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FROM: SEP-OCT 2009 ISSUE | BY DON GOODISON
Taxing authorities are always on the lookout for ways to wring more money out of taxpayers in order to offset the tax cuts made by politicians. One area that the Canada Revenue Agency has set its sights on is “perks” that employers give their employees such as free parking. Such is the case in Leslie Bernier v. Her Majesty the Queen [Tax Court of Canada; 2008-129(IT)I].
In 2002 and 2003, the Government of Saskatchewan in Regina employed the appellant and provided him with a free parking space. No amount was included in his income for those years in respect of the free parking. In 2006, the Minister reassessed him and included taxable benefits of $840.12 for 2002 and $703.28 for 2003. The inclusions were based on the fair market value of the parking stall for those years minus any payments made by Bernier. Starting in September 2003, he had been paying $29 per month by way of payroll deduction, resulting in a reduction of $145 in the assessed benefit for that year.
Bernier appealed to the Tax Court of Canada on two issues. One was the length of time it took to get the matter heard in Court and the fact that he was taxed retroactively. He stated that he would have refused the parking space if he had known he would be taxed on it. The appeal was dismissed. The delay could have been resolved had Bernier used the provisions of paragraph 169(1)(b) of the Income Tax Act, which permits the taxpayer the right to appeal to the Court after 90 days from the service of the Notice of Objection. Although Bernier may not have been aware of this, it was his responsibility to bring the appeal forward. The Court was sympathetic to his complaint that the reassessments were retroactive, but reassessments are invariably retroactive.
The case is quite straightforward and Bernier really had no chance of winning. If a taxpayer is going to challenge the Minister in Court, he/she has to refute the major assumptions made by the Minister. Bernier did not challenge any of the Minister’s assertions, the main one being that he was the one who benefited from having the parking stall, not his employer. I’m not sure if that assertion could be countered, but it would have been worthwhile to at least give it a shot. Maybe the employer benefits from having a happy employee who is more productive, leading to increased profits. The appellant’s reasons for appeal had absolutely nothing to do with whether or not the parking stall was a benefit. It is like going into Court to fight a speeding ticket by arguing that the speed limit is too low.
Bernier does have a minor victory if one considers the amount of tax raised by the assessments as opposed to the cost of the action. While Bernier represented himself, the Crown had both Counsel and a Student at Law representing them. I would hazard a guess that the cost of these representatives greatly exceeded the tax recovered. I wonder if the Auditor General is aware of this.
I have to say that people’s attitude towards taxable benefits is somewhat puzzling. Most would rather have a root canal than incur a taxable benefit. However, do they consider the actual cash impact of the benefit? The only cash outlay is the tax paid at the individual’s marginal tax rate. For example, Bernier would have had to pay $70 per month in cash had his employer not paid for the parking. Instead, he pays a tax of maybe $35 per month. It’s like getting stuff wholesale or better.
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