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CRA AND ESDC CRITICIZE THE DRIVER INC. MODEL AND HAVE PUT THE TRUCKING INDUSTRY ON NOTICE
Drivers whose operations fall under the Driver Inc. model have been having an easy time for far too long but this is soon coming to an end says the CRA.
The Driver Inc. model constitutes self-incorporated drivers that operate company vehicles and it has come to the attention of the Canada Revenue Agency (CRA) and the Employment and Social Development Canada (ESDC) that the model is causing massive losses in government revenue. As such, the two, CRA and ESDC, have had to make clarification on how Driver Inc. drivers will be treated.
As far as the Canadian Trucking Alliance is concerned, the Driver Inc. model is encouraging illegal practices that create the possibility of taxes being manipulated. This is because the drivers operating in this model are not deducted any source deductions from their pay. The CRA is in agreement with this claim, stating that an incorporated individual with no characteristics of labor that differ from those of an employee, then the individual is considered a Personal Service Business (PSB). An example of such an individual is one who is signed exclusively by a single employer and does not have any equipment assets registered under their name.
The following are the characteristics of a PSB:
From the start of the 2018 tax year, the CRA expects the CTA to ensure that payments for self-employed individuals that satisfy the PSBs criteria be recorded on a T4A slip. But for this to be effective, the CTA expects the CRA to implement this policy at the national level with a high level of strictness that deals ruthlessly with non-compliance.
So far so good, the CRA has done a great job of implementing the rules in a clear manner that stipulates both the tax filing and enforcement points of view. According to the CTA president, Stephen Laskowski, it is the CTA’s responsibility to ensure that the industry is enlightened about the policy.
Just as the ordinary employees are entitled to benefits like overtime payments, vacation time, general holidays, termination and severance as stipulated in the law, the ESDC expects the CTA to extend the same entitlements to incorporated drivers. This will create a level playing ground where compliance and adherence to the policy will no longer be a struggle. To further ensure more fairness in the implementation of the policy, the ESDC is willing to go to the extent of inspecting those industries that are considered to be high-risk like the trucking industry.
As far as Mr. Laskowski is concerned, the collaboration of the ESDC and the CRA will help reduce the losses that the Canadian government incurs in tax revenue. In addition to that, all the players in the industry will willingly comply with the labor standards and this is because fairness in taxation will be achieved.
The Driver Inc. model constitutes self-incorporated drivers that operate company vehicles and it has come to the attention of the Canada Revenue Agency (CRA) and the Employment and Social Development Canada (ESDC) that the model is causing massive losses in government revenue. As such, the two, CRA and ESDC, have had to make clarification on how Driver Inc. drivers will be treated.
As far as the Canadian Trucking Alliance is concerned, the Driver Inc. model is encouraging illegal practices that create the possibility of taxes being manipulated. This is because the drivers operating in this model are not deducted any source deductions from their pay. The CRA is in agreement with this claim, stating that an incorporated individual with no characteristics of labor that differ from those of an employee, then the individual is considered a Personal Service Business (PSB). An example of such an individual is one who is signed exclusively by a single employer and does not have any equipment assets registered under their name.
The following are the characteristics of a PSB:
- Its income tax deductions differ from those of the other corporations
- Not allowed to deduct most of the expenses like other corporations
- Pay a combination of federal and provincial tax rated at 33%
- CRA expects the business to report payments of services provided by a different business, although they will not be subject to payroll deductions
- In the event that the corporation pays wages and salaries, then the withholding of income tax, CPP and sometimes EI are applied
From the start of the 2018 tax year, the CRA expects the CTA to ensure that payments for self-employed individuals that satisfy the PSBs criteria be recorded on a T4A slip. But for this to be effective, the CTA expects the CRA to implement this policy at the national level with a high level of strictness that deals ruthlessly with non-compliance.
So far so good, the CRA has done a great job of implementing the rules in a clear manner that stipulates both the tax filing and enforcement points of view. According to the CTA president, Stephen Laskowski, it is the CTA’s responsibility to ensure that the industry is enlightened about the policy.
Just as the ordinary employees are entitled to benefits like overtime payments, vacation time, general holidays, termination and severance as stipulated in the law, the ESDC expects the CTA to extend the same entitlements to incorporated drivers. This will create a level playing ground where compliance and adherence to the policy will no longer be a struggle. To further ensure more fairness in the implementation of the policy, the ESDC is willing to go to the extent of inspecting those industries that are considered to be high-risk like the trucking industry.
As far as Mr. Laskowski is concerned, the collaboration of the ESDC and the CRA will help reduce the losses that the Canadian government incurs in tax revenue. In addition to that, all the players in the industry will willingly comply with the labor standards and this is because fairness in taxation will be achieved.
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