CRA attacks that which they created for themselves so that CRA themselves do not have to hire workers as employees. CRA forced the temp agencies to make their contractors into corporations. Now CRA is saying the workers are employees of the temp agencies. CRA wants its cake and eat it too … and they don’t care who they hurt in the process. There is no sense of fairness.

In this case; CRA is partially correct. The test of…if you removed the corporation from the picture, would the worker stand the test of self employment.  The irony is that if you apply the test properly, you will see that CRA is the real employer. If you see through the bull… you will see that CRA’s primary purpose in hiring (LONG TERM) Temp workers is simply to save long term money by avoiding hiring staff. CRA sets the hours of work, they supervise, they train, they provide most of the tools and worker space, the workers take no risks… AND… it is really CRA who pays the workers… the fact that CRA pays the temp/staffing agency… is just a process of indirectly paying the worker via the temp/staffing agency.

What is the solution requires CRA to not have double standards, it requires them to sweep their own porches. CRA needs to stand up to the plate and get real. They need to either accept that the contractors are independent businesses or they need to use the temp/staffing agencies to source workers that CRA would then hire.  If CRA wants source deductions taken, then it is CRA who should take the source deductions not the staffing agency.

This type of behaviour of our government allows for all sorts of negative words and definitions to be supplied as colorful descriptions.

The horror stories from across Canada are building.  To read more on horror stories go to [1] www.taxauditsolutions.ca

Read on what Katherine May of the Ottawa Citizen has to say…

Contract IT workers dangle in tax limbo

Shadow workforce not self-employed, CRA rules — but they’re not employees either

By Kathryn May, The Ottawa Citizen October 12, 2010 Comments (5)

OTTAWA — Canada Revenue Agency’s crackdown on the tax assessments of small IT businesses could cut federal departments off from thousands of workers they rely upon to run their operations.

It’s a move that could alter the landscape of Ottawa’s shadow public service, where thousands of contractors, consultants, temporary help agencies and other staffing agencies rely on government work that costs taxpayers billions of dollars a year.

The tax agency’s review is felt by IT specialists and engineers who work for government through large IT businesses, consulting firms or staffing agencies that act as middlemen.

These intermediaries have contracts with government departments to find whatever talent or staff they need and charge fees for their services.

With government and high-tech as the main employers, the capital region has one of the country’s largest concentrations of IT consultants, who typically incorporate their practices, said tax lawyer Mark Siegel.

They are the IT backbone of many departments, often working for months and years at a time.

This three-way relationship has flourished in the nation’s capital for a decade.

The government gets IT staff without having to hire them and avoids pension and benefits costs. The consultants get much higher pay and more freedom than they would as bureaucrats, and the agencies pocket fees for putting consultants and departments together.

But the tax agency’s review is upsetting that relationship, said Siegel.

Many of these consultants created corporations for their businesses, which entitle them to a number of tax advantages. The staffing agencies have also demanded the consultants be incorporated since CRA reassessed them several years ago and decided that if they did not have their own corporations, the consultants were their employees, and were entitled to EI, CPP, vacation and other payroll taxes. So, if they’re not incorporated, the agencies simply won’t work with the consultants, said Siegel.

The tax agency, however, is re-assessing these corporations as ‘personal services businesses,’ which aren’t entitled to the tax advantages they have been claiming.

Siegel said some are faced with three-year tax bills that will cost them thousands of dollars. Not only do these workers owe money to CRA, but they lose their key entrée to work if staffing agencies won’t hire them.

“These people are in a hard position because if they simply accept CRA’s assessment and disband their corporations, then they won’t get work. Because the feds are not going to hire them directly and the staffing agencies only hire corporations in these circumstances.”

Siegel is challenging CRA’s assessments for a group of IT consultants. He argues they’re being unfairly penalized for a way of doing business that thrived because of the government’s inflexible hiring practices and policies.

He argues the firms he represents have two options. They can disband their corporations and pay higher taxes, but they won’t get work.

Or they could remain as corporations to ensure they get work, but they won’t get the preferential tax rates and deductions of other small businesses. Nor are they eligible for EI, CPP or other benefits.

The Commons finance committee sided with the IT professionals, particularly because they were caught unable to get the benefits of being either a small business or an employee. In a recent report, the MPs said the Income Tax Act should be modernized to “ensure tax fairness of those small business owners who are deemed to be incorporated employees.”

MPs said these IT workers are ensnared by a 1981 provision of the act that was supposed to plug a loophole that saw employees leaving their employers but returning to work under contract to get tax advantages.

They argue this provision doesn’t apply with these incorporated IT workers, because they work through intermediaries or middlemen.

Serge Buy, a lobbyist for CABiNET, which represents the IT professional services sector, said CRA’s reassessments set a “dangerous precedent. It’s intruding on how entrepreneurs want to structure their work and could affect their livelihood.”

“These people have made a choice and CRA should not be telling them how to live their lives. These are completely legitimate businesses and should not be questioned by CRA. Parliament has discussed this issue and CRA should back off.”