Union leaders want NAFTA talks to focus on Mexican labour
ALICJA SIEKIERSKA
TORONTO — The leaders of the largest autoworkers unions in Canada and the United States say they will not support a renegotiated North American Free Trade Agreement that does not address the significantly lower wages and subpar standards of living for Mexican workers.
Foreign Affairs Minister Chrystia Freeland and Canada’s lead NAFTA negotiator Steve Verheul met with Unifor president Jerry Dias and U.S. counterpart Dennis Williams, president of the United Auto Workers, on Friday in Toronto to discuss renegotiations following the first-round of trade talks last week.
Dias and Williams stressed they are on the same page when it comes to renegotiations, and that both unions want a new NAFTA deal to address low Mexican wages, something Dias called “the elephant in the room.”
“Where there’s commonality between our two unions is that we recognize that the problem isn’t us,” Dias said after the close-door meeting.
“We understand that we aren’t the problem. The problem becomes the migration of jobs to Mexico, and the fact that Mexican workers aren’t benefitting as a result of getting those jobs. We need to fix that.”
According to a Centre for International Governance Innovation report released earlier this month, Canada’s share of North American auto production under NAFTA has fallen to less than 13 per cent since the 1980s. Meanwhile in Mexico, where wages are a fraction of the rates paid in plants in both Canada and the United States, auto production has almost tripled to 20 per cent and is expected to continue to increase. The report also points to the opening of eight new assembly plants in Mexico in the past decade, while both Canada and the United States have had plants close in recent years.
While they did not specify what sort of mechanisms could be deployed in a new NAFTA deal, both Dias and Williams stressed talks must address standards for Mexican workers as well as enforcement of stricter labour rules.
“Corporations ought to be held accountable as well,” Williams said. “They are the ones that exploit workers in Mexico. All they are doing is making huge profits off of it, while at the same time hurting Canada and hurting the United States.”
Freeland, who was not available for comments following the discussions, said ahead of the meeting that Canada wants the talks to touch on labour provisions, the environment and gender.
Dias said the Canadian government understands the importance of raising labour standards as a key issue at the negotiation table, as well as the issue of right to work states in the United States.
“NAFTA in its current form is a disaster,” Dias said, pointing to GM’s CAMI plant in Ingersol, Ont., which announced in January it was laying off 600 people and moving production of the GMC Terrain to Mexico. GM and Unifor are currently in the midst of bargaining over a new collective agreement. “We’re not going to support a trade deal that doesn’t include (labour standards),“he said. “Thiswholetradedealcan’tbesigned with respect or understanding or the support of our unions unless we deal with it.”
The next round of NAFTA negotiations is scheduled to take place in Mexico City from Sept. 1 to 5.
Employees are taxable on pretty much everything they receive, whether it be cash remuneration in the form of a salary or bonus, deferred compensation through stock incentive programs or even fringe benefits, such as a free fitness membership at the local gym.
Indeed, the wording in the Income Tax Act regarding the taxation of employment income and benefits is extremely broad: “The value of benefits of any kind whatever received or enjoyed in respect of, in the course of, or by virtue of an office or employment” must be included in an employee’s income.
That said, there are some notable exceptions and one of them relates to employer-provided counselling services.
The term “counselling services” is not actually defined in the Tax Act, but the Canada Revenue Agency has said it refers to “guidance and assistance provided by a trained person on a professional basis.”
Under the tax rules, employee counselling services are not taxable if they fit into one of three categories: an employee’s re-employment, retirement or mental or physical health (other than a benefit for using a recreational facility or club) such as counselling for tobacco, drug, or alcohol abuse, stress management or various employee assistance programs.
But not all employer-paid counselling services can be received tax free.
For example, the CRA’s position is that the value of employer-paid legal and financial counselling services is generally not excluded from an employee’s income and is considered to be a taxable benefit.
The CRA has also stated that fees an employer pays for an employee’s income tax preparation are usually considered a taxable benefit. But this may not always be the case.
The CRA this week released a technical interpretation letter discussing whether federal employees, affected by the government’s troubled Phoenix payroll system, have to pay tax on the value of government-reimbursed fees paid for financial advice and tax preparation services to sort out their tax situation.
Since the launch of the government’s consolidated payroll system in early 2016, tens of thousands of current, former and retired government employees have reported being either underpaid, overpaid or, in some cases, simply not paid at all.
According to the Government of Canada’s website, all employees who had pay issues related to the Phoenix system and who required assistance from an accountant or another qualified tax professional may seek up to $200 (including tax) in reimbursement for tax advisory services for their 2016 or 2017 income taxes.
Eligible employees include those who were either underpaid or overpaid in the 2016 or 2017 calendar years or who had incorrect tax slips for either tax year.
For the purposes of submitting a claim, tax advisory services include qualified professional advice that helps an individual understand the impact of overpayments or underpayments as they relate to their 2016 or 2017 income taxes. It also includes income tax preparation fees and reconciliation fees for an individual’s 2016 or 2017 tax slips against income amounts employees actually received.
Affected employees who have already filed their 2016 income taxes but are uncertain about the potential current and future income tax issues related to Phoenix can still seek advice from an accountant or a qualified tax professional and be reimbursed.
Costs for tax advisory services related to an employee’s small business activities or investment activities are not eligible for reimbursement. Similarly, the cost of tax software and online services are not eligible, since the intent of reimbursement is to encourage employees who are uncertain about the Phoenix pay issues to seek professional advice.
In typical bureaucratic style, the government has designed a specific form for such claims, which must be accompanied by a receipt from an accredited professional accountant, tax preparation firm or individual tax preparer.
The CRA reiterated that the value of all benefits must generally be included in an employee’s income and then cited its “Benefits and Allowances Received from Employment” folio, which explains the federal income tax treatment of various benefits and allowances received from employment.
The folio discusses when a benefit may or may not be included in an employee’s income and cites a twodecades-old case in which the Federal Court of Appeal confirmed that, generally, the value of a benefit will be included in an employee’s income where the employee “receives an economic advantage measurable in monetary terms and is the primary beneficiary of the benefit.”
An employee generally receives an economic advantage when an employer pays or provides a reimbursement for their personal or living expenses or the employer reimburses the cost of an employee-owned asset, but “(t)here is generally no economic advantage if the employee is simply restored to a previous economic position.”
As a result, the CRA concluded that compensation paid to an employee by an employer for financial loss incurred due directly to the employer’s error is not included in income since the employee is being restored to a previous economic position.
Therefore, reasonable employer reimbursements for the cost of tax advisory services incurred as a direct result of Phoenix pay system errors will not be included in the employee’s income and won’t be reported on the employee’s T4. Jamie Golombek, Cpa, Ca, Cfp, Clu, Tep Is The Managing Director, Tax & Estate Planning At Cibc Wealth Strategies Group In Toronto. Jamie.Golombek@Cibc.Com
Jerry Dias, Unifor president