Canadian Trucking Groups Band Together to Restore 80% Meal Deduction for Drivers
OTTAWA, ONT. (Jan 2, 2007) – Compared to most Canadian workers and small businesses, many truck drivers spend a significant amount of time away from home, eating at irregular times in truck stops and diners. Where and when they stop is often dictated by hours of service regulations. What's more, if they travel to the U.S. they can no longer try and save a few bucks by brown bagging it since U.S. border authorities have clamped down on drivers who attempt to bring personal food items across the border.
At one time, Canadian truck drivers were able to defray most of the impact on their pocketbook by deducting 80% of their meal costs for tax purposes. However, in the 1994 federal budget, the government rolled the deduction limit back to 50%, ostensibly to prevent big businesses from getting a tax break on lavish meals consumed while entertaining clients, truck drivers were caught in the whiplash. At the time, the government justified the move saying that it was merely following what had been done in the U.S. shortly before. However, it did not take the U.S. government too long to realize that reducing trucker meal deductions was unfair and it began a gradual restoration of the 80% deduction limit specifically for truck drivers. The 80% deduction limit will be fully restored in the U.S. in 2008. The Canadian government has not followed suit.
So, the country's major trucking organizations representing carriers, owner-operators and unionized drivers are banding together in a campaign calling upon federal finance minister, Jim Flaherty, to put Canadian truck drivers on the same footing as U.S. drivers in terms of the allowable proportion of meal costs they can expense on their personal or small business tax forms. The Canadian Trucking Alliance, the Owner-Operator's Business Association of Canada and Teamsters Canada say that truck drivers should not be lumped in with businesses where entertaining clients and doing the lunch and dinner circuit is a part of the culture. They say meal costs are a reasonable expense incurred by Canadian truck drivers to earn a living and that Canadian truck drivers deserve to at least be on a level playing field with U.S. truckers.
According to the Census of Canada there are over 200,000 truck drivers in the country. But, because of the amount of time they have to spend away from home it's hard for truck drivers to be politically active. So to try and get the finance minister's attention as he prepares his 2007 budget, the three organizations have launched the "End Canada's Lunch Bag Let-Down Campaign" which features a post card that truck drivers can send to the finance minister. The post cards will be delivered to truck drivers in their pay envelopes, at truck stops, trade shows and the like.
Joanne Ritchie, executive director of OBAC urges owner-operators to get behind the program saying, "It'Â´s time for the government of Canada to do the right thing and stop eating our drivers' lunch.” Phil Benson, a lobbyist for the Teamsters agrees, saying "when a U.S. and Canadian truck driver sit down side-by-side in the same truck stop, eating the same breakfast, it's very hard to stomach the fact that one of them is getting an 80% write-off while the other gets only 50%; its not fair or reasonable." David Bradley, CEO of CTA says "we are not talking about lavish meals with $100 bottles of wine here; this is about subsistence, pure and simple."
Click HERE to print out a copy of the post card. Fill in your name and complete address to ensure you get a response. You will need to use an envelope for mailing, but no postage is required. Mail to:
The Hon. Jim Flaherty
Minister of Finance
House of Commons
Ottawa, ON K1A 0A6
Truck Driver Meal Deductibility – January 2007
Why the Concern?
Canadian truck drivers can deduct only 50% of their meal expenses when calculating their taxable income each year. This compares to 75% (soon to be 80%) for their American counterparts. This is patently unfair to one of the largest groups of workers in Canada, many of whom, as a requirement of the job, spend much of their time away from home and must purchase all their meals – not just one per day like an office or factory worker – from restaurants and truck stops.
In 1994, Canada reduced its meal expense deductibility rate, across the board for all classes of personal taxpayers, from 80% to 50%. The government's stated reason at that time was to bring Canadian rates into line with those in the U.S.. However, in 1999 under the Clinton administrationÂ´s tax relief strategy, the U.S. established a phased-in increase in rates for drivers subject to federal hours of service regulations. These rules have increased meal deductibility rates for drivers to 75% in 2006, and will fully restore them to 80% in 2008. Meanwhile, in Canada, the rate remains unchanged at 50%, even though the Canadian Trucking Alliance – for more than 10 years – has been asking the federal government to revisit the issue and increase the deductibility rate for drivers as the U.S. has done. Drivers have two options when claiming meal expenses on their tax returns: keeping receipts and claiming actual expenses or using a flat rate specified by the Canada Revenue Agency. In both cases, only 50% of total meal expenses for the year can be deducted when calculating taxable income. The Canadian maximum (for 3 meals) receipt-free per diem is currently $51 (or the Canadian equivalent of $51 USD if the driver is operating south of the border).
What This Costs Drivers
Our calculation of the tax impact on drivers is based on the following assumptions:
• We assume that the driver is on the road 5 days per week, for
50 weeks in the year and uses the simplified (receipt-free) method to
claim $51 per day.
• The driver's income (before tax deductions) is $50,000 per year, which is in line with the Statistics Canada 2006 estimate of earnings for long-haul drivers.
• For purposes of this calculation, we do not attempt to break down what an individual driver might claim for other deductions such as RRSP contributions, union dues or child care expenses. However, we factor in a total of $1,500 that the driver claims for these other deductions.
Based on these assumptions, and applying the average combined federal-provincial personal income tax rate for 2006, the 50% meal deductibility threshold would cost Canadian drivers about $1,300 per year more in income tax than they would pay if they could deduct 80% of meal expenses. However, at the highest combined federal-provincial rate (Quebec) the tax penalty to drivers would be almost $1,500.