With a federal election Bill C-205, the Tool Tax Bill, is destined to die before reaching third reading. It seems like bad news, but if you look closer, perhaps it’s not such a fatal situation after all. There is, as they say, more than one way to skin a cat. And it would seem there is also more than one way to get tool tax relief.
Speaking prior to the election call, Maurizio Bevilacqua, Member of Parliament for Vaughan-King-Aurora and chairman of the House of Commons Standing Committee on Finance, explains.
“First of all there’s the Bill, and once it gets referred to the committee we’ll be looking at it. Secondly, there is the pre-budget consultation report that we table each year in advance of the budget itself, and these are basically recommendations dealing with what sort of direction that we feel as a committee the government, particularly the Minister of Finance, should take in the upcoming budget. Three years in a row we actually called for changes to the Income Tax Act to reflect the concerns cited by individuals who were looking basically for tax changes for mechanics’ tools. The vast majority of recommendations made by the committee are in fact implemented into the budget. That’s been the history. Sometimes you get them immediately on the first try and sometimes you have to wait. You have to be very patient, in the sense that the minister can’t do everything at once. But this is an issue that’s been around for a while and we’re hopeful that they’ll look at it.”
Bevilaqua says that the committee is charged with analyzing the impact of various bills from a financial and economic perspective. Questions don’t just purely revolve around the direct costs of changes to financial regulations and tax legislation, but they do play a role.
“If you give this particular group this exemption, what does it mean for other people–other people that may be excluded and feel that they have the same strain placed on their financial resources? So you cannot just be looking at the issue as a sort of singularity; you’ve got to look at how does it affect the tax system on a cumulative basis, is it in fact an exception that is worth making or not? The major issue right now is that people want lower income taxes. So that’s the focus, and that benefits even mechanics. This is a very specific case, but the merits are, I think, self-evident. Now before we move on this though we’ll have to study the issue and that’s what we’ll do in committee.
We’ll find out what the costs are, what the benefits are not just to mechanics themselves but to the economy.”
Among the points Bevilacqua wants to change is the reference to “mechanics’ tools.” He says that it is important to recognize the term “technician,” and what that term says about the industry. In putting forth this point, he also shows that he is no newcomer to the issue.
He has in fact been working on it for at least three years, and has a history of exposure to the automotive industry for longer than that. He remembers, he says, spending time around his father’s business’ trucks and watching the men charged with their maintenance listening intently to the engine sounds to determine the source of the problem. He knows too, that this is no longer possible and that the trial-and-error method of diagnosis sometimes employed is just not the way to go. Often, he says, that is a matter of being well equipped.
But what does this cost the government? If, as proposed in Bill C-205, technicians would receive a tax break on purchases under $250 and some tax relief on tool purchases over this amount, it will surely have an impact.
Bevilaqua says that the cost would be around $50 million. That sounds like a fair bit of money on one hand, but not so much when you consider the federal government’s estimated $12 billion surplus. With such a relatively small amount, why all the fuss? Why not just pass it and be done with it?
“No, it’s not a lot but we can’t adopt that attitude, because if we do then what happens is that there are a lot of things that are not a lot,” says Bevilaqua. “There would be people who would say ‘Well, why don’t you lower the GST by 2%, it’s only 2%, we have a lot of money.’
“Let’s say that this is anywhere between $30 to $50 million. You do twenty things like this and you’re up to a billion. You have to be responsible, plus you have to be careful not to be setting a precedent. It is clear to me that the case is a solid case that they are making, but you have to take into consideration the overall impact, and that’s what we plan to do. When you think about the overall impact, you think about its impact as applied to certain other trades as well. Right now, it’s written for essentially automotive technicians. Do you have to consider other trades that have a similar situation?”
It is not a purely short-term financial equation, however. The social impact of changes to tax legislation is considered strongly by the committee.
“I think it’s very important particularly if it is determined that there is a skill shortage or that we’re failing to attract new people in the business. That’s not just true with this particular industry. An industry that’s also faced with many challenges today is the construction industry, which has seen an aging of their laborers, I think it’s 53 years old (on average) now. When you think of construction that’s not exactly where you want to be.
“You have a limited career life and it’s probably not a really attractive field for a lot of people to get into–and it’s not that dissimilar from people’s image of technicians.”
Bevilacqua is very aware of the image barriers to the industry, but goes further.
“Is there a shortage of people being attracted to the industry? Does the fact that these tools are so expensive make it difficult for people to start? If the answer is ‘yes’ then you have yet another reason why this particular tax change would make sense. These are the sort of decisions that we have to make. Does it discriminate against any other group, is it fair, unfair? These are all value judgements that you have to deal with and factor in. Like I said, I don’t think the expenditure in and of itself is very high, but the benefits may be.”
While the financial permutations of the Bill are being considered, the clock on the Bill is ticking. Still on the agenda for the committee is Bill C-38, the Financial Services Act, nothing less than the largest piece of legislation in Canadian history. Then there is the coast-to-coast consultation scheduled as part of the pre-budget process. This puts C-205 in the metaphorical in-basket for the balance of the year. And this was the schedule prior to the threat of an election being raised.
As your high school Canadian studies taught you, a Bill needs to be voted on three times in the House of Commons before becoming law. What your high school studies seldom spoke of, however, were the many other avenues through which change could be effected.
“Well, I’ll give you an example. If let’s say we recommend in our report that tax relief be given, that we act on this particular issue and the minister moves to have it in the budget there’s not really, at the end of the day, the Bill. The effect of the Bill is, I guess, felt in the budget. It doesn’t have to come necessarily from the Bill and if you ask mechanics whether it comes from here or there as long as they get the tax relief it doesn’t matter. It’s the result that counts. So they might get their answer in the budget as opposed to the Bill itself.”
So just because the Bill doesn’t necessarily seem to be getting passed through the House, it doesn’t mean that the issue is dead. If the substance of the Bill ends up as part of the budget then why pass the Bill?
“As a public policy maker I often put myself in the shoes of the people who are going to be the beneficiary of all this and I ask myself ‘Do they care whether it’s through the Bill, through a recommendation of the Finance Committee or through the budget?’, and I must say to you, I don’t think they care. What they want is the result , the effect of the Bill or the recommendation
in the budget, and they would accept it that way.”
What Bevilacqua is saying is that the aftermarket should not be so concerned about whether Bill C-205 makes it through the House of Commons, but rather whether it gets the support of the Finance Ministry and ends up in the budget.
If the Bill makes it through the House, then fine, but with an election looming that seems even less likely than at the time of my conversation with Bevilacqua.
“You have it in black and white in the three reports that we tabled, so we have been at this for a while. Now this Bill comes around, but it’s not shocking news for us as members of the Finance Committee. This is an issue that needs to be dealt with. Now it’s a question of resources and priorities.”
Bevilacqua said at the time that he was hopeful the Bill would be dealt with by the committee, but admitted that the timetable was pretty full. One event on the schedule is a February replay of the Tool Tax event of this year. Held in the Parliament buildings, the event would serve as an information session for MPs and others on Parliament Hill.
“I think awareness, not just of this particular issue but awareness of the industry, is extremely important. You have to remember that people in public office come from different backgrounds and are therefore not exposed to everything for obvious reasons. They can’t know everything about everything. So, the more exposure, the more knowledge that you provide the members of parliament, the better educated a debate you will have on the issues. There may be some mythology about the automotive industry out there, maybe it doesn’t contribute as much to the economy or it contributes much more or less. So you need to put it out there, showcase it, talk about the changes in technology, talk about how the market has changed, the type of new cars that are on the market, what I consider important changes that I face personally with this issue.
“These are issues that you need to be told about, and that’s why I strongly supported that initiative, because I think the more we talk about the issues related to the industry the better dialog and debate we can have in the House and within our own caucus, and it’s essential to a proper sort of functioning parliamentary system.”
An important component for Bevilacqua is that the tool tax issue hits close to home as an issue with a demonstrable affect on the economy, and the quality of life. By extension, economic growth is critical to being able to provide social programs, such as Medicare, that improve the quality of life in this country.
“It comes out to value added, that’s what all decisions ought to be about. At the end of the day, there’s the quality of life issue. You want clean water, but let’s not kid ourselves, in Canada, we also have a standard of living issue and you want good pay. You need both and so what I’m saying is does this particular measure enhance the productivity of the worker, does it eliminate barriers to employment? What does it do? This is what we plan to address, whether it’s Bill C-205 or the submissions made by those individuals who would like to see this. We have representation from individuals who think that this is the right thing to do and obviously from the past three committee reports we feel that it is the right thing to do.”
Bevilacqua, without making any predictions, is hopeful that eventually there will be tax relief. He certainly expects it to be among the 20 or 30 recommendations from the committee for inclusion in the next federal budget. And the chances of it making the next step are better than ever.
“I think that as the economy improves, as revenues for the government improve and economic conditions improve, certainly this year is better than last and last year was better than the year before. So, we are heading in the right direction for this type of change now. I can only make recommendations to the Minister of Finance, and he is the ultimate judge of whether they go ahead or not.”
But what if, say, an election gets in the way? What if it again ends up on the cutting room floor? What should the aftermarket do then?
“Well then you try again the following year. I mean if you believe in something you’ve got to stick to it. Sticktoitiveness is very important in politics and in public policy, because it’s easy to get discouraged if you think that we’re never going to do anything about this now. Well, that’s not true. Our record of the committee is that we are more or less getting everything we are asking for. It might take a year, maybe we don’t get it in the first year or second year, but we certainly get it in our third or maybe fourth.
“If you stop talking about it, then my natural reaction is that it’s not an issue any more. I always encourage people to come back if they don’t get what they want on the first time around, because there is always hope.”