Honourable senators, I am pleased to rise today as the sponsor in the Senate of Bill C-241, An Act to amend the Income Tax Act (deduction of travel expenses for tradespersons).

I want to thank the Standing Senate Committee on National Finance for all their work on this bill and for taking time to examine it carefully. I also wish to acknowledge the critic of this bill, Senator Dagenais, and the work that he has done to date.

As senators are aware, the primary intent of Bill C-241 is to amend the Income Tax Act to allow tradespeople and indentured apprentices to deduct from their income amounts expended for travelling where they were employed in a construction activity at a job site that is located at least 120 kilometres away from their ordinary place of residence. This, colleagues, is the nature of the work for many tradespeople. They may be called a “journeyman” or a “journeyperson” specifically because their vocation usually means travelling from one job site to another.

Many tradespeople do not have a fixed location where they show up for work, like you and I do. They work at one site until that job is completed, and then they move to the next one. Sometimes those job sites can be hundreds or even thousands of kilometres away from their home. The problem is that, for the longest time, our tax code did not recognize this need for tradespeople to travel to temporary job locations as a legitimate employment expense or, at least, not for those who were employees.

While these expenses can be readily claimed by tradespeople who run their own businesses or who operate as independent contractors, they could not be claimed by those who work as employees and are often not covered by their employers. In today’s workplace, this is a serious inequity which forces tradespeople who work as employees to absorb costs that neither independent contractors nor business owners are required to absorb. And this is the inequity that Bill C-241 seeks to address. Bill C-241 will amend subsection 8(1) of the Income Tax Act by adding the following to include a tradesperson’s travel expenses:

(q.1) where the taxpayer was employed as a duly qualified tradesperson or an indentured apprentice in a construction activity at a job site that was located at least 120 km away from their ordinary place of residence, amounts expended by the taxpayer in the year for travelling to and from the job site, if the taxpayer

(i) was required under the contract of employment to pay those expenses,

(ii) did not receive an allowance in respect of those expenses that is not included in computing the taxpayer’s income for the year, and

(iii) does not claim those expenses as an income deduction or a tax credit for the year under any other provision of this Act . . . .

The government acknowledged the need to address this situation and introduced the Labour Mobility Deduction for Tradespeople in Bill C-19, which was part of Budget 2022. This legislation became law and currently allows an eligible tradesperson to deduct reasonable expenses for transportation costs for one round trip from the ordinary residence of the eligible temporary lodging for each eligible temporary relocation; meals consumed by the eligible tradesperson during those round trips; and temporary lodging costs, provided the eligible tradesperson maintains their ordinary residence as their principal place of residence throughout the eligible temporary relocation.

This was a step in the right direction, but it did not go far enough for a number of reasons.

First of all, the Labour Mobility Deduction for tradespeople limits the deduction to a maximum of $4,000 per year. This works out to less than $350 a month. In many cases, that is a fraction of the costs that can be incurred for temporary relocation. Some job sites are hundreds or even thousands of kilometres away, and some can only be accessed by airplane. However, if you are a tradesperson working as an independent contractor, the expense limit poses no problem because it does not apply to you. If you are working as an employee, then your allowable expenses are capped at $4,000 a year, even if your expenses legitimately exceed that amount.

Bill C-241 removes that cap because it is arbitrary and unnecessary. I would note that not only does the cap not exist for independent contractors, but Canada Revenue Agency, or CRA, already has stringent guidelines in place for claiming such expenses. These include keeping detailed records and receipts, ensuring that the expenses are reasonable, legitimate and defensible, and do not include personal expenses. If enacted, these same parameters will apply to expenses claimed under the provisions introduced in Bill C-241.

The second shortfall with the existing Labour Mobility Deduction is that it requires that the tradesperson remain at the job site for a minimum of 36 hours in order to be eligible for the deduction. This is problematic because some job sites are remote and do not come equipped with accommodations. In some cases, the tradesperson could be forced to travel home each day and yet be ineligible to claim that travel expense. Alternatively, some jobs simply may not require 36 hours to complete, leaving the tradesperson unable to claim their expenses. Bill C-241 removes this unnecessary restriction.

Third, the Labour Mobility Deduction requires the tradesperson to travel 150 kilometres in order to be eligible to claim their expenses. Bill C-241 reduces this to 120 kilometres.

Colleagues, I want to underscore again that if a tradesperson works as an independent contractor or owns their own business, then none of these restrictions apply. They can jump in their company truck and claim every kilometre that their vehicle travels, including depreciation, leasing costs, insurance, maintenance and fuel. If they don’t have a company truck, they can use their personal vehicle and log their mileage and expenses. Everything can be deducted proportionate to their business use of the vehicle. They can deduct their full accommodations and even their dry-cleaning, towing bill, parking fees, car rental, public transportation charges or airfare, if necessary.

Under the existing scenario today, you could have two tradespeople show up at the same temporary job site, coming from the same location, travelling the same distance and even making the same amount of money, but if one is an employee and the other is an independent contractor, then only one of them can claim their legitimate expenses for travel, meals and accommodations.

How is this fair? Tradespeople often face significant out-of-pocket expenses, with limited means to recoup these costs within the existing tax structure. By introducing a provision specifically tailored for tradespeople and apprentices, Bill C-241 aims to bridge this gap, ensuring that the tax system evolves in tandem with the realities of the modern workforce.

The disparity in how the tax system treats independent contractors and employees with respect to expense deductions is fundamentally unfair. It overlooks the economic realities faced by tradespeople and apprentices whose roles are crucial to Canada’s infrastructure development and maintenance. This inequity not only imposes undue financial strain on these workers but also discourages mobility, which is essential for addressing regional labour shortages and ensuring that critical projects can proceed without undue delay.

During the committee hearings on Bill C-241, a number of concerns were raised about this legislation, which I would like to briefly address.

The first was the potential for confusion among taxpayers. It was noted that the introduction of Bill C-241 alongside the existing Labour Mobility Deduction would lead to confusion. Tradespeople might struggle to understand which deduction to apply for, as both deductions serve similar purposes but have different criteria and limitations.

I would propose that this concern is unfounded. First of all, the Income Tax Act is not known for its clarity and brevity. If simplicity and lack of confusion are now the measure by which we determine what is acceptable or unacceptable tax policy, then we can probably strike down 90% of the Income Tax Act. Secondly, the expense deductions provided by Bill C-241 are far simpler to understand than those provided by Bill C-19. Third, if passed, the deductions provided by Bill C-241 will not create uncertainty because they will be the clear choice of every tradesperson who qualifies for them. A simple comparison will quickly show them that Bill C-241 provides more complete coverage for their legitimate employment expenses, and this will be the deduction of choice.

The second concern we heard at committee was with respect to administrative complications for the CRA. It was suggested that the absence of a cap on eligible travel expenses in Bill C-241, unlike the Labour Mobility Deduction which caps at $4,000, could introduce administrative challenges for the Canada Revenue Agency. This includes managing and verifying claims without a predetermined limit, potentially increasing the complexity of tax administration.

To tell you the truth, I find this objection a bit puzzling. It was made to sound like unless we put a dollar limit on this expense that tradespeople will be able to go wild and claim whatever they want. They’ll now be able to drive across the country to their grandma’s house, pound a few boards on her deck and deduct the entire cost of the trip. This is absurd, and anyone who has had any dealings with the CRA knows this.

With the introduction of Bill C-241, the general framework and principles for claiming employment expenses under the Income Tax Act would still apply with additional specific requirements as outlined in the amendment.

For example, first, documentation and record-keeping. Taxpayers would need to maintain thorough documentation of their travel expenses, including receipts, contracts and records that substantiate the expenses claimed under this new provision. This is consistent with the CRA’s general requirement for substantiation of deductions and credits.

Second, employment contract requirements. As per the amendment, the expenses must be required under the contract of employment. This mirrors the existing requirement for other employment-related deductions where there must be a clear obligation for the employee to incur the expense as part of their employment duties.

Third, no double-dipping. The provision explicitly states that these expenses cannot be claimed as an income deduction or a tax credit under any other provision of the Income Tax Act for the same year. This principle is consistent with the broader tax law framework to prevent the same expense from being used to obtain multiple tax benefits.

Fourth, t2200 forms. Although not explicitly mentioned in Bill C-241, you can expect that the CRA will require a t2200 form, which is a Declaration of Conditions of Employment, or a similar form of certification from the employer. This form is generally needed for employees to substantiate claims for employment expense deductions, as it verifies that the employee was required to incur specific expenses as part of their employment duties. You may recall that during COVID, our staff were required to submit one of these with their income tax returns if they wanted to claim expenses related to working from home.

The fifth is the limitation on allowances. Bill C-241 specifies that a tradesperson is not eligible for these deductions if they have received an allowance for these expenses from their employer. This aligns with the general treatment of allowances in the Income Tax Act.

The sixth is that all expense claims are routinely required to be reasonable. It is a general principle within Canadian tax law that for expenses to be deductible, they must be incurred for the purpose of earning income and must be reasonable in the circumstances. This principle is applied to ensure that only legitimate business expenses are deducted and to prevent the deduction of excessive or inappropriate expenses. While Bill C-241 makes changes and deductions for tradespeople and apprentices, the existing overarching principles and constraints for claiming employment expenses under the Income Tax Act would continue to apply.

The third concern we heard at committee was what we would call lack of definition and scope. The objection was that the bill does not explicitly define terms such as “travel expenses” or “construction activity,” leaving room for interpretation that could lead to inconsistent application or attempts to claim deductions for expenses that were not intended to be covered.

Colleagues, like the previous concern, this is completely addressed under the existing procedures, policies and guidance of the Canada Revenue Agency, or CRA. We do not have to reinvent tax law or define what is an appropriate and inappropriate expense every time a new deduction is created. These rules are firmly in place, and professional tax guidance and advice are readily available for any tradesperson who is uncertain about what is or isn’t deductible.

The fourth concern was with respect to fairness and equity. By introducing a travel deduction for tradespeople and apprentices, the question was raised whether this could be perceived as inequitable, since other employees who are not tradespeople would be unable to utilize the same deduction.

This, colleagues, is perhaps a legitimate question as part of a larger discussion about the Income Tax Act, but it is not relevant to Bill C-241. Here is why: If there is a problem with inequity by giving tradespeople the ability to deduct travel, meal and accommodation expenses under certain circumstances, then this problem already exists. That’s because these deductions already exist in the form of the Labour Mobility Deduction, or LMD. The LMD already permits tradespeople to make these deductions, albeit it does it poorly. It’s not enough. Bill C-241 provides a simplified and improved process for doing so, but it does not introduce new deductions into the income tax system. It merely changes the qualifying parameters.

The fifth objection raised at committee was the question of the impact that Bill C-241 would have on government revenue. By introducing broader parameters and a lower threshold to qualify for the deduction, what would be the impact on government revenue?

This, colleagues, is easy to answer because the Office of the Parliamentary Budget Officer answered it for us. In May 2022, the Parliamentary Budget Officer, or PBO, released a costing note indicating that the Labour Mobility Deduction would cost $459 million over a five-year period. In December 2022, the PBO released a costing note for Bill C-241, noting that it would add to that cost an additional $19 million over five years. This is a minimal increase.

However, I would like to point out that this total of $478 million over five years is not money paid out by the government, but rather money that is left in the pockets of our tradespeople. And these are precisely the kind of policies which are needed to encourage our young people to become tradespeople.

Finally, colleagues, the committee heard the objection that only one time in the last 20 years has the Income Tax Act been amended without the Minister of Finance’s agreement, and, in this case, the Minister of Finance voted against Bill C-241.

Once again, colleagues, with respect, this is not the measure by which this legislation should be assessed. The questions are the following: Is this good legislation? Does it make an improvement and give our tradespeople a leg up? I believe it clearly does.

There is a significant disparity in the expense deductions available to independent contractors compared to the employees that Bill C-241 seeks to address. Independent contractors have long enjoyed the ability to deduct a wide range of business expenses, including travel, meals and accommodation directly related to their business activities. This flexibility reflects the understanding that such expenses are integral to generating income and sustaining their business operations.

Bill C-241 is the correct vehicle to address this disparity, offering a targeted amendment to the Income Tax Act that recognizes the unique challenges faced by tradespeople and apprentices. By allowing these workers to deduct travel expenses for distances exceeding 120 kilometres from their residence, the bill acknowledges the integral role that mobility plays in their profession.

Colleagues, in November of last year, the Canadian Federation of Independent Business reported that labour shortages were costing Canadian small businesses over $38 billion in lost revenue opportunities. This bill will not solve that problem in its entirety, but it’s a critical and necessary step in the right direction.

Honourable senators, the tradespeople of this nation are asking us for our help, and this bill provides it. I urge you to support Bill C-241 and those workers who are so vital to our economy.

I forgot to mention member of Parliament Chris Lewis, who is the sponsor of this bill, and all the work and effort that he’s put into bringing this bill to us.

I ask you for your support, honourable senators, at third reading.

Honourable senators, I want to thank the honourable senator for her speech. She has covered the issue very well. I want to take this opportunity to say a few words about the origins of this bill.

Apart from all the reasons she has given, one of the reasons I like this bill is it has an all-party history. It started with the New Democratic Party in the House of Commons. There have been about five attempts by the NDP to put forward a private member’s bill over the past 20 years. Interestingly, at that point, the other parties were not in favour, but over time, they have moved.

Chris Charlton and Matthew Green are two members of the New Democratic Party who put forward private members’ bills in this regard.

In 2021, the Liberal Party put it in their platform. Then in 2022, as Senator Martin noted, Finance Minister Chrystia Freeland included it in her budget, with a limit of $4,000. That’s an interesting figure because in negotiations between the government and the union, it was Canada’s Building Trades Unions that suggested the $4,000 limit. In their view, that would be the median amount that workers would be asking for. That’s why it was set, at that time, at a level of $4,000.

Bill C-241, introduced by Conservative MP Chris Lewis, takes that further and has said that it shouldn’t have a limit. In many ways, I think that the ideas that were put forward by the New Democratic Party 20 years ago — continuously for a system that wouldn’t have a limit — would finally be coming into force.

I extend my compliments to all three parties: first, the NDP for having put it forward for a long time and supporting the union movement on it, and subsequently the Liberals and Conservatives for coming onside and putting this forward.

I will certainly be supporting this bill, and I urge colleagues to think about it positively.

Would Senator Cardozo take a question?

Yes.

Let me start with Senator Martin first. I very much appreciated her speech today.

Senator Cardozo, I come from Cape Breton, where we’ve long been a deep pool of mobile labour, and many Cape Bretoners have moved across the country and across borders to work and back to provide for their families.

We do our best as Canadians when we are able to connect job opportunities with those who are looking for work and those who are looking for work with job opportunities, and there should never be a disincentive. Certainly, the unfairness in the Income Tax Act — handling contractors and individuals quite differently —

Senator Cuzner, do you have a question?

The question is this: Now that more companies and contractors have cut back on living-out allowances and travel expenses, which were once covered, do you see this as almost urgent in order to make sure that workers are able to find and secure those opportunities?

Thank you, Senator Cuzner, for that. First, in my list of people who have been pivotal in making this day possible, I should mention the name of Senator Rodger Cuzner. I don’t know if I’m going by rumour or not, but I would suggest the reason the Liberal Party moved on this has a lot to do with Senator Cuzner having worked on this and been a real ally for the building trades for a long time. So congratulations to you, too, sir.

Absolutely, it is urgent, and I hope that we can pass it soon and that it would go into effect to the extent that it can for this calendar year. Thank you.