One-third Tax Free Exemption for Municipal Elected Officials

Issue: 
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.” 

Background: 
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. 

Update: 
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.