Canada Truck Operators

Same Mountain, same slide, same advice

2010-07-18T09:42:00.000-07:00

My May 3rd post is still very accurate... The markets are lurching and twisting. Many articles have come out showing an increase in freight volume and even rates. Don't get sucked in, it's temporary and its moderate. The fundamentals of the US ecomomy are still very grim. Obamanomics is perpetuating fear and uncertainty. This breeds conservative business reactions (no expansion, no hiring). Forget about Canada the US public mindset is still in the throws of recession no matter what the media propogates. A lot of the really "BAD" news still isn't hitting the main stream media, such as over a million backlogged home forclosures just to name one. Cap'n trade will be a spike in the coffin of the trucking industry. If it passes (low chance actually... at least according to current estimations) there will be HUGE polorization as some companies try and accomodate the political effects while others hedge against application. It'll create two approaches: old equipment-low overhead-low investment-dynamic business plans verses new equipment-higher overhead-higher investment-static business plans. The former approach will hedge their models on cap'n trade being recinded (if passed) while the latter embraces the "new" political paradym.

Canadian Lease/Owner operators should have one model... the first. The outcome is still far too complex to determine. In times of high volatility and risk minimise your exposure... in other words, get out of debt, stay out of debt... reduce your risk!

RECOVERY????

2010-05-03T14:51:00.000-07:00

These economic times are not like history. Though indicators are up (for trucking) it is too early to express investment optimism. The US debt levels are at historic levels and do not indicate ANY reversal. Greek bonds were just rated as JUNK and the Euro plunged (US rose). These knee jerk reactions are just temporary. The entire global monetary system is in jepardy since governments around the world have been borrowing for decades. They are all monetarising their debt (printing money). Eventually this "fix" will fail as currencies from all around the world will collapse (simultaneously... within months of each other). Sounds drastic... it is. There are only a few situations that will reverse this slide down slippery slope. The US must stop borrowing, and reduce their governemnt spending by dramatic percentages (25-60%). I personally think this will not be possible or probable. THis means that some time in the next ten years or so global currency will be devalued. The eventual outcome has too many variables to call but serious non the less.

Any "recovery" will be lurching and grinding, false starts, turnarounds and setbacks. Lanes will shift, money will be made and lost over night...

This means that the only thing that is truely "safe" will be assets free of debt/leins. Look at what happened to Europe when they changed their currency, convertions killed equity and buying power of citizens. Very turbulent times. Even if I am wrong in my predictions, the advice is still good.... get out of debt, stay out of debt, equipment valuations should be primarily on fuel economy! NEVER upgrade equipment for tax purposes or because of company demands! FUEL ECONOM, FULE ECONOMY!, FUEL ECONOMY!

A little of what I see coming

2009-12-21T07:35:00.000-08:00

Canada has intimate ties with United States. In fact 80% of our economy is based on US consumption. This means that whether we like it or not as goes the US so goes Canada.

This has huge implications. When Harper decides what to do with GHG he rightfully “dovetailed” his position to the US. It makes no sense to do anything else. When we choose a monetary policy we have to consider what the US is doing and “dovetail” our response accordingly. It’s not that we’re absolutely powerless or mere puppets, but we have to consider our circumstances and surroundings. This is why Canadians need to know what’s happening in the US and plan/project/prepare ahead.

The US is going through a “civil war”, not with guns and bullets but with political philosophy. The majority of US is right of center. When Congress was majority Republican they did not act so. The people rejected them and Democrats took over. Obama rose to prominence as a relatively unknown. He stood on two platforms that appealed to a lot of moderate republicans, “”balanced budget” and “accountability/transparency”. What is happening now (primarily from tea parties) is a huge rejection of government (41% prefer an independent approach). THESE NUMBERS ARE HUGE! Canada took over twenty years to get a grassroots with ¾ of that percentage (Preston Manning to Harper). Politically the US are activist and move much faster than Canadians. Therefore, having said all that what can I say about our future policy? Here are a couple of my conclusions:

There is a good chance Cap’n trade will die! The strong right movement in the States will overturn the EPA (along with “climate-gate”). The 2010 elections will move congress to a “stalemate” (at least). If Obama ends up being a one term President the EPA “promises” will be empty air. If the next president radically cuts government spending then monetarily the US will be dependant on perception of the treasury board strength (audit wise). They will have their currency devalued by 50-75% (or more depending on stability). Canada will have to follow because too much of our economy depends on them (Europe will try not to but probably will). Inflation and possibly hyper-inflation may be the worlds fate (short term minimum long term possibly).

Transportation will always be important. However, depending on what the US does, Canada’s shipping lanes will settle and plunge settle and plunge. The surge of instability will be reflected on the highway. It will bring opportunity and devastation, sometimes in the same day. Best advice is…. Get out of debt, stay out of debt! Don’t invest anything unless you can afford to write it all off.

Speed Limiter Debate gains Momentum

2009-09-28T08:36:00.000-07:00

Several years ago I worked with a lease/owner operator who got into an accident. He damaged a trailer. The damages totaled $2664.00 (so he was told, he never received an invoice). His deductible, clearly labeled on his signed contract, was $2500 yet the company removed the entire amount from his statement. He asked the controller why he charged the extra $164. The reply was “…we didn’t put it through insurance…”. The operator calmly and rationally tried to reason with the controller to get back his $164. It was no use! The company stood by their flawed logic and ignored their written contract. They had his money and nothing short of a law suite would change it. I had another operator who experienced the exact same situation and flawed logic but that time the damage was $5700 ($3200 above deductible).
Flawed logic is a form of deception, an action designed to distract someone from the glaring facts. This intellectual “slight of hand” is similar to strategic misdirection or “spin”. Call me old fashioned but to me a spin doctor is just a fancy word for professional liar. Imagine an occupation that pays people to lie and on a sliding scale, the better the liar the higher the pay.
There are many professions and industries that require “spin”. The most infamous work(ed) in the tobacco industry. They funded millions of dollars of “research” to “prove” that tobacco didn’t cause cancer. However, when the truth finally came out in court the industry coughed up BILLIONS.
The speed limiter debate is not without its own spin doctors. Let’s first look at the facts on how the law is administered. Let’s see where the liability or punishment is placed and what affect it has on the industry. On July 3rd I talked with a company driver who got a fine of $390.00 for driving a truck that is “non-compliant”. He asked his boss many times when he was going to “emasculate” it. The procrastinating employer kept saying “don’t worry” blah, blah, blah… He’ll pay the fine if there is one. Needless to say the driver had to keep working (wife-three kids-mortgage). Then he got checked. When he delivered the ticket, his boss still agreed to pay it (luckily) but he found out two things along the way: first the ticket goes on his personal abstract (apparently no demerits), second there was NO fine for the owner, it doesn’t even go on his CVOR scoring (MAYBE in the future but not now). It therefore appears the application of speed limiters is a simple punishment and tax on helpless drivers, not on non-compliant companies. The driver I mentioned had absolutely no physical or legal opportunity to comply. His only option was to refuse to work and therefore refuse to pay his mortgage and feed his wife and kids. In effect, this legislation places the ENFORCENENT of a law firstly on the pocketbook of the DRIVER yet ignoring the ones with authority.
Secondly let’s consider the evidence trail of how the speed limiter legislation was lobbied (spun). It was promoted as reducing both accidents and the industries carbon footprint (GHG). The argument originated from the OTA spin doctors who were successful in rejecting or ignoring all other evidence: University of Manitoba’s Barry E. Prentice’s excellent article June 2008, Transport Canada Studies released July 4th (not even three weeks after the vote), the notorious “public meeting” shame, and many others. The OTA’s spin is complete with its truth’s, half truths or maybe even full out lies. We shouldn’t be shocked at this. “Spinning” may well be a large part of David Bradley’s job description.
There are some truth’s mildly associated with the spin. The 400 series highways may well carry the majority of freight travel in Ontario. The 401 highway alone accommodates over 400,000 vehicles per day and is one of the busiest highways in the WORLD! One contributing factor of the volume is the speed the vehicles are allowed to travel. If the OPP actually enforced the speed limit the volume would decrease as congestion increased. Slowing down trucks and implying it doesn’t affect congestion should insult intelligent people. It is mathematically impossible!

The half truth about accidents is that speed kills. Of course speed kills, especially when its 80,000 lbs, but speed alone doesn’t kill, especially with heavy trucks. It’s the passing that creates the danger. Therefore, logically, the speed limiters actually INCREASE danger rather than decrease it (this logic was brought out by Mr. Prentice’s article but flat out ignored by the MTO). It was bad enough changing lanes going the same speed as the four wheelers, now try changing lanes going 15kmh slower than the 399,999 Mario Andretti’s. There is a direct correlation between the time of day traveling and the volume of urban fingers you get. But, if you are collecting fingers, there is more to consider than just time of day. The flat as a pancake 400 series thoroughfare does not represent the entire contour of Ontario. It has lower grades than Uncle Buck.
Traveling Hwy 17 has become a real crap shoot. Consider the hill near Roseport, which used to be climbed without gearing down (all-be-it approaching over speed limit). It must now be ascended in the basement (results slightly vary depending on gear configuration of course). A fully loaded tri-axle hitting the base of the hill at 112 KMH can stay in top gear right to the peak. However, just 7 KMH slower (combined with a delayed electronic kick in) has the driver pumping down gears till he’s crawling up at about 35 KMH (a perfect opportunity for collecting rural fingers). Since most drivers are paid by the mile the speed limiter reduces wages to about $8.64 per hour on Roseport hill (I’m afraid I don’t know the exact name). Isn’t that below minimum wage?
But alas, this is only late summer! What happens in our frigid ice and snow? Since drivers can’t chain up in Ontario how much do they get per hour when the inevitable spinout occurs? Can a driver start collecting EI immediately upon spinning or do they have to wait until the tow truck comes?
Assuming the MTO's primary concern is public safety is ignoring their track record, for example the awarding of LCV permits (Long Combination Vehicles). If safety was MTO’s primary concern, only trucking companies with excellent safety records would be awarded. But MTO awarded exclusive permits to companies who rated “satisfactory-unaudited” while hundreds of companies who rated “excellent” were flat out ignored. Logical people understand that MTO is all about political favoritism not safety. It’s the provincial Liberal version of the sponsorship scandal.
Safety was only one spin the MTO and OTA used to ram through bill 41. The other spin was the reduction of green house gases. If the OPP would enforce the speed limit the way all other provinces and states do, GHG savings would be generated from both trucks and four wheelers without any tradeoff with safety due to an increase in passing. Therefore any GHG savings from electronically limited trucks on the 400 series is a mute to duplicitous argument.
The real question is: what affect dose electronic limiters have on non 401 Series roads? Does GHG increase, decrease or stay the same?
Let’s look again at Hwy 17. According to my documented sources (all else being equal) it now takes about 45 liters MORE to travel from Thunder Bay to Ottawa than it did June 30 2009 and takes 15-25 minutes longer (in the summer). Trucks can no longer use momentum to carry them to the top of hills. Add to this cost: 4 wheelers trying to pass 35 MPH trucks in two way traffic, winter spinouts, or twisted drive shafts. All these situations costing MORE! It uses MORE fuel, emits MORE GHG and increases our dependence on fossil fuel. Sounds like a government solution to me! Anyone care for a cigarette?
Why would the MTO be interested in passing a law that has little to do with safety or GHG? The answer is simple, it’s because the OTA is interested! The speed limiters were birthed and written by the Ontario Trucking Association lobby group.

“…as for the amendments, we have none, and in fact I would go further and say that we would be very strongly opposed to any amendment. This is our bill. Every period, every comma, every semicolon was put there by us, and we would be very, very unhappy were it to be amended in any way…”

Lobby groups (same as unions) serve their members first. It’s not right or wrong it’s just how it’s done.
So why is the Ontario Trucking Association interested in increasing GHG, costs, risks and accidents? It surly isn’t to mandate their competition better fuel savings. I originally thought it was “…to legislate competition OUT of Ontario markets…”. Though this may have been on the minds of some OTA members I now believe the lion share of the reason is YOU! That’s right the Truck Driver!
Given the chance to drive 105KMH for 40 CPM verses 115KMH+ for 40 CPM, too many drivers were still choosing the 115KMH+. The OTA members, instead of possibly raising their pay rates, chose to restrict their competitions ability to attract YOU! That now means your speed and paycheck are limited (specifically in jurisdictions that have posted speed limits over 105 KMH). While other provinces and states are increasing speed limits Ontario mandates inter-jurisdictional limits. Just who do they think they are?
Let’s remember, individual OTA members hide behind the association, manipulating the industry human resource pools through legislation all the while “spinning” Bill 41 as a great environmental and safety initiative.
At the time of passing the MTO knew of the “spin” the OTA was making (otherwise they would have waited for Transport Canada’s studies and given a true forum to debate the issue). The reason they didn’t is because the Ontario Trucking Association politically owns Jim Bradley! Even though the liberal party was elected to represent the public, that assumption appears to be just another spin. As we can see, once elected, the office goes to the highest bidder. Vote out the liberals if you like, but that still doesn’t expose the bank rollers. The true puppeteers of this spin are the OTA members
It was the individual members of the OTA that voted to spin and misrepresent Bill 41 to the public. They hid behind an association but they are all equally complicit. Let’s remember, if they agree to spin in one area of business, to achieve their bottom line objectives, how safe do you feel working for them?
At the beginning of this article I wrote about a trucking company who “spun” $164 from an operators pay. Would you leave a company if they spun 164 of your dollars? Some would some wouldn’t. Would you leave a company if they spun 3200 of your dollars? Most would. The employer-employee relationship is based on trust. If they practice the art of “spinning” for $164 you can be assured they will enforce it for $3200. A smart driver will leave (or at least start looking) the minute they see the spin regardless of the amount or its impact on them personally.

From Subsistence Allowance to Speed Limiters

2009-07-27T06:40:00.000-07:00

I'm switching gears somewhat as the implementation of Per-deum/subsistance allowance becomes more accepted (at least somewhat). As the first step of introduction to my second book, I'm entering another topic, "trucking companies". Specifically, I'll be drawing the line on the speed limiter debate. It is a very hot and passionate controversy. By no means is it over just because it was rammed through a vote.

Bill-41 is an example of how our democracy works. It was the brainchild of the Ontario Trucking Association. People elected to an office generally don't know much about an industry. Lobby groups present their case and (if it appears politicaly expedient to do so) bills are passed. Therefore the real power in Canada (at least at this time in our history) is lobby groups such as the OTA (made up of trucking companies).

Let's think logically about speed limiters for a moment. On the surface it appears a "no-brainer" enforce speed limits electronically rather than through the OPP. Anyone who opposes it appears to be a red-neck speeder bound to break all laws (a very unpopular poition). I don't think that position will be able to be reversed publicaly without sound leadership accompanied by clear arguments about the negative aspects of ESL's.

The negatives (just to name a few):
1. Limiting Inter-provincial trucks means OTA/MTO is governing other jurisdictions which have different speed limits.
2. This jurisdictional conflict may jeopardize NAFTA
3. May make roadways LESS safe (due to increased passing)
4. May actually increase fuel consumption since momentum for fuel management is significantly reduced.

If Canadian truckers don't band together against jurisdictional conflicts (such as these) they will continue to be needlessly regulated. I think it's about time that the trucker fights back.

Action Packed Future

2009-06-09T14:35:00.000-07:00

For those who have never read the information on this sight before its best to view it from the beginning of November forward, it may save you thousands of dollars in taxes.

We will be rearranging this blog sight to accommodate another topic. Its an introduction to my second book. Until then any questions regarding Subsistence Allowance and its application can be read at this sight or you can contact me directly at Robert @thrconsulting.ca.

Stay tuned for additional action packed controvertial trucking industry research and analysis.

Another Canadian Tax Scandal

2009-06-02T10:47:00.001-07:00

June 2009 will probably prove to be a major juncture in my battle with meal allowance, per-deum, subsistence allowance. Nothing what I’ve said in the past will change but I think a slight change in focus may be needed. In the last three years I have NEVER battled CRA regarding the application of meal allowance. However, I HAVE battled accountants and lease/owner operators.

The battle is never direct. Those who contact me directly have been very gracious and professional. However, there are too many accountants just not applying the rules correctly… or not even at ALL!. It’s disgraceful, and can only lead to disaster and confusion. It is in June 2009 I must make a choice for the betterment of the entire industry. Where do I concentrate my efforts? Immediately, right now, I’m concerned about the thousands of operators who are financially liable and don’t know it or refuse to believe it. It’s a tax scandal waiting to be exposed, but this time CRA is not the problem.

Success is not always what it seems

2009-05-26T12:42:00.000-07:00

Subsistence allowance/Per-deum continues to be a controversial topic among accountants, not CRA agents but accountants. They seem to continuously mumble about its application and their firms liability. Operators get half truths one month and reversals the next. If accountants don’t “get with it” operators bumping down the road will loose their faith in either the system, their current accountant or both.

When I first started publishing articles (after my book) I thought the lion share of education would be directed at the operators not the accountants. Oh well, it seems I’ll be tapping away at two industries simultaneously.

Last week we had another client go through an audit. It’s a standard thing for clients to be audited. The interesting thing about this one was that contrary to our communication to our client harsh and strong words were directed at the auditor. Apparently our clients thought it “prudent” to give the auditor a piece of their mind before the audit even began. This is not advisable under any situation since auditors have a great deal of autonomy and can make things much more difficult than they normally are. Though some accountants would like to mussel clients we have not gone that far… yet (just kidding).

The audit actually went exceptionally well even though the “foundation” started shaky. If fact our entire system got anther round of compliments, the employer-employee agreement all the way down to the personal vehicle log. It helped that the client was A rated and balanced down to zero regularly (monthly). All our other audits occurred with C or D rated.

Even so, I am still convinced that the application of subsistence nationally is dependant on a universal application of standards among accountants and operators. Two or three years from now, if Ottawa politics changes every subsistence allowance user may find themselves in the crosshairs if not universally applied.

I’m focused on making the system secure… which is sometimes a challenge when dealing with CRA.

That's my story.... one more time!

2009-05-12T09:43:00.000-07:00

Two more court cases came into the media recently, both had to do with personal vehicle, log books, and company vehicles (in this example leases). I have been rather blunt regarding business use of personal vehicle or company vehicle used for personal use, even accused of being more rigorous than the average bean counter. These two situations may bring some clarity as to both my position and my “standards”.

The first was Jorgensen v. Canada, 2009 T.C.J. No. 20, T.C.C., Sheridan J., Jan 19/09. Digest No. 2846-025 (Approx. 7 pp.). A farmer had an extended cab diesel truck with no log books supplied. Other not so critical information was that the taxpayer traded in the lease as soon as the warranty expired or was about to expire. Additionally the “extended cab” was modified or converted to a “non-passenger”.

The judge (considering all the evidence) assessed that the truck was used all or substantially all for business purposes. Even though the taxpayers did not maintain a daily record of the trucks use, they maintained sufficient source records of their business activities to allow them to reconstruct a reasonable diary of the business use of the truck.

This, at face value, seems to contradict much of what I have been stating. However, let’s look at the second case.

The second is Martin v. Canada 2009 T.C.J. No. 2, T.C.C., Margeson J., Jan 05/09. Digest No. 2846-023 (Approx. 13 pp.). A corporation leased vehicle was provided to the wives of two shareholders. CRA assessed taxable benefits and standby charges for each participant. There were no log books supplied and the vehicles were licensed as personal use. The judge agreed with CRA in this case.

In my personal estimation 70%+ of personal vehicles that are used for business purposes (and are used as deductions) do not have log books. Too many accountants revert to the first case assuming they can “reconstruct” a defense after that fact. Many auditors don’t push the issue. The industry assumption becomes “no log book is defendable”. I still strongly disagree, especially in the trucking industry. The Jorgensen’s were farmers, which is a completely different industry than trucking. Driving to and from fields moving equipment and supplies is vastly different than using a “second vehicle” to transfer paperwork and supplies. Reconstructing a reasonable diary for a trucker (without a log) will be vastly different. It will be similar to the Martin case where vehicles are licensed as personal rather than farm use.

My position stands! No log book (for truckers using personal vehicle) no deduction. That’s my story and I’m sticking to it.

Subsistence Allowance, a look to the future

2009-05-05T14:24:00.000-07:00

OK! Long time no update. Congratulations to all those who won a copy of my book on CD. April was a very busy month for me. We have received a great deal of communication about subsistence allowance coast to coast. It seems many accountants are realizing the national implications.

This is what I predict will happen over the next several years (assuming no political changes in Ottawa). Independent accountants will apply subsistence allowance (per-deum) to clients (usually with a signed liability waver). Therefore operators will be left “vulnerable” to regional auditor interpretations.

Until CRA comes out with specific bulletins on the trucking industry applications the entire system will not be “confirmed” in the minds of many designated accountants. Since currently no firm is publicly willing to ensure the application (providing protection as we do) the entire industry is left without assurance (something CRA has on their side). One of the several reasons I believe they will NOT comment publicly for several years (if at all).

It’s a little like what happened when Don Wilkenson won that court case in August 2000. Within a couple months accountants all across Canada knew that the TL2 was not restricted to CRA guidelines, however, they were not informed of what number they CAN use… therefore to ensure returns accountants continued to restrict THEMSELVES to the guidelines. Uncertainty fosters conservative standards… or… if in doubt leave it out!

For those who want to know what needs to be done read my prior posts. It makes more sense when you start reading from November 1st 2008

Taxes and National Equality

2009-04-24T06:11:00.000-07:00

The trucking industry (driver specific) has, at least in my opinion, never been so quiet. There seems to be a silent desperation going on. Those who are making money say nothing and those who are not are eaking it out. Options are slim. Saving every penny, including taxes, is on too many minds.

I stated in my prior blogs that when times are tough the crooks come out from the woodwork. The temptation amoungst drivers and operators is also there. I urge people great and small to weather the temptation. Stay true to integrity. Just because Canadians don’t like taxes dosen’t mean they can cheat on them. Let’s be clear Canadians don’t ike “over paying taxes” not “not paying taxes”. The key is organizing your finances and business to pay the LEAST amount of taxes.

Those who regularly read my blog know the best possible method of reducing taxes to the position of national equality. If you want to know the whole story read the 50 entries below. I guarantee you won’t be sorry.

Who's responsibility is it anyway? The demise of the TL2!

2009-04-21T17:29:00.000-07:00

In a perfect world where justice and equality prevails, everyone pulls their own weight, carries their own pail of responsibilities. There would be no government bailout of GM, Chrysler, Banks or Insurance companies. Sink or swim is the motto of business.

If in that world every industry carries their own there would be no need for the TL2. Why should the government reimburse citizens for industry related costs? And yet this is what is being done. Thirty years ago the trucking industry paid meal expenses on the road, but they abandoned that (or the responsibility taken from them) when the government started issuing a “rebate”.

In a perfect world a truckers wages would be separated from his job related costs. But we’re not in a perfect world.

Canadian Tax Savings...

2009-04-16T15:51:00.000-07:00

All hail head colds, the stumper of all thoughts!

Saving taxes is a love for many. The extent to paying taxes boils down to one fact “fair share”. Canadians are not averse to paying taxes just so much as they believe they are not paying “too much”. Using the per-diem system ensures the Canadian truck operator they are in fact paying no more (and no less) than what is fair and reasonable. Check it out! If every lease/owner operator in Canada used the system they would save $100-200 million dollars in taxes.

E-mail me at Robert@thrconsulting.ca and you’ll enter to win my book on CD… FREE don’t even have to pay shipping and handling. Just read the entries and learn for yourself the real benefits.

Audit trail one of the pillars of compliance

2009-04-14T09:30:00.000-07:00

I watch CSI at times, piecing together evidence of an event. Blood trails, angles of entry, exit and deflection are all set together to tell a story. There is nothing that is left out. It shows motive, it shows intent and it shows what actually happened. Evidence usually dose not lie, things can sometimes be covered up but even the absence of evidence is evidence.

So it is with an audit trail. It is the paperwork that supports an agreement (employer-employee). It also reflects motive and intent, especially over an extended period of time. Where money goes reflects probably the clearest intent of it owner.

I once took a survey of leaders in a specific field. I was given the mandate to find out the priorities and intent of the field as a whole. I decided to ask only one question. “If I gave you $5000 dollars what would you do with it?” The results of my survey were an in-depth reflection of the entire field. It was very successful.

How an operator manages their cash in their corporation MUST reflect their employer-employee agreement, both its intent and its ultimate results. If all an accountant does is make journal entries to a shareholder loan account at the end of the year it is GROSELY inadequate. If the operator doesn’t want to conform to the requirements then the operator should not be able to benefit from compliance. NO COMPLIANCE… NO BENEFIT… (non-taxable that its!)
If an accountant doesn’t educate their clients to provide a reasonable audit trail, one that reflects the employer-employee agreement, I suggest the accountant find another industry to serve… maybe specialize in Chiropractors!

I know I’m harsh to accountants, but I believe that they are critical to the national implementation of subsistence/per-diem for the entire trucking industry. If they don’t get it right, the potential negative publicity of a failed appeal will delay tax savings to thousands of operators…

Don't forget to enter for this weeks free draw (see prior few entries for details). Last weeks winner has been notified and their CD's are on the way!

Political Will continued...

2009-04-09T13:35:00.000-07:00

The publicity around per-diem (subsistence/meal allowance) is not an income tax issue! It is a political issue, guided by political will! Let me take the long road, with a few stops along the way, to explain what I mean.

CRA has many, many levels of authority. The higher up someone advances the more politics are involved in their job descriptions. In order to advance as high as the upper crust “generals” (as I described them in my book) civil servants need to make sure they don’t get blamed for ANYTHING! “Cover your butt” is the first course taken by civil servants when contemplating advancement. This means that any new application of the income tax act must be able to be flexible enough to weather shifts in political parties. Sometimes new administrations direct CRA in different directions.

Here is the latest example of “upper level” income tax legislation designed to be applied through political will rather than clear legislation! The article is called “Lawyers see overkill hidden in federal bill” it is found at http://www.thebottomlinenews.ca/index.php?section=issue

The article can be summarized as follows. Current changes to the Competition Act and the Investment Canada Act hidden in our government’s budget implementation bill is legislation that is aimed at those who “fix prices” through cartel style agreements. It “…changes the conspiracy law to make it illegal to conspire with a competitor, without proof of the impact on competition…”, “…there will be no test… any agreement will be a violation…”. Another significant change comes with the label “abuse of dominance” (anti-bullying policy). As the article states “…caution is the keyword as it will be hard for many companies to know, in advance, when they have abused their dominant position… it is difficult to distinguish between aggressiveness and abusiveness…”

In this legislation there is deliberate vagueness. It produces an INVISIBLE glass ceiling, imposing “law” without clarification or definitions yet with record setting fines and penalties. So we must be realistic in the application of the law, ultimately it will come down to “political will”. Who will complain? Who will listen? Who will send out the dogs (no pun intended). Owners of monopolies, oligopolies etc would view the legislation as forcing a “blank check” to be written to the government… with no clear invoice!

Legislation like this may be designed to intimidate and control without specifics. It is a reflection of how the higher level CRA officials view their jobs and positions. Legislation must have administrative flexibility, no definite right/wrong, no clarity just authority.

The only way to affect long term stability in the application of some income tax issues (such as subsistence/per diem) is political will. Most “exceptions” must be individually defended until they become common knowledge with universal application. Once enough people use the exception it would create a negative public perception if it suddenly was taken away.

The more people know about it, the more people who use it the safer it is for everyone. Political will, in a democracy is always the citizens. Think about the implication of long term application and stability of any tax benefit!

Keep sending your e-mail's to win the CD version of my book (see prior entries)

Ethical application of the Income Tax Act

2009-04-07T16:21:00.000-07:00

I’ve been in discussion with some very interesting people in the last several months. Privately accountants nod their head in acknowledgement and slap my back in support of the effort I’ve displayed in applying ethics to the income tax act. However, as several have asked “…what does the income tax act have to do with ethics?...”. It is a very interesting topic, especially amongst accountants. Placed as bluntly as that, reactions usually vary from philosophical interest to “deer in the headlights”. Applying ethics to the Charter of Rights and Freedoms is a given. The Federal Accountabilities Act is a shoe-in for an ethics discussion, but the income tax act? The longer a person’s been in the profession the more it appears wasted effort. It’s wasted because the act is so complex and produces such conflicting results, not the atmosphere that fosters feelings of security, justice and equality all results of solid ethics.

I read a couple articles lately that show examples of this. There was an article in “The Bottom Line” http://www.thebottomlinenews.ca/index.php?section=issue page 19 by writer Vern Krishna titled “Law consistent in its inconsistencies”. Without going through details (which are pretty amazing as well as complex) it discusses the outcome of a court case similar to the one I described on December 19, 2008 Singleton vs Canada. Without me drawing to much attention to a different case I’d just like to quote the writer’s final statement of the supreme courts decision “… Westminster prevails over GAAR, except in the circumstances where GAAR prevails over Westminster…”. It was a clear example of the “super complexity” and circular reasoning/results within the income tax act.

There have been many people who have stated that accountants refuse to publicly fight for their “clients”. They too often assume “all accountants just work for the government anyway”! These are the people who believe that the income tax act is a “black and white law”. They believe it is clear what is allowed and clear what is NOT ALLOWED! Thinking they know the white they accuse accountants of painting things black. This may be a serious misrepresentation of the industry… note the vague terms.

The income tax act has over two thousand pages that are added to it every year. For every concrete rule there are several (if not many) concrete… or vague exceptions. The more complex a deduction, generally, the more clarity is lost to various interpretations, as in the English spelling Rule: I before the E… except after c… or in seize… height… either… foreign… It becomes so weird that you can choke on the exceptions and be forced to use the Heimlich maneuver.

Accountants generally like systems and predictable rules. The economy generally likes systems and predictable rules. The income tax act is not friendly to either unless accountants refuse to navigate the plate of spaghetti exceptions. Some accountants assume one primary rule: the fewer exceptions used the more assurance there is of compliance. Better to err on CRA’s favor than to risk explaining your string of exceptions.

GIVEN THIS… the application of per-diem to the trucking industry can be too much of an “exception” to too many accountants even though it is based on sound ethics and applications historically allowed within the income tax act.

If CRA can twist a very flexible act into a contradictory tool of discrimination rather than a guideline, ethics means NOTHING! The bottom line would be… don’t stand in the way of the judge, jury and executioner. Stay quiet!

Who is going to pay an accountant to defend this income tax application? Both an honest and reasonable question! Few, if any, individual operators will pay to have their accountant go before the Supreme Court. Few, if any, individual accountant will pay their own way to go before the Supreme Court.

So why do I write what I write? Why not just apply it and be happy to grow my firm?

I need time to explain my reasoning. Let me give you a hint. It has to do with political will!

See you on Thursday!

Don't forget to e-mail your name for a free CD version of my book. See prior days for details!

FREE CD Book giveaway draw every Saturday. One (or more) per week for the month of April. Find out how by reading this page!

2009-04-02T12:28:00.000-07:00

For some, spring break develops pictures of beaches and university students partying all night. For me it’s a reduced work load at the office so I can spend half days with my kids. Tuesday I watched the Lord of the Rings trilogy with my son. I can’t tell you how many times my feet fell asleep.

The half days are filled with immediate correspondence and critical things (basically a week of partial procrastination). I’m working on developing a more in-depth relationship with my readers. This is one reason I am giving away one copy of my book on CD per week (in a draw) to anyone who e-mails me stating they read each of my entries since November 1st 2008 (honor system). If you want to be included in the draw just e-mail me at Robert@thrconsulting.ca. I promise I won’t sell your e-mail address to anyone. If there are too many participants I will increase the amount of CD’s given away per week to make it easier to win (at my discretion).

The publicity of per diem subsistence allowance is slowly building. There are accountants all across Canada reviewing data, informing drivers and making career choices. Working with accountants is like herding cats. Each has a mind of their own (which, long term, is actually a good thing).

Truck drivers are becoming more and more attuned to the options available to them. It’s a slow process but the information supply chain is starting to work smoother.

DRAW FOR FREE CD VERSION OF MY BOOK... one winner every Saturday for the month of April!

2009-03-31T09:01:00.000-07:00

I'm reminded of Lord Randolf Churchill (the father of Sir Winston Churchill). He was in line to be a probable candidate for the Prime Minister of England, and would have had he not contracted sypholis... anyway! Before his afliction he was as swift minded as his son was to be. After inumerable quotes that garnished him a reputation for intellectual greatness he finally said "...and the constant necessity of trying to say something new makes one a drivelling idiot..." (The Last Lion/ Visions of GloryLittle, Brown and company, Author: Manchester page 203, ).

If you scroll through the history of short articles you will have more knowledge about saving taxes for a lease/owner operator than 80-90% of all designated accountants serving operators coast to coast. It dosn't matter if they belong to a "fellowship" or even have direct access to the Finance Minister! You have the eductiona to save more tax cash than they do.

This site gets 450-650 hits per day! It has had over 15,000 hits per month since inception. I chart both the number of hits as well as how many pages are viewed. Today I'm going to suggest over viewing the history, starting with the very first post (November 1st). This blog is designed as an educational and entertainment source for CanadaTruck Operators. It's designed to expose one of the most horendous incremental tax assaults in Canadian history. It is also designed to perfectly cure the anguish that assault has caused. Go ahead educate yourself! If you e-mail me that you read it all I will place your name in a draw for a free copy of my book on CD. I will draw one winner every Saturday for the entire month of April 2009.

Don't get detoured on the road to tax savings

2009-03-26T14:57:00.000-07:00

On the issue of incorporation many operators ask very similar questions. One question that keeps coming up is having your corporation own a vehicle so the entire costs can be written off. It is a question that comes about because when the average individual thinks about corporations they picture big money operations such the trucking companies they work for. They see trucking companies have “corporate vehicles” and they often are allowed to drive around “free”. They then assum they can do the same thing if their corporation purchases one. The truth is, they can but at a cost.

CRA does not want “company vehicles” driving around as total write offs. Automobile dealerships (for example) regularly used to provide dealer plates to their salesman. One of the reasons why they do a lot less of it is because of “taxable benefits”. Taxable benefits are the exact opposite of non-taxable benefits (on that point my logic is impenetrable). Estimated re-imbursement for job related costs are classified as “non-taxable” the exact opposite of receiving the benefit of a “company vehicle” for personal use.

If a company owns a vehicle and the employee uses it as a personal vehicle, CRA calculates the percentage of personal use and assigns a taxable benefit to the use (a generous rate by the way). However, even if the vehicle is NEVER used but is parked on the driveway of the employee, the opportunity for personal use still exists, and is therefore taxed. The specific name of this opportunity is called “standby charges”. To place a long complicated formula into a simply number it would be 30% of the purchase value. This means that a $20,000 vehicle that is NEVER used but parked just once on the employees driveway is deemed to be $6000 of taxable benefit… indefinitely! If the vehicle is kept and owned by the corporation for 10 years the charge will be $6000 EVERY YEAR! It does not reduce in value as does depreciation.

This application of tax is BRUTAL on company owned vehicles. It is so horrendous that operators who are incorporated should NEVER have their corporations own a small vehicle. Using their personal vehicle for business use, and having the corporations pay them “non-taxable benefits” by using the treasury board re-embursement figures is the BEST after tax system available to ANY Canadian citizen. Check out your province rates at: http://www.tbs-sct.gc.ca/pubs_pol/hrpubs/tbm_113/b-eng.asp.

Saving bucks is often times a matter of using the right system!

Human Resourse: supply, demand, taxes and labor laws

2009-03-24T14:26:00.000-07:00

I have had the pleasure of talking with perhaps hundreds of drivers coast to coast. Sometimes it affords me information about certain geographical areas that experience certain trends where other areas do not.

As a small example (if you please). I spoke with a recruiter a little over two years ago (pre Oil boom of Alberta) and they informed me that the rate of pay for their lease/owner operators based in the West was four cents per mile MORE than the rates for Ontario based operators. It confused me slightly because at the time it tended to be more expensive to live in Ontario than in the West. The reason was… supply and demand! There were more operators available in Ontario than there was in the West, therefore they didn’t need to pay as much.

This supply and demand example reflects more than just “rate of pay”. Another more drastic example I have heard and seen out of Ontario is the tendency for trucking companies only to hire/contract drivers who own their own corporations. It’s a “driver services company/corporation”. A single driver wanting to work for a company is pressured into incorporating, and the corporation would be paid by the mile. The benefits to the trucking company are numerous: no labor board hassles, payroll taxes, short or even long term obligations, damage claims… on and on. This tendency allows some trucking companies to do an end run around numerous labor restrictions while legitimate companies are forced to operate legally. It’s a corner cutting that MUST stop.

Of course when everyone is looking for work, desperate people end up doing desperate things. Giving up employee rights should not be tolerated. It’s not good, but it probably won’t stop until demand picks up above supply.

In tough economic times scoundrels run rampant. Watch yourself.

BEWARE OF DRIVER CONTRACTS...

2009-03-19T14:23:00.000-07:00

Though this blog doesn’t get many comments I regularly receive responses directly by e-mail. The other day through various circumstances I received a copy of a “driver contract”. For obvious reasons I won’t share who it came from. Here is a condensed outline:

1) Driver’s name:_________________
2) _______ cents/mile for the month… etc.
3) A $300 per week ($1200 per month) for road allowance is deducted prior to payroll deductions in lieu of TL2.
4) A phone allowance… etc.
5) Health benefits… etc.

Item 2) shows the individual gets a cent per mile “gross” and item 3) shows a road allowance deducted off gross. This means the rate of pay is entirely based on cents per mile while “subsistence/per diem/road allowance” is deducted as a portion off the gross.

No matter how a person explains this or defends this it will NOT pass a non-taxable benefit audit. As I have stated many times before subsistence/meal allowance/per diem MUST be paid BY THE DAY and independent of productivity pay. I’m not trying to be a smarty pants, I’m trying to save people a mountain of headaches, penalties and interest. I repeat, this contract will NOT stand up to an audit!

In an audit the truck driver will be reassessed based on the gross (before road allowance deduction), therefore the tax deducted will be far too small (ie big tax bill). T4’s will be RE-ISSUED and both EI and CPP will be assigned as penalties to the trucking company. Additionally, holiday pay can be assessed on the $1200.

The risk to driver and company is outrageous with no benefits whatsoever unless both the company and driver are never audited. If you are a driver or a company that uses a contract like this please, for your own sake, stop immediately!

In my book I went through the application of subsistence to a trucking company. The national implications are bold and somewhat risky (to the company if they hire a lazy character). It can be done, probably in the next ten years it will be done but not like the example above. If companies try and cut corners and have the best of both worlds like this contract tries to, there will be screaming “Nay Sayers” coast to coast when re-assessments are issued. Do it right or don’t do it at all! This above mentioned contract places risk on both driver and company. STAY AWAY from this!

There is a way to do it legally but it’s almost triple the paperwork and the risk to the DRIVER is substantial. It will also produce a moderate risk to the company if the driver is lazy. For both these reasons I will not publicly explain how to do it. You can contact my office if you like but I’m not convinced of the national benefit of having companies hold that much power over individual drivers.

My goal is to have subsistence allowance applied the way it is designed to be, as a daily reimbursement of job related costs! Personally I don’t think the trucking industry is financially or emotionally mature enough to carry the responsibility of it. Some will undoubtedly desire to, but the pressures of the industry will financially hammer them back into the old mold.

That’s my story and I’m sticking to it!

The Ombudsman's report...

2009-03-17T16:32:00.000-07:00

Last week I received a copy of the Taxpayer Ombudsman’s first annual report. I’m not sure how many people know of or use the Ombudsman but as an accountant it’s a valuable source and venue for our industries difficulties.

I want to comment on a story the report shared. I’ll quote it here:

“The operator of a special care home for adults received a per diem allowance for each of her residents from the provincial government. This allowance is a form of subsidy to the residents and is not considered taxable income for the owner of the home. The CRA officials who reviewed the owner’s file were not aware that this revenue was ax-exempt and proceeded with collection action that included freezing the taxpayer’s bank account and garnishing $4700. This resulted in considerable difficulties for the taxpayer. Once the Ombudsman got involved, the CRA ceased its collection activities and released the taxpayer’s bank account.”

This story in the report showed me two things. First, that rogue auditors (its what I call them) often times are wrong in their interpretations of events (such as per diem or subsistence allowance being classified as non-taxable). Since per-deums are relatively unique to the trucking industry I assume in the next couple years rogue auditors will make their stand somewhere or in several places across Canada. Accountants must be aware.

Secondly, the concept of non-taxable benefit is clearly understood, not just by the Ombudsman but also by CRA (once they are enlightened).

The crusade to have operators use subsistence will be speckled with resistance and education both by drivers as well as CRA agents.

The only comment that needs pondering is what form of compliance did the special care operator have in regards to the per diem system? Was there an appropriate agreement? Paperwork? Etc. We must assume there was since CRA backed down on the claim. In my opinion compliance and audit trail will be the fulcrum for many accountants applying the system.

Tax deductions usually a matter of definition

2009-03-12T12:45:00.000-07:00

I came across an income tax case the other day. It’s related to the topic I raised last week (personal vehicle for business travel). All accountants know that driving to and from work is NOT tax deductible. Here’s the story:

An employee of a company worked out of their personal home office. During that time they also drove too and from the employer’s office. The employer paid the employee for the travel and the employee did not report the income on their taxes. Even though the employee mostly worked from their home office, the judge sided with CRA that the amounts received from the employer was taxable. One of the critical points in the case was that the employer had an office available for the employee at the employer’s location. The choice to have an office at home “…was entirely the taxpayer’s decision… and the decision was based on convenience.” McCreath v. Canada (2008) T.C.J. No 454, T.C.C., Campbell J., Oct.30/08. Digest No. 2833-025
Something of importance should be noted. The tax courts determine business travel and also home office expense (not specifically discussed in this case) in light of “base of operations”.
If a person is self-employed the base of operation is clearly the home office (practically or so documented). Under incorporation the base of operation is clearly the head office (practically or so documented). Therefore an employee driving to and from the place of employment is not an issue unless documentation implies otherwise.

Therefore when a driver logs his/her personal vehicle as “went to work” there may be an implied problem with the definition of “base of operations”. However, if the log reads “went to move equipment” or “delivered paperwork to customer” the definition of “base of operations” is not compromised.

Though this case isn’t an exact replica of the concept it does enforce the courts understanding of tax deductibility.

Why accountants are conformists rather than activists? (part two)

2009-03-10T13:16:00.000-07:00

Here is another theory why accountants are conformists. “most accountants are conformists because the accounting industry is a conformist industry”. (pause for laughter)

Dah! (you say) Of course the industry is conformist!
Yes it is… but let me explain my point from a different angle.

Several years ago Enron, and other multi billion dollar accounting scandals, exposed a virtual tsunami of accounting and reporting conflicts. Consequently the government implemented there own tsunami of new reporting requirements. Over the last several years accounting firms all across Canada were struggling and reorganizing to implement the new requirements. I heard it said that if a firm had 100 clients they can now only serve 75 of them, due to the new restrictions. Firms have been adding staff, combining firms and releasing clients frantically trying to conform. Their energy has been placed in conforming and not in being a client activist. With regards to service, unfortunately too many truckers are falling through the cracks.

For those who think the “change” may be over may I inform you its only BEGUN! With the advent of IFRS (International Financial Reporting Standards) Canadian accountants will be consumed by many more rigorous changes. IFRS represents one of the most dramatic changes the accounting profession has witnessed in a long time, maybe even ever! The difference between IFRS and Canadian GAAP are substantial and is scheduled for implementation in 2011. The “conformist industry” is about to become the most rigorously regulated in debit and credit history. Many truckers will be standing at the dock waving good buy to quality service. It does, however, represent an opportunity for those accountants who wish to specialize in lease/owner operators, construction contractors or some other niche.

It seems the only logical alternative to a highly regulated, wide sweeping, information intensive industry.

Vivi La Avant-garde!

Why accountants are conformists rather than activists? (part one)

2009-03-05T14:46:00.000-08:00

I have a theory that’s not going to be very popular among accountants. They may agree in private but may contest in public. The theory is this “most accountants are conformists because the market pressures them to be activists”.

Accountants, especially designated ones, may be held financially liable in the event there is something wrong with an income tax return (or review/audit etc). The market (ie. clients) place pressure on accountants to report earnings/expenses in a format that may not (or will not) survive a CRA audit. Here are a couple examples:

Using a personal vehicle for business is a legitimate expense. However, if the person is self-employed they must keep a vehicle log which shows the personal to business ratio (how many business miles used compared to total miles logged). If 22% of the miles were traveled for business than 22% of the cost of operating the vehicle are expensed. Without a log of business to personal travel how is an accountant or auditor to know what percentage to expense? Every good accountant KNOWS this is the law! However, if an accountant tells a truck driver that he/she CAN’T expense anything on their vehicle without a log book most clients would walk out the office and seek an accountant who allows something (try and get a trucker to keep ANOTHER log book).

So the accountant has an ethical choice. What (in his mind, or in the mind of the average auditor) is a reasonable percentage or figure to expense? Thus the “self-deception” and market “disinformation” begins. The accountant has convinced themselves to become an income tax activist. They are cutting corners. Their internal conscience nags them that under audit they may well be taken to the cleaners. They are vulnerable and they know it. Therefore they become “conformists” by desperately trying to stay off the CRA “radar”.

Another example is the “non-use” of TL2’s for meal deductions. By now all well informed accountants know that self-employed operators require meal receipts as expenses. They are not allowed to use the TL2 any more. However, many calculate meal expenses using $51.00 per day and place the dollar figure in “8523” where the total of all meal receipts should to go. This means under audit, when asked for verifying receipts, there will be none. OPPS! No wonder many accountants are emotionally hiding under their desks at the thought of an auditor.

One more theory! “Compliance builds confidence, and confidence endorses boldness”. Do you want to know why I wrote my book the way I did? Or maybe why I write the way I do? My passion is justice and equality in a system of compliance not self induced cowardice.

Vivi La Avant-garde!

I don’t expect to be sent invitations to Christmas parties. Oh well!

The Ten Commandments of an Owner Operator in a troubled Economy

2009-03-02T17:01:00.000-08:00

1. Never, Never, Never, Never, Never run out of cash. Do everything you can to build and keep four to six months worth of cash in a safe and liquid place. The new "tax free savings account" is a great place for some of it.

2. Get out of debt! Pay off as much as you possibly can, as fast as you possibly can without violating the first commandment. Simplify your life! If that means selling things... then sell! Nobody can eat a bass boat or a Harley!

3. The value of a truck is based on its fuel economy not its age or comfort. Your primary asset is you golden goose. It's what makes you money. Without violating the first two commandments make sure your truck holds and keeps its VALUE! If it gets terrible cash flow because of fuel consumption change your driving habits. If that dosn't help trade down (or maybe up), to a more fuel economy based assest, but remember you'll take a bath on the trade in.

4. Reducing speed and acceleration is critical to reducing both fuel and maintenance costs. Consume less and invest as little as possible. In a troubled economy there are loads of get rich quick schemes that entice people to SPEND rather than save. Be the smart one! Become more efficient rather than trying to break into a NEW market!

5. If you DON'T trust the company you work for, its probably too late to find a quality company that is hiring. Therefore make the best of what you got!

6. The key is compliance, don't speed, don't neglect your log book, follow the rules and don't cut corners. When money is scarce fines and penalties are often used to subsidise municipal/country/state/provincial budgets. They're out there gunning for you, stay off the radar!

7. If your not mechanically inclined TRUST your mechanic. The best way to embrace your mechanic is to PAY him! PAY your mechanic... PAY your mechanic! If you can't trust them find someone you can trust. If you don't trust anyone and your not mechanically inclined, get out of the business!

8. Work harder, sacrifice more, go the extra mile, serve your customers, create your own value, build your own life margin! and of course STOP COMPLAINING!

9. Build a network of support. Friends who encourage each other through tough times are priceless. Everyone needs support and encouragement. If you don't have one, start your network today! and I'm not referring to a multilevel marketing scheme... dah!

10. Invest your time in eduction. GROW, GROW, GROW! Think! Plan! Learn more about your craft than you've ever known before. It should cost virtually nothing to learn the most valuable things. Ask questions, knock on doors introduce yourself to new people and learn how to keep yourself afloat.

Beurocracy 101 and Compliance 101

2009-02-26T14:24:00.000-08:00

Many years ago I went to a tractor pull. I’m not a huge fan but wanted to see what the noise was all about, and noisy it was! The dirt was flying and the fumes were fuming. For me, however, the real interesting part was the mechanism that the tractors pulled. For every yard the tractor pulled, the weight was shifted closer to the tractor (multiplying the effective resistance/friction). Finally the multiplication factor made it virtually impossible for the tractor to drag the weight. Even with the most powerful of tractors the gears and shifting burden will eventually make it impossible to continue.

Canada Revenue Agency is designed the same way. The primary goal of the agency is not to administer the income tax act justly and fairly but to manage the population of the country in such a way as to collect taxes from virtually everyone with the relative same degree of intensity. The more aggressive the citizen is in reducing taxes (apart from the norm) the more incremental burdening obstacles CRA shifts to the tax payer. It’s the “policies”, forms, requests and explanations that slowly weight down the citizen or actually it’s the accountant that gets weighted down.

Accounting firms constantly evaluate their clients compliance, punctuality and financial stability (including whether they pay their accounting fees or not). The clients compliance and punctuality are critical to the level of risk a firm is able or willing to absorb. For instance we rate each of our clients about twice a year for compliance to subsistence. If they fall short they are either encouraged to higher compliance or (eventually) we find them another accountant.
Using subsistence allowance is not for the slackers. The immense savings it provides comes with a cost, compliance. A word to accountants, if its used by your clients make sure they do it right, the last thing this opportunity needs is a rejection because of “non-compliance”. On the road the word would be the “entire opportunity” failed and the industry would battle disinformation for years.

Working within the CRA system requires clear definitions to avoid a continual tsunami of weight/restrictions.

Update on industry education projects

2009-02-24T15:23:00.000-08:00

Today marks the final day of work on a project I have been exhausting myself on for over six months. We finally finished the studio production of “Making Your Miles Count: taxes, taxes, taxes” CD version. Included in this audio version is an additional chapter that updates users of subsistence allowance (and potential users) in several compliance and risk issues. Some people have been waiting for the CD for nearly eight months. Their patience is admirable, my time estimates grossly inadequate.

Slated on the horizon are two more audio projects that I hope to have available by spring. These projects are much less intense and much more informal. Their educational and entertainment value is my most pressing objective.

I don’t have the CD version available on our web sight yet but it should be up in a couple weeks. Those who wish to pre-order a set can do so by e-mail.

There will be several topics and projects I’ll be sharing in the next coupe weeks. One has to do with a report submitted to the taxpayer’s ombudsman. Those who regularly read this blog can look forward to it.

Leave it to Doctor Demming!

2009-02-19T15:25:00.000-08:00

If you’ve been in the accounting industry for longer than 20 years you get to know the beurocratic system, both its strengths and weaknesses. CRA does NOT operate using the same business “rules” that the public is exposed to. In fact the rules that CRA plays by are: written by themselves, are written for their benefit, and is subject to change without consultation with the public (whom they are designed to “serve”). It can very well be a frustrating industry, not unlike trucking who must work with the DOT.

In the last twelve months our office has recorded a HUGE increase in CRA errors. Our numbers show triple digit increases. In our specific experience we have nailed it down to data entry. CRA has made significantly more data entry errors than we have EVER experienced before. We have attributed some of the errors to their “new system” which was launched early last year (ie. GST-ITC checks stopped due to late or incomplete data). I personally am not against the new system as it relates to late filers. In fact some aspects of the system I am very comfortable with. However, some things are getting out of hand.

Here is just one example. One of our clients sent in a check for $1400 in source deductions. The check cleared the bank with the appropriate deposit information on the reverse (Revenue Canada DID receive and deposit it). Under the “re” the appropriate RP number was clear. The appropriate amount was placed on the source deduction form (submitted). However, the amount was not applied to the source deduction account. In fact it didn’t appear ANYWHERE! In fact they are still looking for it. In talking with the client I have to communicate it will take 2-6 months to have CRA adjust it correctly. Meanwhile T4’s and T4 summaries are all submitted as “balanced” and yet CRA numbers disagree. Not until the file is given to someone who has authority to investigate and correct will it be rectified (hence the 2-6 months). Meanwhile the “request for payments” pile up, interst, penalties etc.

When CRA data keys errors the system operates as a punishment to innocent tax payers. The process of correcting CRA errors is brutal! As I stated, under most situations it takes four to six months to correct CRA blunders (or anyone’s blunders for that matter). That kind of correction would NEVER pass in the real world. The only reason it is tolerated is because of a lack of competition (maybe we can get Bosnia administer our taxes). Performance evaluation is balanced by a “systemic” approach to implementation, which means that the “system” comes first. Then, when and if there is time service!

Dr. Edward Demming is my hero (as anyone who reads my blogs knows). He states that people are restricted from excelling at their work because of the system! Bang on Dr.!

CRA's "WAYS"

2009-02-17T12:55:00.000-08:00

I just finished my book on CD, which included a revised chapter on the national application and strategic plan for subsistence allowance. One aspect of the chapter discussed the historic (and not so historic) ways CRA “deals” with issues of possible conflict. I provided an example of a not so publicized situation where CRA had the “Moral High Road” in dealing with a tax issue. Instead of ethically dealing with the problem, CRA chose to lie, manipulate and harass citizens in blatantly illegal procedures. In the specific case I outlined, all that needed to be done was change a particular law (as it was written in the Income Tax Act). However, instead of closing a legal opportunity they chose to stalk and intimidate individuals into an economic stupor. It was (and is) a deeply sorrowful day for our Country.

However, it revealed the “mind” of CRA. Its power is derived from its ability to harass one specific individual (with virtually unlimited resources) until economic oblivion is achieved. It can also focus on a small or medium size group of citizens (ranging sometimes in the tens of thousands or hundreds of thousands).

Too often Canada Revenue Agency has been promoted as an entirely law abiding body of beurocrats. This, unfortunately, is not the case. When given an opportunity and a reason to abuse, they can be brutal. It reminds me once again of Silvio Berlusconi, the President of Italy who stated “when taxes are too high it is morally acceptable to evade them”. It is my solemn determination to avoid this type of national attitude. Too many accountants across Canada hear clients try and justify “tax evasion” every year. Granted, they do so because they feel they are being unjustly taxed. It’s not the taxation that motivates resentment and abuse but the “unjustness”. That is one of the primary reason I am an advocate of subsistence allowance. If properly and nationally implemented, subsistence may change our Countries anti-government sentiment (starting with truckers of course).

If CRA (with the Finance Ministers approval) focuses on shutting this just and non-discriminative opportunity down, I fear a much more vocal carnage may occur. Eventually, the only other option for equality may come in a flat tax (something I don’t view as entirely necessary at this time). A flat tax would eliminate the jobs of 50-70%+ of all auditors and CRA workers as well as accountants and tax lawyers (an efficient but not very popular move for sure). I trust the current Canadian leaders might see the ultimate outcome of the conflict, embrace justice and equality while refusing to comply with another tax scandal.

So far they have, in fact they have been more than just co-operative. But politics is politics….

Advice to the weary

2009-02-12T12:11:00.001-08:00

Historically, being an operator produces 5-10% more net income than just being a driver. Taking in consideration the non taxable benefit of subsistence allowance however, would move the national averages up anywhere to 10-17%. These numbers are significant and could well produce a shift from company driver to company operator. In this turbulent time this tendency may harm uninformed drivers.

I would hazard a guess, however, the 10-17% will not be a national average this year (or even last) as too many operators are sacrificing their own salaries to sustain their business. “Fortunately” (and also sadly) the glaring tax benefits are offset by the sight of operators dropping like flies. However, those who are surviving, and even thriving will continue to maximize non-taxable benefits.

In these turbulent times, understanding supply and demand is critical to sound business practices. Operators changing companies over a cup of coffee must become a thing of the past. In tough times, providing a high level of service creates your own demand and company loyalty. It is critical to operator’s success in an economic downturn. Those who too quickly jump from ship to ship will eventually fall into the water and drown, its inevitable, especially in a recession.

As early as September of 2007 I started telling my clients to “buckle down” and don’t make waves, create value within your company. My advice now is, “if you are at all making a living, no matter how uncomfortable, stick it out!”. The lower grade companies, dealing with lower grade customers and lower grade operators will soon fall by the wayside. You don’t want to be licensed on one of those during a recession.

Take it easy, count your blessings, save your pennies, take advantage of every savings when you can.

My dilemma with the Employer Employee Agreement

2009-02-10T14:18:00.001-08:00

It is my firm belief that the fulcrum to subsistence allowance is the employer employee agreement. Without an adequate EEA CRA may try and find legal grounds to overturn its inherent equality.

Therefore I am in a deep personal conflict. I wish to see thousands of operators use subsistence allowance within three to five years. However, one of the success factors needed is the compliant application of the EEA. Without adequate control over the application I may be placing the national acceptance in jeopardy. Providing a perfectly acceptable EEA to someone who doesn’t apply it properly may be placing the entire industry at risk. So what do I do? … its not a rhetorical question… it’s an actual question….

I’ll tell you what I’ve done SO FAR. I have provided a general EEA to our firm’s clients. I then monitor (yes even demand) proper application of it. If a client shows that they are not interested in compliance I remove them from its application (and usually our firm). Why should non-compliant people receive the same non-taxable benefits as compliant people? I don’t know… maybe I’m a control freak!

For the good of the entire industry and future application of the allowance, I am of the opinion (at least right now) I must retain control of the EEA. I am willing to go to the Supreme Court defending the systems integrity but not without assurance the application is reasonably applied.
I am reminded of the tax court judge that presided over the Don Wilkerson court case. The critical quote was “… these kinds of aberrations cannot occur…”. It was clear that the tax court will not stand for injustice, inequality and aberrations. However, we don’t want to present an ethical argument without any regards to compliance. In my opinion the application of the EEA must be applied nationally, the more consistent the better. I think that firms that have been using subsistence would agree with me.

Come on! Let's hear it for equality!

2009-02-05T12:46:00.000-08:00

In my research on the application of subsistence to lease/owner operators I have found several firms that use it. However, none have done any public advertising because they seem to be intimidated by Canada Revenue Agency. In their defense CRA is not an easy book to read and not an exact science to practice. They appear to “let things go” and “draw the line” indiscriminately. Sometimes exposing a court case that proves them wrong only seems to delay their tactics rather than stop them.

Too many Canadians believe that CRA audit assessments or re-assessments are based entirely on the Income tax laws as supported by tax court rulings. Unfortunately they are not! They are too often formulated as a geographic application or interpretation. Sometimes one or a group of auditors take on a particular issue with an “end justifies the means” mentality. With the “ends” being tax revenue and the “means” being ignoring of court rulings. For example: I have a case right now on my desk where a T4’d executive (who was re-assessed for a particular tax year) filed a notice of objection against the assessment. Several months after filing it, suddenly the executive’s employer received a garnishment order. I personally presided over a phone call to the auditor assigned to the file. The garnishment immediately was repealed (no apology or explanation). It was repealed because I mentioned the “Notice of Objection”. The auditor acknowledged the filing on their data base and then immediately faxed the retraction. This is NOT an isolated case, in certain instances they are routine. The point is, CRA knew of the notice but ignored the legal requirement to suspend all collections until they were advised (by the citizen) that they (the citizen) knew of their rights under the law. Once it was clear the citizen knew the law, CRA obeyed it. It appears that the phrase “ignorance of the law is of no avail” only applies to citizens not to the government.

This is just one reason why most accountants (if they use subsistence) try and operate “beneath the radar”. They don’t want to be on the phone all day arguing with agents quoting court cases and being harrased with illegal and ignorant actions. I sympathize with them! It’s not a cake walk, especially if an accountant has to work for a living as well. CRA seems to have all the time and money! BUMMER!

This is an open invitation for accountants to ask for assistance in the application and defense of subsistence allowance. If this opportunity is ever to catch on, accountants have to feel comfortable with their application and know how to (or have someone) defend it. In my opinion the strongest means of defending subsistence is compliance and publicity. It’s kind of hard to garnish popularity when one profession is shy to publicize. Come on guys and gals, let’s hear it!

Not Exactly Chump Change

2009-02-03T14:21:00.000-08:00

Once an employer–employee agreement has been finalized (I recommend having the agreement placed in the minute book of the corporation) the new employee (driver) takes the keys and starts driving.

After a month he/she receives their first salary check. They also calculate the days gone multiplying it with the current treasury board figures (both Canada and US, adding exchange of course). The total is calculated and submitted to the corporation for payment. Let’s work through an example:

12 days in Canada
81.55 x 12 = $978.60

11 days in the US
81.55 x 125% = $1,121.31

Total nontaxable benefit to driver $2,099.91
GST ITC for company $46.60 ($978.60 x .047619 equals $46.60)

Total expense for the corporation $2099.91 – $46.60 equals $2,053.31

Remember this estimated re-imbursement for job related costs are not subject to and reduction (such as the 50% rule or the soon to be 80% rule). They do not fall under the meals and entertainment category as does expense accounts for salesmen (who entertain). It is a write off identical in principle and format to the treasury board of Canada’s travel directive Appendix B module 1,2, and 3.

So lets re-cap! A driver who drives 23 days gets 2099.91 tax free (tax savings of $735.xx, not including CPP) and the corporation receives a check of $46.60 in ITC’s). If a driver (who also owns the company) does this eleven months of the corporate year the combination of corporate and personal tax savings will be $8,597.60 (not including CPP savings). Not exactly chump change.

So, why aren’t accountants jumping all over this? Because its not how they’ve always done it. If they start changing how they do it, CRA may ask questions. Questions they are shy to answer. It’s not that the questions don’t have answers (and good ones) its just most accountants don’t want to talk to CRA unless they absolutely HAVE TO!

Employer Employee Agreements... Continued

2009-01-26T10:51:00.000-08:00

I watched four or so hours of debates on the floor of the house of commons yesturday. One member would make a glaring accusation, only for the other party to make a completely opposite accusation about figures and numbers in the same document. To a person with common sense its obvious someone (or both) HAD to be lying... but nobody demanded verification of the claims....

It reminded me once agian that its always best to drink water from upstream of the herd.

Well now that the Conservative budget was passed by the Liberals… no wait!..

The Liberal budget passed by the Conservatives…..................... no…

The Conservative budget passed by… NO NO NO!

It’s the Liberal budget passed by… no… ratified by…………… aw!

y7tu6hrigkjbn! j7tu6hrigkjbn! (Head banging on keyboard)

Forget it! I’m going to the nearest carnival to ride the zipper and tea cup to regain my equilibrium.

Let's get back to trucking shall we?

The critical qualification of using subsistence allowance is the Employer Employee Agreement (EEA). If the designers agree, it can become a very creative application. Let's compare how flexible it is to the current system.

Another controvercy over the lunch bag let down is the application of the TL2. "Qualification" for the 50-80% increase is restricted to drivers who travel more than 160KM from their municipality and also gone over night (24 hours). However, in an employer-employee agreement operators can ignor those type of restrictions because that has to do with forms that apply to another system. Travel status qualification can start immediately when an employee marks "on duty" in their log book. That means if they leave before breakfast... they qualify to be paid for it! I know its a novel appoach that hasn't been applied to the trucking industry for decades but I think it may just catch on... don't you think? So not only is the system fair and just in its numbers it can be just and fair in application as well.

EEA's are also customizable! An EEA can add or remove specific features applicable to a specific job. The most important thing to remember is that it must be "reasonable". Let's remember that the definition of "reasonsble" is defined and mandated by CRA not by the public.

The simplest way to determine what is reasonable is answering this question: Has CRA accepted the application before? For instance, when a government auditor leaves home before 8am they qualify for breakfast, otherwise they don't qualify for subsistence until noon. Therefore, according to the Charter of rights and freedoms (equality or non-descrimination), because CRA allows one group to define travel status this way all other agreements may be taylored with this type of detail.

I can't caution operators enough, it must be reasonable! The application of subsistence allowance is NOT, and should not be considered a blank check. All I am promoting is a fair, just and equality based tax system, nothing more... nothing less!

Decades ago most drivers received a meal allowance from their employors but for "closed door" reasons trucking companies stopped paying it.

So lets get back to it... literally!

The Employer-Employee Agreement

2009-01-26T06:19:00.000-08:00

There is much more to huge tax savings than just incorporating. Too many operators and accountants stop short. When that happens accountants fill out a Corporate T2 using the exact same numbers as if the client was self employed. If this is your situation, don't bother incorporating.

The next step HAS TO BE an employer-employee agreement (EEA).

The EEA is a contract, a legally binding document that the courts and labor boards enforce. Historically EEA's have been made between unions and management or just by companies looking to recruit people. Some agreements are standard and applies to all employees while others are custom, provideing benefits to one group, individual or position over another.

An EEA that truckers regularly utilize is the "Cell phone requirement". Many companies require that a driver provide their own cell phone in order to perform their duties. CRA allows drivers to use their cell phone as a deduction provided that it was a written condition of employment. This "condition of employment" is actually an employer-employee agreement. It is a small simple agreement but operates under the exact same principle as a complex EEA inclusive of subsistence allowance.

The details of an EEA can be as varied as employees and positions. They can be as restrictive or liberal as creative minds produce. However, there are limitations as to what can be classified as a non-taxible benefit. For instance, subsistence allowance allowance can't be set at $500 per day (without defending the value). Whatever value is assigned as a "non-taxable benefit" must be deemed reasonable. CRA is mandated the responsibility to determine what is reasonable and what is not.

There are pipeline workers, for instance, that are apparently getting $95 per day living allowance (subsistence), even though the treasury board of Canada only has its numbers at $81.55 (as of October 1, 2008). If this is true, the extra $13.45 must be defendable in the tax courts (if CRA would contest). For the trucking industry, however, I am only interested in pegging subsistenace allowance at Treasury Board numbers.

I think I'll take another day to go a little more in detail about this topic. For right now, however, It would be prudent to state that the EEA is hammered out between the "President" (officer) of the corporation and the driver. If both roles are filled by the same person it can feel rather schizophrenic.

Employees Only

2009-01-22T16:02:00.000-08:00

If you have been reading this blog for an extended period of time you have somewhat of a history behind the opportunity for Canadian operators. So lets get down to some of the details for those who have been patient enough to keep tabs on this sight.

There are three steps to qualifying for subsistence allowance. The first qualification is that only employees can collect. The second is that the employee must have an employer-employee agreement. Then finally the agreement must be followed. It sounds obvious and simple but the steps are somewhat confusing at times and can appear schizophrenic to the seasoned self-employed operator.

Let’s look at the first step. Employees only can collect. Simply put, self employed people can never have an agreement “with themselves” that transfers estimated expenses into non-taxable benefits. Therefore the only way to have an employer-employee agreement is by incorporating. Based on over 125 years of corporate precedent, separation can be achieved by incorporation. The shareholder appoints a director, the director hires a president the assets would be sold to the corporation and the president interviews a driver for the position. Our legal system recognizes each role as a separate position even though each role can be occupied by the same person. The average person thinks the system is schizophrenic (and they may be right) but this is how its been done for over a century.

The employer employee agreement, what I’ll write about next week, is wrestled through between the president and the driver. Incidentally, if you hold the position of: shareholder, director, officer (president) and driver… you can still only use one log book.

Canada's Inauguration

2009-01-20T16:35:00.000-08:00

What greater illustration of new beginnings than an inauguration? The swearing in of a new President, even though it’s not Canadian it is still an exciting event. Starting a new government administration may not actually be the right wording. It probably should be described as a “DIFFERENT” administration rather than a “NEW” administration. There are still the same offices, roles and their respective responsibilities. Even taking a look at his “new” cabinet reflects recognizable faces. I’m not saying that’s good or bad but its not “NEW”… just different. The US government will still operate with the same general speed and restrictions as it has over the past 220+ years.

Changing an administration affects a change of perspective, tolerance or “policy” and generally not much more. The beurocracy will remain similar to what it has been in the past. If the leader of our southern ally wishes to change the beurocracy I suggest it'll take a time frame that exceeds the maximum allowable eight Presidential years. Bureaucracies run independent of administrations. They shouldn’t, but they do. Even Ancient Rome, the founder of democracy, had that problem. Regardless, I wish our neighbors the best. Their balance sheet needs all the encouragement it can get.

The global economy is truly amazing. The only real restriction to free world economy is government intervention. It’s the axe that hacks at Adam Smith’s invisible hand. It’s also what downgrades “NEW” to just “different”. They have taken on more than just national defense and enforcement of the law, they have assumed the care of our elderly all the way to the education of our young. They have taken our income and distributed it as they interpret the need. Unfortunately, society has placed their faith in government to solve all life’s ailments. To place faith and control in the hands of any government is to relinquish our personal rights and freedoms to a beurocratic system. Eventually we may vote away our own lives.

On this solemn yet jubilant occasion let us all remember individual rights and responsibilities are still inherent in each person. Justice and equality will never come from government but from the collective conscience of each person. Tyranny, oppression and injustice will always come from the collective complacency and cowardice of each citizen.

With that said I desire, in this year, to unite as many trucking industry readers as can be collected around a new “administrative system” that produces more justice and equality than Canada’s beurocratic tax system has ever distributed. There is a clear political window of opportunity that each trucker should understand and take advantage of. Now is the time for the Canadian tax system to be pushed back from its historic roots of prejudice and intolerance towards the hard working citizen. Subsistence allowance is here to stay!

The Busiest Day of the Year...

2009-01-15T09:58:00.000-08:00

Welcome to the busiest day of the year for an accounting firm. If a firm deals with self-employed operators only the busiest day would be April 30th (for checks to be mailed for CRA) or June 15th (for returns to be mailed), but for those firms who work with operators with corporations (due to subsistence allowance) today is their day of “madness” (not really if one is organized and didn’t procrastinate).

An operator that is incorporated should send regular source deductions in for their salary. However, once the year end is completed, the income from the corporation should be transferred to the owner/president through what is called “management fees”. The source deductions for management fees claimed December 31 is due January 15th (hence the busy day).

As I stated in my book, the majority of operators who drive one truck (their own corporation’s truck) should almost always claim the income personally. The corporation should not be claiming any income (actually about 80% of all privately held Canadian corporations claim zero income). This is because the combination of corporate income tax and dividends tax is greater than if the operator claimed everything personally (unless the t4 would be more than $63-65,000 per year). If it is above that amount the new tax bracket would propel the operator into a tax range that it would make sense to pay corporate tax then dividend tax. Since the vast majority of all operators would not fall into that category (especially if the operator is collecting subsistence allowance and has a spouse who is a shareholder/director/officer and can receive a $63-65k t4 as well). One truck whose operator is collecting subsistence will rarely make more than $65K. National averages are $50-55K before subsistence (which knocks off an additional $15k).

If your accountant starts spouting off “dividends” when your t4 is less than $65K start asking questions!

CRA-GST-ITC and other four letter words

2009-01-13T13:24:00.001-08:00

There is a section in chapter eight of my book called CRA-GST-ITC and other four letter words. It describes a potential liability issue hanging between Lease/Owner operators and Trucking companies. The example I used has the potential to affect up to 40% of operators. The chapter explains the instigators are hard to determine but the potential outcome may still be disastrous for operators. The liability to operators is completely at the mercy of the trucking companies. The book further emphasizes the critical need to trust the company you work for.

GST is a simple application. However, the application of the tax is still not consistent across Canada. For instance, most trucking companies deduct GST off operator’s settlements while some do not. As in this case the inconsistent application of GST can be hazardous to the company. The practice of not deducting GST off settlements is rare. I would put it at less than 1% and in this case the “potential liability” may rest on the company rather than the operator. It’s not that they are doing things unethical it’s just not how the GST ACT is (and has been) written, interpreted and applied.

If you are an operator with a company that does not deduct GST... DON”T WORRY! You are safe and well within your rights not to claim the GST ITC’s. Even though over 95% of other companies do deduct the GST, your “employer” did not set things up to shaft you.

After a close and careful look at the thought process to either apply GST or not, one must only conclude that the company chose not apply it for honest and ethical reasons. There is no sense in charging GST to someone who only goes out and claims it back immediately. That is a logical and prudent interpretation of business activity. However, as we know, CRA is neither logical nor prudent. The entire GST application is designed to apply tax to as many applications as possible.
There was a small example I used in my book where CRA tried to apply GST to a deduction that a company took off operators settlements. It was a “lump sum” wage for a driver(s). It would have sent hundreds of thousands of dollars to Revenue Canada, only for operators to fill out their pretty pink form and get it back three months later. I think the idea sprung from the “Department of redundancy department”. The trucking company shuffled their numbers around and just ended up paying less to operators who used company drivers, thus doing an end run around the application (smart guys!)

However, the question still remains, why does CRA apply GST to as many things as possible? Simple, so they can have the opportunity for operators to overlook rebates or for CRA to refuse ITC’s in an audit. Apply as much GST to everything, then see how much can be “dis-allowed”.
GST was never intended to be a burden on businesses… but its ending up that way.

Origins of Truckers Subsistence Allowance

2009-01-08T10:29:00.000-08:00

I have conducted hundreds of interviews and dozens of seminars. Many times in the process I have been confronted with the concept of “origins of subsistence allowance”. Many people ask a very good question “If it is such a great opportunity how come so few truckers are doing it?”.
First of all I’d like to say that CRA does not publish “tax tips” big or small. They generally only release information that reflects their internal policies, such as compliance, restrictions and general assistance on preparation (some exceptions apply).
The accounting industry then, is responsible for providing individual tax service for citizens. Companies like H&R Block, Liberty tax as well as a host of other franchises compete with T1 preparers coast to coast, most claiming the best value.
For the more complex returns, accounting firms also should be providing services on navigating the many options and opportunities. Professional preparers are responsible for finding and presenting the best tax opportunities available. With respect, the Tsunami like changes in the accounting industry has left professionals swamped with new regulations, restrictions and obstructions to service. An industry that “doesn’t like change” is overwhelmed with turmoil and backlog. However, that’s their excuse today but it provides no defense prior to approximately 2000-2002. Simply put, accountants (myself included) up until several years ago simply never thought outside the box.
The second thing I’d like to confirm is that I’m not working as a historian. Even in my book I resisted a detailed exposure of certain facts. So as to resist pointing the blame, I still prefer to restrict some information to the general public. I believe blame (sometimes) leads to retaliation and revenge. In history, revenge is the antithesis of justice and equality. In my opinion, it would be counter productive. However, the information I now share should not foster revenge but co-operation and collaboration.
Back in 1991 a trucking company was working for and with a pipeline company with varied contracts and results. They had a high GST return then low and visa versa. The fluctuation flagged an audit. The auditor (apparently a very helpful one) scoured through the books and found out why and was satisfied. The audit produced no re-assessments, all things were done well. The jolly (and apparently robust) auditor asked why the company wasn’t claiming the GST on the flat rate meal allowance and accommodation allowance provided the pipeline workers (ranging from $95 to $125 dollars per day). He conveniently calculated the amount to $143,000 (expensed at about $2 million). To state that the auditor was helpful is a six figure understatement.
One of the consultants who were working for the company at the time (Lucien Bleau) had a long chat with the auditor. In the end, the auditor informed Mr. Bleau that there is nothing stopping the trucking industry from providing the allowance to drivers, and collecting back the ITC (GST Memoranda 400-3-11 and 400-3-3). The resultant opportunity was exposed.
According to my limited research and knowledge this is the roots of the opportunity. However, tracking the initial exposure to present is like finding the tail end to a bowl of spaghetti. There appears to be a lot of start and stops. If I start to mention names and companies I run the risk of including or excluding a whole lot of people. Since I’m not interested in hurting anyone’s feelings I’ll keep it to one name… Lucien Bleau, the man many operators owe a cup of coffee or more. He was at the right place at the right time and asked the right questions. The CRA agent (who will truly remain anonymous) is owed a multi-million dollar thank you.

To Clear Muddy Intentions

2009-01-06T15:01:00.000-08:00

After WWII the Pentagon was stuck in a mindset of potential nuclear destruction. Destroy or be destroyed. The philosophy initially came from the Allies desperate need to triumph over the evil Axes, which was followed by the desire to contain Russia’s launch to dominate the world with nuclear arsenals. It appeared the Pentagon had no choice but to adopt the “dam or be dammed”.
Then along came a man named Henry Kissinger, a man of exceptional understanding, countering the global philosophy with the concept of “limited nuclear war” (among other subsequent beliefs). It was a controversial yet brilliant change of global thinking (at least the pre-scandal portion was). Instead of seeking to destroy the opponent entirely, he proposed to place a series of options that restrict and direct, all the while trying to retain his opponents pride and dignity (even though force may be used). It was a concept of collaboration with your enemies rather than trying to obliterate them.
The West never (or rarely) compromised the notion of Freedom. The West tried to hold firm to the destiny that man was to walk in freedom. They would not tolerate domination, fear and oppression (at least publicly… not withstanding Cambodia-type ventures). This concept of collaboration without compromise appeared to be an oxymoron. Mr. Kissinger’s life work proved that belief to be at least partially wrong (there is nothing like a major controversy as an illustration to further muddy… muddy meanings).
To some who have read my book, and viewed this blog, I have appeared as “destroy or be destroyed”. However, I wish to continue the sliver of honorable intentions Mr. Kissinger proposed in his “collaboration without compromise”. I believe, and can see, the universal application of subsistence allowance as a great leap for the trucking industry, CRA, and maybe even Canada as a whole. Properly implemented it could affect the average citizen’s view of the entire Canadian income tax system (maybe even something that could moderate the national contempt for our government). It’s certainly not a cure all, but I believe it can follow in the noble footsteps of its predecessor “The Federal Accountability Act”.
My goal is not to annihilate, punish or even aggravate CRA, only to bring clarification on their mandate, and to expose their responsibility for integrity and justice.
Today, somewhere in the rage of 80-90% of operators are still self-employed. I believe within 3-5 years that amount should be 50-70% incorporated. I am also determined to ensure those who do incorporate for the benefit of subsistence allowance to do so with the clear intent of compliance to the rules.
I will continue with my mission to directly educate some 25-35,000 operators as well as some 300,000+ drivers nationally. Subsistence allowance is only the first rung on a very long ladder. Some time this summer I will be introducing my second major topic and subsequent book (to be released some time in 2010) so stay tuned.

Thinking ahead never hurt anyone...

2008-12-30T15:43:00.000-08:00

Well, we have one more day left this year. My kids (early teens) are starting on the transition phrases such as “…see you next year” or “…I’ll wait till next year to do that!”. All the phrases we learnt to say decades ago when we experienced a new year. The humor wears off after a few decades, yet we chuckle along for posterity.
I’ve taken on a daunting task these last couple years. Promoting incorporation and subsistence allowance in an industry that is 80-90% self-employed is a monster job. In the words of Yancy from The Waltons “…I thought this would be a much bigger task than I thought it would be!”
I estimated five to eight years for saturation to take place in the industry… in some respects I guess I was right. However, the industry seems to have sat up and taken notice in respectable size pockets across Canada. When I started this blog (November 1st), I settled on not “evaluating” success for two years. However, today the consistent volume of hits (as well as other writers commenting in their articles) has convinced me that many are listening, and not just through publicity but firms and individual operators as well.
There is only one problem with a mass movement, it is disorganization. I am still concerned with the implementation of the employer-employee agreement. Talking to as many accountants and operators as I have these last couple years I have concluded that there are a whole host of operators (and accountants) not fully complying with employee agreements. Their “audit trail” looks virtually identical to self-employed status. This will NOT satisfy the CRA, at least not without a needless fight. Both accountants and operators must follow the rules of the agreement and integrate their monthly records with CRA’s system. There must be a regular salary, regular source deduction remittance, accurate subsistence allowance checks etc. If the operator hasn’t changed their cash flow habits, chances are it’s not done right.
As the industry ramps up usage of the system CRA WILL retaliate! It’s hard to ignore $100-200 million dollars in revenue. They may not retaliate publicly but probably through individual disqualification and intimidation. Without a universal standard, national support and networking, private accounting firms are vulnerable to CRA bullying. If you’re an accountant you know what I mean, if you’re an operator who is choosing an accounting firm (and the one who will ultimately defend it) it is your primary concern. If you are required to sign a waver just remember, you are on your own, you are officially “SELF-ensured”. You may only have a year or three to prepare your personal system for defense. It truly is the time to think ahead.

"Simple" Cause and Effect

2008-12-23T16:01:00.000-08:00

The trucking industry is changing in many ways. Driver demographics are only one. Over the last several years, many trucking companies in Canada fished for drivers in Europe with encouraging results. This trend even affected our accounting firm, so much so that I hired an account executive that was fluent in German and some Russian. For those clients of ours that immigrated from Britain… you are just going to have to be patient with me… I’m still researching. I’ve been married for over twenty years… anyone speak “Emotionese”?, of course I need a translator that is fluent in my native Simplelodeon” (dialect of Nickelodeon).
Changing the demographics of the trucking industry through immigration sounds and looks like a fast and easy fix, however, there are side effects that some companies seem to be refusing to acknowledge. For instance, plucking a driver and family from their “home” and relatives is not without drawbacks. Most eventually desire to return for visits. Usually immigrants return to visit family and friends once every year or two (at least the first number of years). However some companies refuse to let them go, producing some rather ticked off not so foreign… foreigners. It appears some companies forget that loyalty is built by the companies not the drivers.
This anomaly is not the only effect that Europeans have on the Canadian trucking culture. They bring in a comprehensive understanding of the European style of drivers pay and “DOT” compliance. If anyone has ever driven in Europe as a commercial truck driver the rules (compared to North America) are at the least… shall we say… intrusive. Therefore, it’s not the classical DOT issues that most immigrants comment on (at least generally).
However, driver pay appears to produces a burr in the saddle for some. Europe doesn’t have “open roads”, they can’t drive 100km an hour for eight hours (even if they wanted to). In Canada getting paid by the mile is their first little leap of faith. It sometimes takes a little mentoring to balance their financial expectations with driver fatigue. You see, European drivers are used to getting paid by the hour, not just the driver but the truck as well. The system evolved that way as HOS and other legislation squeezed and unions negotiated.
Comparatively, in North America, the HOS is starting to squeeze. However, that alone doesn’t create the aggravation. When Ontario and the Quebec rolled out the speed limiter legislation many Europeans had flashbacks of continental careers. The association was just too great to overlook. Questions such as “How much should an operator charge per hour for their truck?” started showing up interview after interview. We may have heard it more than most firms because we deal with subsistence allowance (per deum) but I believe the national seed has been planted.
Let me prognosticate (as does our ground hog Punsatoni Phil), “By the end of 2016, per deum will be available at most quality based trucking companies”. I know that may cause coronary heart failure at Trucking Associations but the collective squeezing of operators and drivers nationally causes many to start pointing fingers. Sooner or later the chronic driver shortage will advance to the next level, become creative and much more educated. If you so desire, you can go ahead and laugh at me… I’m only speaking Simplelodeon.

My Contrarian DNA

2008-12-18T14:44:00.000-08:00

Well the kids are getting out of school tomorrow. It gets one thinking about eggnog, a cracking fire place and family gatherings. Someone once told me that at a family gathering, their is always one “oddball” relative that makes the others roll their eyes and sigh. If your family gathering doesn't have one of those….then YOU’RE probably IT!

It also a time of reflection and contemplation. Since I’ve been in the industry for over 20 years (it doesn’t sound so long if you say it really fast), I’ve met a lot of really great people, and not just a LTL of oddballs. I am convinced the trucking industry has a significantly higher percentage of highly motivated and passionate people at its helm and on its deck. Working with hyper achievers should come complete with a case of valium (or eggnog).

In my line of work I also rub shoulders with several related industries (for example CRA). Recently several individuals and organizations have contacted me, encouraging further anti-government sentiment. So, being faithful to my contrarian DNA... I must respond!

I want to express my sincere appreciation to some really fantastic people who work as auditors at Canada Revenue Agency. Sometimes the roses are overshadowed by the thorns. In my experience there are many more roses then thorns. I have personally seen the anguish on the faces of auditors torn between doing what was right and doing what they are told to do. No matter which choice they have gone (and I've dealt with both directions) I think I still retained at least some form of respect for them, I wish them a very Merry Christmas

Specking Your Taxes (condensed from OTR Article)

2008-12-16T10:47:00.000-08:00

Reducing your costs during a time of slim margins is the first smart thing operators do. Especially today, drivers who spec their trucks for 75 MPH just don’t reflect smart business sense (regardless of speed limiter legislation). When oil was $10-15 per barrel nobody cared, but today it’s nearly certain financial suicide. A lease/owner operator must think business minded now more than ever before. Bells and whistles can sometimes become death and destruction.

Smart operators are still making money. They’re still doing ok because they thought ahead to most all the risks and pitfalls then devised a plan to minimize or even eliminate them.

Thinking ahead for your taxes is also a smart business choice. Too many drivers still have “off the lot” mentality when it comes to taxes. They think that, at the end of the year, taxes are what they are. When they drop off their shoebox full of statements and receipts they think there is no other result than the tax bill presented. This is how they’ve always done it. I hate to break it to them harshly but that’s just not true. It is no truer than specking a truck for 75 MPH and saying fuel consumption “…is what it is”.

The Canadian Tax system is complex. It is sometimes written in vague terms that are subject to considerable interpretation. It is what keeps the accounting industry hustling. The Income Tax Act says a business can deduct “a reasonable amount” of meal expenses. The Tax Law does not mention ANY number. It is the mandate of Canada Revenue Agency to determine what that amount is. Once CRA determines that maximum number for the year (or time period) it is assumed by the citizens and the tax courts to be fare, just and universal. However, this is where confusion and controversy arises.

CRA allows several different systems of reporting business income. Each system has subsequent rules assigned and the bottom line results can vary significantly. The difference is how expenses are reported and presented to CRA.

Let me give you what I consider an extreme example of difference in reporting and presenting. Singleton vs. Canada 2001 2 S.C.R. 1046, 2001 SCC 61. A lawyer took $300,000 capital out of his partnership and bought a house, then (the same day) he took out a mortgage for $300,000 and BORROWED that money to his law practice. He reported the interest on his personal home mortgage as “tax deductible”. CRA audited his return and rejected the interest. The first time I heard of the case I didn’t think the guy had a chance, it appeared to be an obvious paper shuffle. However, the Supreme Court of Canada held up the appeal. The interest was deductible. This is what the Court said:

“…Taxpayers are entitled to structure their transactions in a manner that reduces taxes, the fact that the structures may be complex arrangements does not remove the right to do so… It is irrelevant that… the respondent structured the transaction for tax purposes… Since fairness requires that the same legal principles must apply to all taxpayers, irrespective of their status as natural or artificial persons…”

It is the right of every Canadian to minimize their taxes, how they do so is up to them or their accountant and requires research into specking or reporting their income and expenses accordingly.

The industry is changing fast, those who find the right answers ahead of time will be prepared for the future.

In defense of publicity

2008-12-11T15:29:00.000-08:00

Well Ottawa should be relatively quiet now that the liberal musical chairs leadership campaign is over. Looks like the music stopped and the winner has his chair. Unfortunately for Bob Rae he followed the rules and kept standing as the music played. He lost his bid for leadership as Ignatieff managed to stay seated during the entire sonata, a hearty congratulations for a well run (or sat) campaign.
So… let’s get back to trucking!
The primary reason I’m abandoning politics is I wish to keep this blog an industry specific topic. One of the only reasons I deviated was that a coalition would have possibly threatened the application of subsistence allowance (per dium).
I’m going to make an assumption about our political future that will indeed be a stretch for some. I will move on and assume Ignatieff and the NDP will not get along (as opposed to Bob Rae or Dion). That’s my story and I’m sticking to it… until things change of course… then I’ll simply modify my position.
There have been several situations and conversations recently that have brought up the topic of the class action law suit. Though most opinions are anti-government or anti-court, I do have people still disturbed at the lawyers and promoters of the action. In my opinion this is a shallow response to a court loss.
The truth or facts of the case have not changed. The duplicity is still present (for those self-employed). Those participants in the action should be proud of their contribution to the entire Canadian trucking industry. Even though the case was lost in December 2006 (from a legal perspective) the publicity and national exposure was incalculable. For five years the class action kept the issue in the front of people’s minds. The issue became a place of reference for drivers. There have been very few issues (if any) that galvanized an industry as did the class action.
There were several reasons I wrote my book, one of them was the supreme court’s failure to hear the case (five months later my book was published). The end of the class action brought much despondency at the truck stops. The silence was loud, even louder than the cussing. The lunch bag let down campaign picked up the publicity but not the numbers, for clarification check out the actual after tax difference on our web sight.
Using the Tl2, 2008 provided 10.80 and will now rocket to $11.63 in 2009 giving a whole $.83 more per day (don’t spend it all in one place).
Publicity and conformity will keep subsistence allowance as a safe, equitable and profitable opportunity for Operators coast to coast. For those useing it stick together!

All those in favor raise your right hand... those opposed... form a coalition!

2008-12-09T11:13:00.000-08:00

Evaluating political leaders is a slippery slope. It is almost certainly laced with personal ideological prejudice. One way to remove or minimize oneself from personal prejudice is comparing behavior with history.

Today Cincinnatus is generally referred to as a mythical character. He was the Roman general that inspired George Washington and the “Society of Cincinnati” (in honor of which the city was named). It was the equivalent of today's American Legion or VFW. As the story goes, Cincinnatus defeated the Roman enemies and saved the city of Rome. After conquering Rome's enemies he resigned as “dictator” and went back to his farm fields. This story so inspired George Washington that after defeating the British he also resigned and went home, shocking and inspiring rulers, leaders and civilizations around the globe. George Washington was an intimate part of a social movement typifying the title “civil servant”. It was a society of self sacrificing noble characters. If there is another more honorable and inspiring illustration of civil servant leadership I do not know it.

I think this is an excellent place to begin when benchmarking political leaders. Stepping down for the benefit of the whole (or as Spock said “…the needs of the many outweigh the needs of the few…”) is a noble leadership philosophy. Today however, this “steeping down as leader” is thrown around the media and parliament as rhetoric of mere “political partisanship” greatly trivializing its noble and honorable origins. The words are no longer linked to honor and integrity but used as an emotional leverage in the meager conflicts of ideology. Having two vastly different political and economic paradigms are normal in modern day democracies. Demanding “resignations” based solely on difference of opinions and ideology is senseless arrogant gibberish. It’s intellectual trash.

Canada has been exposed to too many political opportunists rather than true civil servants (sometimes humility is hard to see in the presence of such wide spread arrogance). Unfortunately the current political format is the leveraging and muscling INTO power for the benefit of the few.

Harper’s denouncing of a coalition of the liberals with the Bloc/PQ is only a hypocritical refection of “what goes around comes around” referring to his own attempt at a Bloc/PQ coalition years ago. My words would be: “…you can’t denounce today what you accepted as a tactic years ago…” Either apologize for your prior behavior or “repent” of your denouncement of the Liberal attempt. Submit YOURSELF to democracy, however difficult that position becomes for YOU or your party!

That said, let’s flip the coin, Since Dion is on his way out, the attempt to form a coalition government smells of radical desperation! To the Canadian public, it’s somewhat embarrassing (unless your passion for Liberalism/NDP policy tampers judgment). It discredits individual party platforms. It waters them down and virtually reduces the participants (especially the Liberals) to a second class party. However, its the Liberal party's choice, and it is still within our democratic process (flawed though it may be). Unfortunately, the Canadian parliamentary system does not provide a whole lot of predictable functionality in a minority setting, especially in a pluralistic atmosphere.

But that’s not all… Ignatieff’s coalition to form a coalition must be one of the most unprecedented political grasps in Canadian history (A Cincinnatus Antithesis… Oooh look I invented a new phrase). Personally, I’m frustrated! I’d rather see Ignatieff’s ideology as opposition/coalition leader than Bob Rae’s. But now I’m forced to defend Bob Rae’s kick at the can! He… de…serves…. a Lib...eral... party... vote! (Phew I could hardly get that out). Without a respectable full party inclusion vote I think the front runner would be diminishing his respectability and ultimately repeating history by blowing his lead again. He would be painting himself as a demagogue. This coalition… to form a coalition… smacks of someone desperately trying to avail themselves of the democratic process.

Unfortunately for the Liberals they have spun themselves silly. If there is a gain to be made in this coalition (I refer to the later coalition not the former) at best it will be short. Imagine how much fun the Conservatives will have in the next federal election (something we will probably have again shortly). Will Dion/Ignatieff/Rae-Layton-Duceppe campaign together? What color would their platform book be? It sure would reduce GHG to have them all on the same bus. Would they have seporate podiums at the debates or share one? I have a suggestion, if they all campaign together and they’re shooting for a Liberal Minority and their slogan is “Really Strong!” they can be the L-M-N-D-P-Q-R-S Party! It flows nicely into a jingle and is easily remembered by the younger demographics.

The coalition would stand as the desperate opportunistic “bad guy”, while the Conservatives slide into the “knight in shining armor” seat. Partisanship aside, I think Canadians don’t have a lot of faith in the concept of a coalition. Therefore we may be stuck with perpetual annual elections until ideologies soften or one ultimately dominates. All those who agree raise your right hand… those who oppose… form a coalition.

A change is as good as a rest? I think Canadians would like to “put to REST” Ottawa’s shenanigans.

2008-12-04T11:56:00.000-08:00

As some of my readers may know I’m a fan of Dr. Edward Demming the bean counter of bean counters. I first read his book “Out of the Crisis” many years ago. I took my time reading it (two years). It may be more appropriate to say I took bit sized meditations of it. Even though I was used to reading textbooks and technical stuff, Dr. Demming’s book was often dry as Sahara sand and in order to keep my baby bottom complexion I had to read some of it in the shower. However, I would encourage people to at least google Dr. Demming’s 14 points and see if you can apply them to your personal life and family, better yet, how about lets apply the concept of quality to our current political environment.
Lets look at Dr. Demming’s first point: Constancy of purpose: “Create constancy of purpose for continual improvement of products and service to society, allocating resources to provide for long range needs rather than only short term profitability, with a plan to become competitive, to stay in business, and to provide jobs.”
These points are not just applicable to business. If a family (for instance) invests their resources (time, effort, finances etc.) in meeting long term needs rather than just short term satisfaction, true quality will immerge.
Politically, if our government seeks to meet our long term needs rather than short term “demands” our Country would also run consistently and with purpose. However, our political system too often focuses only on how to get re-elected or “obliterate opponent’s power” rather than creating consistency of purpose. This attempt at a coalition “coup d’etat” is even shorter term political thinking than the standard preschool four year old mentality we’ve been accustomed to. It’s also an act to antagonize an already polarized (yet thankfully still civilized) society. Let’s go over the “short term” facts.
In addition to the six week old election changes (moderate though they may be) and the proposed “coup d’etat” 180 degree change (now assumed scheduled for January), the current liberal leadership race will GUARENTEE another change in leadership by May/June of 2009 (provided of course the coalition even lasts that long).
IF we reach spring without another election we have to ask “Will Layton put up with the new guy? Will the BQ put up with him? Will the outrage of the Canadian society temper or fuel further multi party shenanigans? Ultimately, can our Country even afford to have our polarized views exacerbated while plunging us into chaotic obis?
Meanwhile, back at the ranch, our globe is plunging itself into a recession/depression obis. The already financially challenged Canadian public is forced to additionally weather our own government imposed vortex of turmoil, the most inefficient, ineffective state of being civilized society can even pretend to function at. Our Country’s SURVIVAL may actually depend on constancy of purpose. A recession, a serious recession, maybe even a depression should NEVER be entered into while we operate in a state of turmoil and uncertainty. Our dollar may well be hammered like it was during the Quebec referendum (or worse). Our allies and investors have yet another reason to pull out. What greater negative global sentiment can be fostered than by political short term shenanigans?
Historians know that government spending has NEVER been more than a moderate contributor to pulling a Country from recession/depression, and that only once its “bottomed out” not while it’s still sliding down. Even if the Liberals /NDP/Bloc got a hold of the countries check book and started spending tens or even hundreds of billions of dollars immediately (in a credit crunch environment at that) to apparently “get us out of recession”, economists know it will take a minimum of several months (at best) for anyone on the street to see a penny (assuming we reached the bottom-which of course we haven’t- because they only just announced an official recession last week). Meanwhile, we could see three different Prime Ministers before anyone even cashes a check.
At the least… at the VERY least… if the Liberals truly operated in the best interest of Canada they would, upon the concession the Conservatives axing their “…gut public subsidies of political parties…”agenda, suspend the idea of a “coup” until after their OWN Liberal leadership race was concluded. But that’s probably too much to ask of children trying to play together in a sand box.
Therefore we are left with our Country presenting itself internally and globally as unstable, unpredictable and chaotic.
Nice going Parliament! Just when we need you the most you leverage the crisis to satisfy your own thirsty selfish agendas.

Oh what a tangled web we weave...

2008-12-02T12:23:00.001-08:00

There is nothing more thrilling for the Canadian public than a government butt whup’in. The exposure of scandals and corruption keeps the chairs at Tim Horton’s warm. So when the Conservative government announced the axing of beurocratic “perks” the average Canadian has mixed feelings. What the heck are we going to complain about now?
Initially, at least for me, the announcement was laced with jubilation and then cautious questions and concerns. First of all, why did we need an economic catastrophe to finally consider restricting the big government spenders? Or, does this mean when we come out of the recession we’ll open our taxpaying pockets all over again? Or even before we get to a recovery, is this just lip service to the panicking public? All fair questions but none of which will be answered, at least in the next year… or will they?
Axing government perks sounds prudent, self sacrificing, noble and even has a scent of Canadian pride. Proud that leadership asks “more of themselves than of its citizens”. However, the meat and potatoes of this “axing of perks” (so to speak) is not necessarily as noble a policy move as the surface reflects.
One of the perks referred to in the “axing” is the illustrious “…poison-pill-proposal to gut public subsidies of political parties….” This means that all political parties would be dependant on public contributions as their primary (or only) source of financial viability. Considering the campaign contribution reforms already enacted, (ie. $1000 maximum) it would provide the Conservative Party a phenomenal competitive advantage over virtually any other political party (considering the current balance sheet of opposition parties as well as contribution demographics). Political party finances are the entrails of future public success and failure (unless of course there is a massive grassroots network).
Gutting opposition funding (with the rationale of global economic catastrophe) is like juggling nitroglycerine, its not IF things blow up, its WHEN! It can even appear to be the antithesis of the Federal Accountabilities Act (the act that negated ruling administrations from using public funds to propagate their parties). Therefore the current thirst for a Coalition “coup d’etat” is not necessarily a greedy grab for power as much as it may be a frantic lunge to protect against certain future financial and political annihilation. It may not be openly discriminative as was the sponsorship scandal but it reflects the same outcome while staying true to the “Conservative mindset”. Though coo-does for brilliance and “spin” it certainly doesn’t reflect an atmosphere of co-operation on the floor of the House of Commons.
Personally I’m not in favor of the Government supporting political parties, however, I don’t think Canada is entirely ready for the alternative… exclusive use of public contributions.
What concerns me so much about an apparent change of administration is its possible immediate affect on CRA’s position on truckers subsistence allowance. As I stated in my book, subsistence allowance is not necesarily a matter of law but of administration. If a new administration enacts policies that hamstring the system for truckers, then the entire lease/operator industry may administratively loose their constitutional right for fair opportunity.

To adapt Sir Walter Scott “…Oh what a tangled web we weave, when first we practice politics…”

The Big Three Bailout

2008-11-27T15:05:00.000-08:00

OK… I can’t keep my opinion to myself any more. Regarding the bailout of the big three automakers. I have very deep feelings about this which is rooted in a decade or more of quazee-related research.
One cannot comment on the automakers for very long without sooner or later considering the impact one man had on the industry. His name is Dr. Edward Demming (one of my personal business hero’s). Actually his work was much broader than just the auto industry but his impact was still paramount to this topic.
Dr. Demming went from America to Japan after World War Two to help reconstruct the industry base. He was a statistician, a bean counter of bean counters. He was instrumental in assisting Japan changing from manufacturing “junk” to manufacturing “quality”.
There was a scene in Back to the Future where (I believe) the flux capacitor was “blown” on the DeLorean. Dr. Emmet Brown pulled the useless part out of the car and said something like “No wonder its blown its made in Japan”. The statement shocked Marty McFly who (as memory serves) tried to reconcile his understanding of Japan as a quality building country (in 1985) verses Emmet’s 1955 “Japan is junk” mindset. That conflict within Marty was primarily the result of Dr. Demming’s decades of work (with contemporaries such as Joseph Joran of course).
In his later years Dr. Demming was known as a rather bitter man. He was bitter because American industry refused to reevaluate their paradigms of quality. They were big, they were successful and they thought they were impenetrable. Specifically the “big three” thought they were “above questioning”. Bottom line was they were arrogant, especially GM.
In spite of the rejection by his native country, Dr. Demming continued his six sigma work in Japan (with Toyota, Honda, Suzuki and a host of other companies). In his three to four + decades of teaching, Japan was changed into a country manufacturing quality. Slowly, bit by bit, Japan’s quality ate away the big three’s market share. By the time the big three moderately humbled themselves to listen to Dr. Demmings teachings they were decades behind the competition. Even then GM (for example) never really embraced the teachings culturally (still do not in my opinion).
When I went to school we studied GM’s culture as an example of what NOT to build and embrace. Their arrogance and bullying is legendary.
Why should taxpayers “reward” top level management, unions and shortsighted shareholders with a bailout when arrogance got them into the predicament they are in? Without question, they are still trying to bully and blackmail the marketplace (now politicians) with their “economic size” (employees/voters, GDP impact etc). They are not sorry for what they did, they are sorry that they got caught! Big difference!
However, that doesn’t mean they won’t get paid. It just means they own the countries check book because they can exacerbate the panicking public’s political sentiment. Both misery and irresponsibility enjoys company.

Some Operators Left Dangling

2008-11-25T14:34:00.000-08:00

Though there are many large trucking companies in Canada, the industry is pretty much dominated by smaller companies. Being a lease/owner operator at a smaller company has both its advantages and disadvantages. One potential hazard that most operators don’t know about is a potential GST liability that is relatively unknown. I wrote about it in my book (chapter eight) and got a great deal of interest and comment about it.
Simply put, for each transaction within our economy that someone is claiming an ITC (Input Tax Credit), there must be a clear purchaser and a clear seller. In addition, the sellers GST must be clearly viewed.
What creates a problem between the trucking industry and GST auditors are the way about 40% of all trucking companies settle with operators. Since the vast majority of all operators use company fuel cards and trucking companies usually just photocopy fuel company statements, circling/highlighting or otherwise indicating what amount was purchased by the operator, there is no clear transaction between the operator and the trucking company. The invoices photocopied are between the fuel company and the purchaser (deemed to be the trucking company). Therefore a GST auditor may disallow all ITC’s if they so choose. The application of this GST “hazard” seems to be random and geographically sensitive, however the vulnerability for an operator is not to be underestimated.
Bottom line is that CRA has the clear authority to mandate trucking companies apply GST in their statements (and often times they have) but it is not universal. There are still some operators dangling in the wind. Unfortunately CRA is left to govern an extremely ethical dilemma.
Kindah leaves one feeling warm and fuzzy doesn’t it?

GST-HST interlining fiasco

2008-11-20T12:08:00.001-08:00

The implementation of the HST is not as “smooth” as many might think, especially for interliners. (Interliners are lease/owner operators who run inter provincially under someone else’s running rights, they either own a truck and trailer or just a truck, they are GST zero rated, not collecting GST but able to get their GST/HST refunded)
Take the implementation of HST on an interlining highway tractor leased from a financing company. In New Brunswick the department of motor vehicle DEMANDS that all interliners show proof of HST paid. They even demand it from provinces that do not participate in HST. They demand it even though interliners already pay IRP (a pro-rated form of PST). Hold that fact.
Our federal GST auditors (when auditing interlining operators) some times refuse the ITC application of HST to lease payments (acknowledging only the 5% GST portion not the provincial portion). That means that some auditors force some operators to not only pay IRP at the time of annual registration but PST on lease payments as well. You need a good accountant to fight through this conflict.
The rejection of the HST to an interliner should not occur by an educated federal GST auditor. However, the application of HST is not a universally understood concept by our federal employees (especially in some regions of Canada). Regardless of federal shortcomings this conflict shouldn’t be present anyway. The New Brunswick DMV must be educated to the workings of inter provincial applications of GST/HST in light of IRP. Specifically there MUST be an exception made.
In summary, the DMV in the province of New Brunswick (or any other province that demands HST for interliners) is forcing the administration of HST on financing companies from other provinces. It is needless, redundant and it exposes the lease/owner operator to auditors who weave their own ignorance. Need we remind the DMV again, the province already gets their “PST” through the IRP. Demanding it through HST as well is, in my opinion, an opportunity for Provincial DOUBLE DIPPING. The province may use the application to manipulate the federal numbers so it receives a higher reimbursement than it should. At face value that’s what it looks like. If (for some reason) the province DOSN”T account for the interliners HST in their submission to federal administrators, then why is the DMV demanding extra provincial financing companies to charge HST?
Lets get this straight, either educate the HST DMV’s or the NON HST GST auditors.
Skidoosh!

Canadians and Taxes

2008-11-18T14:40:00.000-08:00

Contrary to our Tea Party neighbors to the south, Canadians handle excess taxes in a less dramatic format. We grumble and complain over a cup of $2.49 coffee and then go home to watch skits humiliating our politicians on CBC. The general public, in general, is tolerant of almost anything. Admitedly, there has been a slight change over the last several decades as people are holding government more and more accountable.
Even still, it seems the only sector of society that is motivated enough to do anything proactive are business people. I guess it hurts that much more when you actually have to sign the check yourself.
However, there is a disturbing trend that has increased over the last few decades. Its cheating on taxes or the use of black market – under the table transactions. The people who see this more than anyone (other than maybe auditors who find the perps) are accountants. If CRA (Canada Revenue Agency) would want to check the mood-attitude-temperature of the Canadian taxpayer all they have to do is interview accountants. We hear it and sometimes see it every tax season.
Italy is a democratic country similar to Canada. Yet 25% of Italy is the underground economy (black market). It is so common place the Prime Minister (Silvio Berlusconi) once said “…if taxes are too high it is morally acceptable to evade them…”.
Does our government want to go the route of Italy? If CRA continues to support duplicity, human nature will escort our predicament down the path to Italy.
Justice inspires justice! Come-on Ottawa do the right thing!

Automobile Travel Costs

2008-11-13T09:58:00.000-08:00

Not that meal expenses are no longer an issue, but I want to continue the exposure of our duplicitous income tax system and its impact on Canada Truck Operators.
The vast majority of operators in Canada are self employed. It’s not that there was much of a choice when operators became popular in the 1980’s. It was the cheapest and most obvious option at the time. However, the quickest and cheapest option is not always the best choice. I’m not blaming those who decided the trend because it seemed pretty obvious at the time.When a business chooses self employed status they must follow the rules and regulations associated with that method. Unfortunately comparing a self employed business with employer-employee agreements is rather sobering. The restrictions and benefits are just not the same. The primary benefit of self-employment is the ease of entry and the ease of exit not the efficiency of taxes or even recordkeeping.
Vehicle travel costs or business use of personal vehicle in the self employed method has radically different requirements than the “estimated reimbursement for job related costs” method. For example: fuel receipts, maintenance receipts, insurance and depreciation costs are all needed for self employed records, however non of that is needed for the estimated method.
If you use a personal vehicle for business travel there is one primary question that must be asked. Considering all the expenses how much is personal and how much is business? Personal miles are not tax deductible (obviously) so the system has to be able to compare them to the tax deductible business miles.
This brings in the most loathed aspect to personal vehicle business travel. On top of keeping every kind of receipt applicable to the vehicle, the self-employed business owner must keep a vehicle log that keeps track of both personal and business miles. It’s not an unreasonable request. There must be a way to calculate the ratio or percentage of personal to business in each vehicle used. At the end of the year or period the percentage is applied to the total of all receipts and expenses. For example if, over the period, 18% of all miles is business than only 18% of all expenses/receipts are tax deductible.
That’s a lot of paperwork, a lot of details needed to be recorded, sometimes every day. This method is about as labor intensive and time consuming as possible. If a business owner alternates between two or more vehicles then separate receipts and separate logs are required for each vehicle. Bummer!
Even though many accountants coast to coast imply and even say log books aren’t necessary they most certainly are (under audit). The only reason auditors may overlook log books is ignorance, passivity, or generosity. Over many years and even decades disinformation about log books has led many self employed people to lax and irresponsible record keeping. But enough about the method itself, lets go to comparing benefits.
With a proper agreement in place, employees and employers have greatly reduced paperwork and greatly enhanced benefits. Whereas the self employed method works on actual costs (applying them as expenses) the employee agreements provide a deduction to the employer and cash to an employee (no receipts needed). What makes the method so beneficial is the dollar amount an employer can provide an employee for the use of their vehicle. See current rate chart .
Using Ontario as an example, an employee can receive 55.5 tax free cents per KM for each business KM driven (that's 90 cents per mile). Unless you have a Hummer or a Ferrari and doing break stands at every stop sign, using these rates you can make good after tax money. If you can drive your vehicle for less than 55.5 cents per KM in Ontario the difference is pocketed tax free as a "nontaxable benefit.. pretty cool!
These two methods are dramatically different. The net after tax difference can be substantial. The average vehicle is usually able to perform at approximately 2/3 of cost. That means a net after tax benefit of about $.19 cents per KM in Ontario.
Comparing the after tax benefit of the self employed method with the employee agreement method can be a journey with exponential results. Efficiency of your vehicle combined with the cents per KM rate determines the net after tax benefit. However, the average operator may not use their personal vehicle enough to provide HUGE savings, however if they record a considerable volume it may make hundreds and even thousands of dollars over a year.
This tax example is another illustration of how choosing your business tax method is critical to your annual tax bill.

The TL2 Dilemma

2008-11-10T11:01:00.000-08:00

About the industries use of the TL2.

Prior to about winter of 2006-2007 CRA was allowing lease/owner operators to use meal expenses as presented on a TL2 (simplified method), even though the form is clearly designed for an employer employee relationship. Historically CRA not only allowed operators to file a TL2 but trained auditors, operators, and accountants how to fill them out. Twenty years of use and training was eliminated one day when CRA announced that TL2’s for lease/owner operators have NEVER been acceptable. It’s one thing to say they can no longer be used its another to say they have never been available. It’s not that they’re wrong, its that they practiced allowing it for 20 years then suddenly changed their mind, confusing the industry.

I have a personal opinion of why they may have done it. Here goes. The Don Wilkenson court case (Aug 2003) proved the guidelines ($33.00 per day at the time) was not “reasonable” and therefore not held up in court. Since then (unfortunately… or fortunately) accountants and operators coast to coast have inserted their own numbers. To stop (or at least slow down) the progression of operators using both the TL2 and higher numbers than the guidelines, CRA eliminated the TL2 entirely (somewhat an example of a few bad guys spoiling it for the majority good guys). I assume it was easier for CRA to eliminate the TL2 than to defend any number in court greater than the guidelines but less than or equal to the Treasury board of Canada numbers.

The timing of this crisis however, hits operators hard. Just as they suddenly appeared to have meal expense reprieve from the lunch bag letdown campaign (increase from 50% to 80% March 19, 2007 Federal budget) they are struck with the lack of access to the TL2. The effect is dramatic. Operators only keep about $20-$25 per day of receipts (on average) and are still subject to the same reductions as the guidelines ($51, the amount offered without need of receipts). The national effect is actually about a 50% REDUCTION in meal allowance writeoffs. The shift of take home income advantage from self-employed operator (owning your own) to employee just rocketed towards the employee. A net effect many may not have calculated on. Bummer!... at least those who are still self-employed.

Historically its just one more example of how the implied best system available, is NOT the best! It is laced with holes of vulnerability. In my opinion equality will NEVER be implemented using the self employed system/method.

PS. My first week of blogging has received a huge volume of hits (I’m displaying hits where I thought I’d be in 1-2 years not 5-7 DAYS). However, I have no comments. I have to admit I’m new at this form of communication. I’d like to get to know my audience. I welcome your comments and questions.

Qualification: another tax angle

2008-11-07T12:48:00.000-08:00

Let’s look at these differences from another angle. Too often the differences are just boiled down to dollars and sense. In the application of taxes, or more specifically expenses, some times the differences come in simple qualification rather than numbers.
Meals for truck drivers (employees) are channeled through a form called a TL2. Without going into details of the simplified method, lets just say most drivers still use it and try to conform to several restrictions associated with the gross $51.00 per day allowance.
Restrictions for qualification come in both time and distance. The driver must be gone from his/her municipality for 24 hours or more and the driver must be 160 KM from his/her municipality.
In the comparison to the other meal system (estimated reimbursement for job related costs) the rules are completely different. Restrictions and qualifications are determined by an Employer Employee Agreement. These are and can be as varied as employees, unions and job titles themselves. However, let me give you one as an example. If the employee leaves their home before eight in the morning they qualify for breakfast. If they leave after eight am they are only allowed to collect re-imbursement on lunch (and onward if applicable).
So, as we see, certain citizens qualify on a meal to meal basis (no distance restriction at all) while other citizens are hamstrung by time and distance.
If a CRA auditor looked at the log of a driver who left at 7:45am on a Monday who returned at 6:00am Tuesday morning they would disqualify the trucker for the TL2 $51.00 meal allowance. No reductions, no allowance at all. It was as if they never ate a single meal in almost 24 hours.
This constraint (and many others) is totally government imposed. In other words the administration can change this restriction on any future budget. Nothing is secure, nothing is predictable. Changing these rules is a matter of: government greed, lobbying, public exposure and political will.
The only other tax option is for drivers to keep every meal receipt (an option CRA would love, seeing that most drivers in general would loathe the imposition). If a driver is gone all day, stuck in their truck, they still may not claim one penny of TL2 job related meal costs according to the qualifications stipulated. In this situation the qualification difference is not just 926% or 1200+% but INFINITE. One citizen qualifies absolutely and the other absolutely not.
This administrative strangulation to the trucking industry is, in my opinion, one of the primary reasons the industry struggles to attract and keep qualified employees. It is not only what they have done, or what they are doing but it is the fact that the entire tax system is vulnerable to tampering. Who would want to become perpetually vulnerable in their career?
The solution is and will always be total and absolute equality. Specifically lease/owner operators can achieve this almost instantly by having an employer employee contract with their employer (a corporation that they own themselves). Using their log books as official documentation for on and off travel status, operators can qualify for the benefits exactly the same as the most generous of employer contracts accepted by CRA. Skidoosh

Truckers Income Tax Comparisons

2008-11-03T13:16:00.000-08:00

In Pursuit Of Equality

To launch “Canada Truck Operators” (my industry analysis blog) I choose to start with a detailed analysis of the tax implications on Canadian trucker’s meals. It’s a hot steamy topic that has been rightfully on the minds of most Canadian truckers for over a decade. Though my research goes back 25 years I chose to only start my chart at 1992 because the prior values are pretty much the same trajectory.
What boils my potatoes more than any other data is the impact of the 1994 budget and it’s gross misrepresentation to the public and the industry. If anyone remembers, the Prime Minister at the time stated “…there are some industries that are not paying their fair share of taxes…”. The party at the time then proceeded to CUT the deductibility of meals to truckers. Even though, according to the data presented, the truck drivers were already OVER paying their fair share of taxes.
When government stands behind a microphone and says something, does anyone hold them accountable? In 1994 the government FLAT OUT LIED! It’s no wonder that Canadians complain about their government so much. People rarely trust someone who twists the facts.
What is also misleading is the effect the “lunch bag letdown” campaign actually had on justice and equality. I projected the net effect to 2011 to show that the most conservative case still shows a difference of 649% ($74.67). Let’s remember, once it bottoms at 649% (in 2011) the percentage will once again start creeping upwards.
I’m not interested in political spin games or smoke and mirrors, only cold hard facts, justice and equality. I believe the more the public and the industry truly knows the facts, the more accountable our government will be.
Fully implemented to the lease/owner operator sector of the trucking industry, equality will provide anywhere from $100-200 million dollars per year. That’s $6-8000 in tax reduction per operator… PER YEAR! Not an insignificant amount.
One of my personal desires is to expose the truth to as many drivers as possible and set the industry on the road to justice, equality, sound business practices and the removal of needless government meddling. This may take many years but I believe it can be done, and in a way Canadians can be proud of.

In this case the Canadian Charter of Rights and Freedoms 15.1 is similar to the Ontario speed limit. It looks pretty when posted but seldom enforced.

Postponed Blog Launch

2008-10-31T13:35:00.000-07:00

Unfortunately do to circumstances beyond our control the launch of the research data blog has been postponed to Tuesday November 4th. Please keep posted.