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CRA AND ESDC CRITICIZE THE DRIVER INC. MODEL AND PUT THE TRUCKING INDUSTRY ON NOTICE

The Driver Inc. Model

Drivers whose operations fall under the Driver Inc. Model will no longer have an easy time. The CRA says this model will soon come to an end.

The Driver Inc. model includes self-incorporated drivers that operate company vehicles. The CRA and ESDC believe the model has caused massive losses in government revenue. So the two organizations want to revisit this issue to clarify how to treat Driver Inc. drivers.

Why is the Driver Inc. Model Disliked?

The CTA believes the Driver Inc. model encourages illegal practices. Above all, the model increases the risk of tax manipulation. Drivers operating under this model do not receive source deductions from their pay. The CRA states that if an incorporated individual has no characteristics of labor which differ from those of an employee, they should be considered a Personal Service Business (PSB). For example, someone signed exclusively with a single employer falls under the term PSB. Similarly, they do not have any equipment assets registered under their name.

Characteristics of PSBs:
  • Their income tax deductions differ from those of the other corporations.
  • They are allowed to deduct most of the expenses like other corporations.
  • They 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. That said, 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.
The CTA’s Role

The CRA expects the CTA to ensure that payments for self-employed individuals satisfy the PSB criteria. The CTA wants the CRA to implement this policy at the national level to ensure it is most effective. For instance, the CRA must maintain a high level of strictness that deals ruthlessly with non-compliance.

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. Likewise, CTA president, Stephen Laskowski, believes the CTA should ensure the industry knows about the policy.

CTA Expectations

As stipulated by law, ordinary employees are entitled to benefits like overtime payments, vacation time, general holidays, termination and severance. Accordingly, 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. The EDSC wants to go further to ensure more fairness in the implementation of the policy. Additionally, they want to inspect industries that are high-risk. The trucking industry is one such example.

Collaboration of the EDSC and CRA

Laskowski believes the collaboration of the ESDC and CRA will reduce the losses the Canadian government incurs in tax revenue. In addition to that, all the players in the industry will willingly comply with the labor standards. This can help ensure fairness in taxation. 

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