The Canadian Trucking Alliance (CTA) is expressing extreme frustration that the 2024 Budget released last week missed yet another opportunity for Canada Revenue Agency (CRA) to unequivocally commit to meaningful enforcement of trucking companies who misclassify workers to avoid paying taxes, as well as their employees who wrongfully file taxes as personal service businesses.
CTA is immediately seeking an explanation why the Government of Canada has again backtracked from its 2022 promise to provide a plan for CRA to increase enforcement of misclassification and “foster compliance with tax rules governing the use of incorporated employees.” The Alliance is also asking for clarification on two somewhat ambiguous Budget 2024 statements dealing with labour compliance, which may or may not affect the trucking industry and Driver Inc.
Misclassification schemes – known as Driver Inc – are the biggest challenge confronting the Canadian trucking industry as they fuel the exponential growth of the underground economy in the sector. The Government of Canada – namely departments which have of oversight of the issue, like the Department of National Revenue and the CRA, Employment and Social Development Canada (ESDC), and Immigration, Refugee, and Citizenship Canada (IRCC) – have all acknowledged the problem and the potential solutions to curb this illegal activity.
“We want to be very clear that both the bureaucratic and political levels of government fully understand the scope of the problem and the required solutions,” says CTA president Stephen Laskowski. “The underground economy, propelled by illegal activity, is flourishing in the trucking sector because the Government of Canada has made a choice to not vigorously apply the laws on the books related to the enforcement of Personal Service Business (PSB) tax filings, T4A compliance, labour misclassification, and the continued abuse of new entrants to Canada.”
After declining to address the issue at all in Budget 2023, this year’s Budget once again afforded the Government of Canada with another opportunity to fulfill its commitment to the industry. However, Budget 2024 came and went without a specific enforcement strategy for CRA or a forceful signal from Ottawa it would seriously crack down on Driver Inc. carriers. There were, however, two references in the Budget, related to misclassification from a labour perspective.
The first could indicate the Government is finally preparing to share data on misclassification: “Employment and Social Development Canada and the Canada Revenue Agency will enter into necessary data-sharing agreements to facilitate inspections and enforcement,” it stated.
CTA – which has pressed for collaboration, information sharing, and joint enforcement between various government departments – has been told in the past that data sharing between departments is not always seamless and there could be significant legal issues associated with sharing this type of information, even among entities within the same level of government.
Despite these hurdles, the Budget statement appears to put in motion the potential groundwork for joint audits between CRA and ESDC on Driver Inc violators. It is also CTA’s understanding that provincial governments, facing the very same issues, could also enter into similar agreements that would allow provincial labour and tax departments to interact with each other and, perhaps, the federal Government as well.
Since many Driver Inc companies that misclassify employees from a labour perspective are often in noncompliance with several other laws and regulations, violations found by one department could easily trigger inspections by other agencies at various levels of government.
CTA is still seeking clarity on this measure as well as commitments from federal and provincial governments to utilize resources and the enforcement powers once the data is provided.
“What’s even more important than announcing a change in processes to investigate offenders, is a public commitment by all levels of government to enforce the law. There must be complete, political commitment on such matters,” says Laskowski.
The second statement in the Budget proposes to “amend the Canada Labour Code to improve job protections for federally regulated gig workers by strengthening prohibitions against employee misclassification.”
“CTA has been clear that the issue of gig workers does not pertain to trucking,” says Laskowski. “Trucking has never been and will never be a gig occupation.”
To be considered gig employees, according to Statistics Canada, workers must be temporary employees and meet both of the following criteria: people who accept short-term tasks, projects or jobs: (i) employees with a temporary contract shorter than three months OR (ii) employees who have a temporary job with no guaranteed hours.
“By the Government of Canada’s own definition, truck drivers are not gig workers. There is a massive crisis when it comes to misclassification in trucking, but it has nothing to do with gig work,” says Laskowski. “The problem in trucking is that true employees are being forced or coerced into misclassification schemes or choose to misclassify themselves to avoid paying income taxes.”
CTA has asked for clarification whether it’s the government’s intention to apply this potential new regulation to the trucking industry; and, if so, how it would support the battle against Driver Inc.
The Government’s ongoing refusal to make a public statement against Driver Inc and declare a CRA enforcement plan in the Budget is puzzling, considering there is some work being done at the bureaucratic level – namely as it relates to the Moratorium on the Enforcement of T4As and attention being paid to Personal Service Businesses.
It’s no secret the PSB model, which is the engine of the Driver Inc scheme, is being grossly abused. CRA is fully aware the problem infects the trucking industry more than any other sector of the economy and is in the midst of a review .
“Nonetheless, Budget 2024 was silent on this issue despite taking on many other tax related topics,” says Laskowski.
Budget 2024 would have also been the perfect forum to announce the lifting of the T4A enforcement moratorium – a key tool in the battle versus Driver Inc. For years, CRA has promised this would be addressed – and that trucking would receive meaningful attention on the enforcement of T4As.
“Again, despite the ongoing work behind the scenes, the Government refuses to make public statements on this progressive proposal to help end the tax and labour abuse crisis in our sector,” says Laskowski.
“CTA will be working to gain clarity on these issue over the next few months and communicate the Government’s response with our members and the hard-working, compliant portion of the trucking industry. The CTA members who operate lawfully and responsibly have run out of patience with the government’s refusal to declare any meaningful action or publicly oppose the unscrupulous behaviour plaguing our great industry.”