One-third Tax Free Exemption for Municipal Elected Officials
Federal government in its Budget 2017 (March) contained a legislative change to eliminate this tax exemption for elected officials effective starting in 2019. It was positioned against a point that “many Canadians receive benefits – such as daily food allowance or transit fare – which are counted as taxable income.” The Budget Plan went on to say that the “tax exemption for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office holders…provides an advantage that other Canadians do not enjoy.”
Municipal elected officials across the country have been able to decide to use a 1/3 tax exemption in lieu of claiming expenses related to their duties. Over the years, some councils have given up the exemption.
AMO undertook a survey, sent to municipal treasurers to get a sense of the impact that adjusting municipal budgets to maintain a gross or net amount would look like.
Results of the AMO membership survey on the expected financial impacts of the federal government change. Here are several examples:
- The cost increase for a central Ontario municipality with a council of nine and a population of 30,000 will be at least $28,000.
- The cost increase for an eastern Ontario county council of seventeen and a population of 77,000 will be at least $74,000.
- The cost increase for a southwestern Ontario municipality with a council of seven and a population of 24,000 will be at least $14,000.
From the federal government perspective, the fiscal impact of these examples might seem small. However, for almost half of Ontario’s municipal governments, a one per cent property tax increase raises only $50,000. The fiscal impact of survey respondents (144 municipal governments) is about $1.4 million. This is revenue that won’t be supporting municipal services and capital investments. The amount will be even greater if there were more survey respondents.
AMO passed a resolution in June asking the Federation of Canadian Municipalities to get involved because it is a matter affecting not only Ontario. FCM is taking this matter on and is asking other provincial associations to do a similar analysis that AMO has undertaken as the information will help FCM in their discussions with federal officials.