It’s time to lift moratorium on T4As to combat Driver Inc.

The outcome of CTA’s lobby campaign to root out the underground economy and bring back tax fairness and order in the trucking industry is the single most important factor impacting the future of the sector. 

During the month of July, the trucking industry and the larger business community have an immediate opportunity to send a clear message to the Canada Revenue Agency (CRA) and its minister, Marie-Claude Bibeau, that we’ve all had enough of the underground economy being allowed to proliferate and want law and order restored to the tax system.

One of the quickest and most impactful strategies the government has available is to simply lift the so-called “temporary” moratorium on T4As.     

T4A moratorium

In 2011, the Government of Canada issued a temporary moratorium that halted enforcement applied to companies that did not issue T4As as required to identify payments to contractors and suppliers.

The government at the time reasoned that the issuance of T4As was too administratively burdensome as it technically applied to anyone who paid for services, including both businesses and individuals.

This was especially true as many also felt the threshold, set at $500 annually, was too low. Together, it was decided that the scope was too broad and that a temporary enforcement moratorium was needed to allow for these and other issues to be considered.   

Almost 14 years have passed and rather than improve the mandatory T4A policy to make it less burdensome and redundant for small businesses (and potentially individuals) while restoring law and order, CRA has chosen not to deal with it at all. Consequently, companies in the underground economy who misclassify employees have taken advantage of this decade-plus moratorium. 

Underground economy 

The underground economy in trucking takes advantage of the T4A moratorium by encouraging employee truck drivers to classify as Personal Services Businesses (PSB) – also known as ‘incorporated employees.’ 

In 2010, before the moratorium, the use of the PSB tax model was virtually non-existent in trucking. There’s a reason for that – because when filed as intended, PSBs would pay a higher tax rate than an employee driver, while also potentially losing many of the benefits and entitlements of traditional employment such as overtime, vacation pay, and mandatory paid sick days, just to name a few.

In other words, there shouldn’t be any truck drivers who would legitimately want to be a PSB. Instead, Phase 1 of CRA’s pilot study on PSBs shows that ground transportation is likely now the single largest user of the PSB models among all sectors. 

Up until July 22, CRA is surveying the business community to ask whether the T4A enforcement moratorium should be lifted. The unequivocal answer from the trucking industry must be, ‘yes’. T4As create much greater transparency between payer and payee – carrier and PSBs – which helps hold businesses and PSBs accountable for tax compliance. 

Bring back the T4A

How is this accountability achieved? Under a mandatory T4A system, a company that does not issue T4As can be held accountable by CRA for failing to do so. As for the PSBs – there would now be an official record of their annual payments, and, correspondingly, their tax liability. T4As provide transparency and accountability in the tax system. 

CTA has launched a campaign to encourage participation from the trucking industry in this CRA T4A survey — click here to learn how you can participate and take the survey. It will take you less than 60 seconds to complete and your input is crucial to bringing back law and order to our tax system. 

Not surprisingly, there is some resistance out there to lifting the moratorium. Some groups argue that it is burdensome and that there are challenges associated with a straight lifting of the moratorium.

However, for almost 14 years, the CRA and key stakeholder groups have had an opportunity to come up with an alternative and create a new, more suitable system – perhaps increasing the $500 threshold, just to name one suggestion – and yet, there has been no resolution to date. 

By taking the CRAs survey, trucking carriers and businesses in other sectors who are being similarly decimated by the exponential growth of the underground economy, have an opportunity to say loud and clear to CRA they want an end to the procrastination on T4As.  

It’s time to take action.