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CUTA Reinforces Call for Tax Law Changes

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CUTA Reinforces Call for Tax Law Changes to Support Employer-Provided Transit Passes – UK Transit Benefit Programs Begin

An open letter to:

The Honourable James M. Flaherty
Minister of Finance
Department of Finance Canada

TORONTO, Nov. 27 /CNW/ –

Dear Minister Flaherty,

The Canadian Urban Transit Association (CUTA) would like to draw your attention to a new development in Great Britain that supports CUTA’s call for changes in Canada’s tax law to allow for employer-provided transit benefits, also known as “tax-free transit benefits”. Being used in Britain since earlier this year, transit benefits are a strategy used to promote public transit use, reduce emissions and reduce oil consumption. CUTA has called for the introduction of tax-free transit benefits in Canada since the early 1990’s.

CUTA is again calling on your government to support tax law changes to allow this initiative as a non-taxable benefit. The proposal for a National Transit Strategy, endorsed by CUTA and other stakeholders, calls for increased incentives to encourage transit use. Employer-provided transit passes would offer Canadians greater reason to choose transit for their urban travel needs.

The tax-free transit benefit idea was initially considered a US initiative, where it has been in place for over 25 years with increasing popularity. The recent British development is already gaining significant attention and is seen as an important new tool for addressing traffic congestion and greenhouse gas concerns.

The program allows employees paying top-rate taxes to save 41% on their travel costs because gross income tax and national insurance is not taken from pre-tax funds; accordingly, basic rate employees save 33%. Employers also save 12.8% for the foregone national insurance tax.

In the US, transit benefits can be either an employee-paid pre-tax deduction, or an employer-paid tax-free benefit. Presently, the US provisions allow up to $110 per month tax-free. Effective January 1, 2008 the maximum benefit will become $115, and legislation to increase it to $200 per month has been introduced in both the US Senate and House of Representatives. Transit benefit programs now serve all major US transit markets, and it is estimated that well over 1 million US transit riders receive tax-free transit fares.

In Canada, public transit accounts for approximately 11% of work-related travel. Each 1% increase in transit ridership will reduce greenhouse gas emissions by almost 12,000 tonnes.

Tax-free employer passes have been a good idea for years and their introduction in Canada would be complementary to the transit pass credit your government introduced last year. We are pleased to see that Britain appreciates this and are setting an international example of the success we would also like to see in Canada. CUTA is calling on the federal government in Ottawa to take steps to make this benefit an important part of Canada’s transport, environmental and tax policies in the near future.


Michael Roschlau
CUTA President & Chief Executive Officer

Copy: The Honourable Lawrence Cannon
Minister of Transport, Infrastructure and Communities

The Canadian Urban Transit Association (CUTA) is the national association representing public transit systems, suppliers to the industry, government agencies, individuals and related organizations in Canada.

Written by Stephen Rees

November 27, 2007 at 4:32 pm

Posted in Transportation

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