Free city staff parking a taxable benefit

City staff have reviewed the taxable benefit status of free parking provided for city employees downtown and concluded that an employer-provided benefit is considered income and therefore must be treated as a taxable benefit.Exemptions to the tax benefit status of parking include an employee who is provided a parking spot due to a disability and employees who use their vehicle for regular business purposes. As per Canada Revenue Agency guidelines regular use of a vehicle for business purposes constitutes an average of 3 or more days in a five day work week.Free parking downtown is currently provided for 365 city employees, including union and non-union members, and six members of council. (I gave up my parking space, and pay the market rate for parking when I need it).The review came as a result of a staff direction I brought during the 2014 budget discussions after researching CRA rules and reading about a court ruling against Kitchener. In that case, where employees had free parking, Revenue Canada said it should have been a taxable benefit and the city ended up paying over $1 million in back taxes owed on behalf of employees.I wanted to avoid that situation in Burlington, both for our employees and for taxpayers.Read my 2014 article here: Treating free employee parking as a taxable benefitThe 2015 budget includes $150,000 to provide salary adjustments to downtown employees to offset the annual impact of the take-home pay reduction arising from the taxable benefit status of free parking. The goal of the adjustment is to treat all city employees equitably (those that work downtown versus employees who work in other areas of the city where emplyer provided parking is not a taxable benefit.)Downtown employees have always had the option of a free transit pass or free parking; the transit pass was always treated as a taxable benefit.My Take:  Treating employer-provided parking as a taxable benefit is not only the right thing to do, it’s required by the CRA, so making this change protects both city employees who receive this benefit and ultimately taxpayers. I’m pleased to have been a part of bringing it about.Regarding the salary adjustment, I understand the thinking behind it and the desire for fairness, however it potentially introduces unfairness, and ultimately takes us down a path of the city covering private tax matters, not a road we want to go down. If CPP, EI or income-tax rates go up, causing a reduction in take-home pay for employees, would the city cover that too? If employees car-pool, walk or cycle to work – options we want to encourage – and don’t take the free parking benefit, do they still get the raise? If they take the free parking benefit one year, but not in later years, is the pay increase clawed back? Will the folks who took a transit pass, which was always a taxable benefit, instead of free parking, also get a salary adjustment in the spirit of fairness?These are just some of the issues that may arise and I have asked staff for further information on these matters. Fairness in this case will be elusive if not impossible. I believe the most prudent course is simply to treat this as a private tax matter between employees and CRA, as we have historically for the transit benefit.The larger issue here is whether the city should be providing free parking for employees, which is ultimately paid for by taxpayers as a transfer to the Downtown Parking Reserve Fund for the value of that parking ($217,000 in 2014). My view has always been that transportation to and from work, including associated expenses (parking, gas, depreciation) are costs that should be borne by the employee, not by taxpayers.Transportation is a choice, and providing free parking provides an incentive to drive, at a time when we are trying to encourage residents to use transit, cycle or walk.