Report to CRD Finance Committee - 2017 Federal Budget Impact on Tax Exemptions
Capital Regional District report regarding the 2017 Federal Budget's proposal to remove tax exemptions for non-accountable expense allowances for municipal office-holders.
REPORT TO FINANCE COMMITTEE
MEETING OF WEDNESDAY, MAY 3, 2017
SUBJECT
2017 Federal Budget Impact on Tax Exemptions
ISSUE
Provide additional information to the Capital Regional District (CRD) Board on impacts from the 2017 Federal Budget.
BACKGROUND
At the April 5, 2017, Finance Committee meeting, the Chief Financial Officer provided a verbal update on both the Provincial and Federal budget implications to the CRD. Speaking notes and a summary of budget highlights were distributed to committee members following the meeting (Appendix A & B).
A further detailed review of the 2017 Federal Budget revealed it proposes to “remove the tax exemptions for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office-holders.”
Detailed information can be obtained at: http://www.budget.gc.ca/2017/docs/plan/chap-04-en.html#Toc477707494
FINANCIAL IMPLICATIONS
The 2017 Federal Budget proposes a change that would eliminate the 1/3 non-accountable allowance that is currently non-taxable to Board members, alternate attendees and any renumerated official on committee or commission business. The 1/3 allowance is reported in Box 70 of the T4, Statement of Remuneration. The impact of this change is that the full amount of the remuneration will now be subject to income taxes and Canada Pension Plan (CPP) contributions. The remuneration is not subject to Employment Insurance (EI) premiums. It is anticipated that this change would be effective from 2018 onwards.
The following table demonstrates the impact of this change (for illustrative purposes only);
| Current 1/3 Exemption | Proposed 2018 Onward | |
|---|---|---|
| Income | $20,000.00 | $20,000.00 |
| Taxable Income | 13,333.33 | 20,000.00 |
| Tax Deduction | (4.94) | (974.48) |
| CPP Deduction | (486.72) | (816.66) |
| Net Income | $19,508.34 | $18,208.86 |
CONCLUSION
The 2017 Federal Budget proposes targeted measures to remove the tax exemptions for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office-holders.
RECOMMENDATION
That the Finance Committee recommend to the Capital Regional District Board:
That this report be received for information.
| Submitted By: | Nelson Chan, MBA, CPA, CMA, Chief Financial Officer |
| Concurrence: | Robert Lapham, MCIP, RPP, Chief Administrative Officer |
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Attachments: Appendix A Highlights of BC 2017 Appendix B Highlights of Federal 2017
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