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Note to subscribers: The Tax & Spend newsletter will return on Sept. 13.

You might think that labour organizations would be embracing the Conservatives’ proposal that would force companies to make payments to their contractors – aka gig workers – in lieu of employer contributions to the Canada Pension Plan and Employment Insurance.

You might think that, but you would be very wrong.

The pandemic has exposed the vulnerability of those gig workers to an economic downdraft. The short-term solution was to include them in the Canada Emergency Response Benefit (and later, the Canada Recovery Benefit), even if they had not made EI contributions.

Self-employed workers are able to make voluntary contributions to EI, although the benefits they receive are more circumscribed than those available to workers deemed to be employees. As for CPP, self-employed workers are required to pay amounts equivalent to both the employee and employer contributions – 10.2 per cent of taxable income.

Before the campaign, the Liberals launched a two-year review of the EI system, in part to address the question of how to deal with gig workers.

The Tories say the solution is to have companies pay. For the CPP, the party says companies could either pay the full 10.2 per cent for pension contributions directly to the Canada Revenue Agency, or to the worker so they could then make those payments to the government. In lieu of EI contributions, companies would contribute 4 per cent of a worker’s taxable income into an “Employee Savings Account.” There would be conditions placed on withdrawing funds, such as job loss or a sustained drop in revenue.

The Canadian Labour Congress called that a “kick in the teeth” to gig workers that denied them access to the CPP and to EI. The latter claim isn’t true: Workers would still have access to the pension plan, and their access to (somewhat limited) EI benefits would remain, if they chose to participate.

The head of Canada’s biggest private sector union has only a slightly less negative assessment of the Tory proposal. “It’s better than a slap in the belly with a wet fish, but not by much,” says Jerry Dias, Unifor’s national president.

Mr. Dias considers the Tory plan to be a gimmick that ducks what he sees as the real issue: guaranteeing gig workers at least some of the legal rights of employees, including access to regular Employment Insurance benefits.

The CLC has a broader critique – that the Tories are acceding to the wishes of business, and the tech industry in particular, by allowing companies to make payments to self-employed workers, but still not classifying them as employees. Taking that latter step, as Mr. Dias also urges, would not only bring gig workers under the umbrella of regular EI, but would give them a host of legal protections under labour law.

The Conservatives would not go that far, but do say they would to support the CRA in “maintaining or strengthening” the criteria the agency uses to determine if a company’s workers are truly independent contractors, or are really employees.

Taxing questions

Responding to a recent Tax and Spend about a Liberal proposal to tax real-estate flippers, several readers suggested that the measure won’t have much impact since the Canada Revenue Agency already strips away the principal residence exemption (and exposes the owner to a tax bill) if a home is solid within a year of purchase.

That’s not true – at least not in the black-and-white terms posed. It is true that the CRA (and tax courts) do consider the amount of time a property has been held, as part of a lengthy list of criteria. Twelve such standards are specified in a CRA memo, including the “business, profession, calling or trade” of the taxpayer. Someone involved in the real estate or construction industry is more likely to have their principal residence exemption challenged. The amount of debt used to finance the property is another factor. And, yes, the length of time that the property was owned is among the factors as well, although no specific threshold is enunciated.

The CRA document makes clear that no one factor is “conclusive in itself” in determining whether a real estate sale is in fact income or a capital gain.

That stands in contrast to the Liberal proposal, which would take in any property held for fewer than 12 months (although there will be exemptions for sales motivated by life events such as employment changes or illness).

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Glad that’s over: The coronavirus-induced recession is over, the C.D. Howe Institute’s Business Cycle Council has declared. Despite a drop in GDP in April and May, the council said, the economy has rebounded sufficiently from last year’s downturn to declare that the recession has ended. The council estimated second-quarter GDP growth at 0.6 per cent., or 2.5 per cent on an annualized basis.

However, one member of the council dissented, wanting to delay a call until the economic effects of the Delta variant become clear. With the exception of that member, the council said any future “pronounced, pervasive, and persistent economic downturn” would be judged to be a new recession.

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