passes, tickets, tokens or transit fare vouchers including bus, rail, ferries and form van pools, but not car pools.
In the United States transit benefits typically average $20 to $30 U.S. per month or about half the full price of a transit pass. Employers typically offer transit benefits to an employee who agrees to commute by transit at least a few days a month. The results of a transit benefit tax exemption are that transit voucher programs are being established in many major American cities. Transit vouchers are produced by transit agencies or independent firms and they are equivalent to a money order or a cheque that can only be used for purchasing transit passes or tickets.
As an example, an employee might receive a $30 voucher with his or her monthly paycheque. They may pay the balance, perhaps another $30, to purchase passes or tickets from any local transit agency. These programs are popular because they minimize employer administrative costs and they allow one instrument to be used in an area with multiple transit companies.
I believe this proposal clearly has merit. This proposal, as the hon. member indicated, should be considered. We need to look at those benefits and say that fiscal policy should not hamper good public policy in terms of improving and encouraging public transit, improving our environment and improving the overall health of Canadians.
I suggest current federal tax policy is both economically inefficient and unfair because it provides automobile commuters with a valuable benefit that is unavailable to other modes. This policy is at cross purposes with municipal, provincial and even federal transportation objectives to develop a more efficient and sustainable transport system.
In conclusion, federal income tax exemptions have a significant leverage effect. They induce employers to provide benefits that meet exemption criteria and as a result most Canadian employers are offered parking benefits but virtually none are offered transit benefits. The total value of untaxed parking benefits represents $1,726 in annual economic incentive to commute by automobile rather than by public transit. We need to look at this and we need to take action. I hope the House will consider the motion and support it.