moved that Bill C-366, an act to amend the Income Tax Act (deduction of mechanics' tool expenses), be read the second time and referred to a committee.
Madam Speaker, I am absolutely delighted today to have the opportunity to speak on behalf of the 100,000 or so Canadian mechanics who pretty much keep our world turning.
Most little children by the time they are two or three years old have figured out that wheels make the world go round. Wheels get things moving and keep them moving. Anyone who has watched a child grow up would realize that at a very early age they figure out that engines make cars, trucks and airplanes move.
The private members' bill which I have prepared and presented and on which I speak today is about keeping engines on which we depend so much moving. More specifically Bill C-366 is dedicated to the mechanics or technicians who assemble, maintain and repair the cars, trucks, heavy equipment, recreation equipment, airplanes, trains and items of convenience which add so much to enriching our lives every day. If anyone has any doubt about that they should just ask their 16-year old son or daughter who has just received their driver's licence what their wheels mean to them.
Every one of us depends on the work mechanics do every day of our lives. We depend on them to keep the wheels turning so that we can go to and from work. We depend on their work to keep the wheels turning so that we can get our groceries delivered from the supermarket, go to the hospital, bring our families together, grow our food and so much more. Now because of unfair tax treatment we may well face a shortage of mechanics which may keep us waiting for all of these things. The passage of legislation as outlined in Bill C-366, an act to amend the Income Tax Act, deduction of mechanics' tool expenses, could help to ensure that this does not happen.
Since introducing Bill C-366 in March I have received over 6,000 letters of support for this bill. I am sure many members of the House have received letters of support as well. The letters are from mechanics, from various types of motor vehicle dealers and from many other companies and organizations involved in the automotive industry, with heavy equipment, any kind of equipment that requires mechanics to maintain and repair to keep them on the road or in the air.
I have received many thousands of letters from mechanics from every province, from British Columbia to Newfoundland. These people are frustrated that even though mechanics are required to spend huge amounts on purchasing tools to get and keep a job, they are not receiving a tax deduction for these costs. As a result there is a growing shortage of mechanics, a problem that will increasingly affect all Canadians who own or lease vehicles or any equipment for that matter.
I will explain what this bill does. Bill C-366 amends the Income Tax Act to allow mechanics to deduct the cost of providing the tools for their employment if they are required as a condition of employment. The deduction encompasses maintenance, rental and insurance costs, the full cost of tools purchased for under $200, inflation adjusted, and the capital cost allowance for tools over $200.
During my presentation I will explain what my bill would do if implemented. I will demonstrate the broad support for this change. I will explain how this more than anything else is an issue of tax fairness.
This bill is necessary for several reasons. First there is the investment needed to get and keep a job. To get and keep a job, mechanics must invest an average of $15,000 in tools. Some may invest as much as $40,000. We have heard from some of these people. They must make annual replacement purchases of up to $1,000. For example, the purchase of diagnostic hand tools which are required to work on anything newer than a mid-1980s vehicle would cost between $1,000 to $1,500. Regular upgrading of software for these tools alone may cost $300 a year. This amount is disproportionate in comparison with amounts in other employee groups that are required to provide their tools as a condition of employment.
The extent of this expense is exacerbated by the relatively modest wage level of mechanics. The average income for mechanics in Canada today is $29,000 a year. Clearly this kind of extra expense without the corresponding tax deduction is a great burden. If anyone needs convincing of this I will quote from a few of the letters I have received from mechanics.
Blair McKinnon, a mechanic from Lloydminster, Alberta said “A mechanic without tools is like a secretary without computer skills. Presently, I have about $7,000 in tools. To move up in my career, in two years the amount would double. As technology changes, tools change at my expense. The tool becomes a special tool and the price goes up”.
Eddie Sagal, president of Sagal Brothers Sales Limited, Moose Jaw, Saskatchewan said “I am the New Holland dealer in Moose Jaw, Saskatchewan. I employ about 10 service technicians, depending on the vagaries of business. These technicians have a great deal of money tied up in their tools. They can easily have $10,000 invested in a starter kit, while most have $15,000 to $20,000 worth of tools. They have to buy these tools themselves and they need them for their employment.
Jay Sinclair of Clandonald, Alberta said “I have been in the automotive trade for seven years now and plan to continue for several more. I have purchased approximately $8,000 in new tools, not including replacements. Due to the rise of electronics in newer vehicles, not only is there a call for more specialized tools but also more costs in the necessary tools. I feel it is unfair that the trade that requires the most tools purchased to stay employed is not considered as an expense on an income tax form. I know my employer does not adjust my wage or any others due to the purchasing of tools”.
We clearly have a problem: low wages combined with the high cost of purchasing tools which is not deductible.
This is a tax fairness issue. In its prebudget report in December 1997 the House of Commons finance committee stated:
The Committee believes that all Canadian employees should be allowed to deduct from their income the cost of large mandatory employment expenses. Special provisions in the Income Tax Act already apply to artists, chain saw operators and musicians.
To deny this tax treatment to apprentices and technicians in the automotive industry is not only unfair, it also imposes an impediment to employment, especially for the young who might choose to work as apprentices. Revising the tax treatment of such expenses would remove the impediment that exists under the present tax rules.
That is from the finance committee. It fully supports this move.
As well, this legislation is also completely consistent with the treatment of others, for example, small business people, including farmers and other independent business people. Farmers can claim for maintenance, rental, insurance and the full cost of tools under $200 and a capital cost allowance of tools over $200. That is what I used as the model for this bill. The mechanism for handling this is already in the tax system. This change will clearly make the system more fair.
Is it not funny, is it not interesting that with this government and with this finance minister tax fairness always means an increase in taxation. Tax fairness always seems to mean a tax hike. This is one case where tax fairness should mean less taxes for mechanics who need to have this tax deduction available to them.
Again, referring to some of these letters that I received on the issue of tax fairness, I will quote Richard Gauthier, president of the Canadian Automobile Dealers Association “The Canadian Automobile Dealers Association was disappointed that the 1998 federal budget did not provide technicians with the tax changes that they deserve. We will continue to work with all stakeholders to ensure that equity and fairness is restored to the Income Tax Act by providing technicians the ability to deduct the cost of their tools as an employment expense”.
Ross Ulmer, the general manager of Ulmer Chev Olds in Lloydminster said “Every journeyman mechanic is required to have from $8,000 to $15,000 of owned tools in order to continue their trade. Most other professions, from musicians through plumbers and doctors, which require this amount of investment to continue their profession have tax incentives to allow them to deduct capital cost allowance on those items that are essential to the employment in their profession. These men and women are not asking for a break to take advantage of the tax system; they are simply asking for fair consideration given most other Canadians in similar circumstances”.
I have a whole stack of other people I could refer to, but obviously I do not have time.
The third issue is the shortage of skilled mechanics. The automotive industry is predicting that the lower enrolment rates in apprenticeship programs combined with high attrition rates in the existing workforce will soon place the industry in a severe shortage of skilled labour. Because employers require mechanics to supply their tools and because of the size of the required investment, it is difficult for young graduate mechanics to enter the labour market.
Can we really take a chance on allowing the wheels to stop? Many say no, including the House of Commons finance committee. The finance committee has stated that allowing mechanics to deduct the costs of their tools would increase enrolment rates in apprenticeship programs and would reduce what the industry considers to be a severe shortage of skilled labour.
With youth unemployment as high as it is and the fact that there is a real shortage of skilled mechanics, talented young Canadians should be able to see a career in the automotive industry. It is unfortunate a change which could be made by this government will not be put in place to ensure that this can happen.
I will quote from a letter I received from Ken Myhre, president of the Southern Alberta Institute of Technology. He says that students who enter the automotive programs at the Southern Alberta Institute of Technology and other technical institutes in Canada face a significant outlay in tool costs as a part of their training program. Only when fairness is restored to these new entrants in the workforce will we see the technicians needed to meet Canada's workforce in the automotive sector.
Farmers and other businessmen and workers employed as artists, musicians and chainsaw operators can claim their tools. They are deductible. Obviously mechanics should be able to do so. The frustration felt by mechanics across the country is highlighted by the fact that I have received well over 6,000 letters in support of the bill in about two months.
Bill C-366 gives mechanics fair tax treatment and in so doing helps to reverse the shortage of skilled labour in the automotive industry and other industries requiring mechanics.
I conclude with a quote from a letter by Sandy Warrington of Paradise Valley, Alberta, who is writing on behalf of her son Scott who has just completed his apprentice motor mechanic papers after four years. Four years ago when she and her son went to the office in Vermilion they were warned that as a parent she would have to help support Scott since as a starting mechanic he could not afford to buy his tools. No kidding. That was the understatement of the year.
I will get five minutes at the end of this hour to wrap u[. I am looking forward to hearing the members who will speak on the bill.