An Inefficient Tax System
As another year comes to an end, operators coast to coast are evaluating their annual performance. This year has been especially rough on some, softer on others. Some will have to work through Christmas others may have the freedom to take time off.
At the end of the year operators usually only review their fuel costs and maintenance. However, since most can only reduce these to a certain point, perception of success or failure too often is determined by taxes, which can appear to be somewhat unpredictable and even unfair.
If one operator gets 7.5 MPG and another gets 5 the later can justify their results by comparing average weights, speed, and destinations (light LTL verses super B’s). But what about two operators: each on at the same company, each averaging 21 days per month on the road, each getting about the same MPG, each having about the same age or mechanical strength of truck? If one pays $6000 in taxes and the other pays $14,000 it’s the later who fumes.
Studies have shown that it’s not the paying of tax that people hate but the feelings of injustice that is associated with it. It’s the belief that they are being victimized by an unjust tax system. In some regards they may be right. In 1994 the federal finance minister stated “… there are some industries that are not paying their fair share of taxes…” and immediately reduced meal deductibility for truckers from 80% to 50%. It wasn’t until 2007 that it started its reversal (returning to 80% in 2012). Compound that fact with the October 2006 issuing of Income tax bulletin IC73-21R9 (which requires all self employed operators to keep meal receipts) and you have a the most IN-EFFICIENT tax system in Canada.
The tax system, though unjust, is unjust by a combination of design and choice. Differing designs bring vastly different results, but ultimately it’s YOUR choice which design to use. 75-85% of all operators in Canada still use only one design: self-employment. Unfortunately it’s one of the most unjust designs available. It is the cheapest to set up but produces one of the highest amounts of taxable income.
Since the publication of my book I have been writing many articles about this conflict. The feedback from operators and accountants across Canada has been passionate and steady. In my opinion within five to eight years forty to sixty percent will change to the system that saves $6-8000 per year. It’s growing. It’s just a matter of time.