SIDEBAR: Ottawa makes no promise of relief
Automotive and heavy-duty technicians are required, as a condition of their employment, to buy their own tools. The expense can run to the thousands of dollars each year. For more than a decade, the automotive aftermarket has lobbied extensively for income tax relief on the purchase of new tools-arguing that it would encourage youth employment and stimulate growth in our industry. We sat down with federal Finance Minister Paul Martin and started the conversation by asking if that was a reasonable request:
Paul Martin: There is a multitude of “reasonable requests” placed on government. Our problem, of course, is that we’ve just come out of deficit and our room to manoeuvre is limited. Fairness is essential: there are other individuals who have large employment expenses and who would expect similar treatment. Personal computers, professional journals, construction clothing-there are a number of areas. And the problem we have, to be quite honest, is that as we reduce taxes, which we very clearly want to do, we’ve got to do it in a way that’s fair and that takes into account that we’ve only got a very limited amount of money.
Q: You talk about fairness, but chainsaw operators and musicians can deduct the cost of their tools from their taxable income. How does their situation differ?
PM: Look, what we’ve got to do, now that we’ve eliminated the deficit, is to correct the distortions of the past. These are things we’re constantly going to look at, budget after budget. But we just can’t overnight repair all of the problems.
Q: Your next budget comes not overnight, but in February. Will technicians get their break on tools?
PM: I’m not in a position to make that statement. What I can say to you is that over time, as our room to manoeuvre improves, we are going to address as many of the gaps or the distortions that exist within the Income Tax Act. Our basic goal is to get income taxes down. We have to recognize that there are situations such as the one we’re discussing, but we also have to recognize the precedent it would create.
Q: What about the technicians’ employers-which typically are small businesses. Is there any move to help these shops?
PM: This government provides about $4 billion in tax assistance to small business. The small business deduction alone is worth about $2.5 billion annually. And at the same time we eliminated the capital gains tax exemption, we left the $500,000 lifetime capital gains exemption for small businesses. There’s been great emphasis on the labor-sponsored venture capital credit for small business, and R&D tax credits for small business. We will do as much as we possibly can, but I don’t think anybody wants to see us go back into deficit.
Q: The ceiling on the small business deduction hasn’t been increased since its inception in 1982. Raising the ceiling from $200,000 to $300,000 would help compensate small businesses for structural costs larger businesses don’t face, and encourage new business, enhance expansion, and create jobs. Are you prepared to raise the SBD ceiling?
PM: We’re prepared to look at this over time, but our focus will be the reduction of personal income tax. And the reduction of personal income tax is felt more beneficially by small business people than anybody else.
Q: I’d like to be able to say that the government, at the very least, knows how concerned technicians are and is considering a deduction for the future. Is that a fair statement?
PM: Oh, I think you could say we are certainly very well aware of the concern. Our situation is the precedent that it creates, recognizing that there are distortions already built into the system, and that we’ve only got so much money. We have to live with that reality.
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