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Citation:2003TCC427
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Date: 20030905
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Docket: 2002-4712(IT)I
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BETWEEN:
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DOUGLAS MCGOLDRICK,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Woods J.
[1] Mr. Douglas McGoldrick appeals
income tax assessments for the 2000 and 2001 taxation years in
respect of meals and other "perks" provided free of
charge by his employer.
[2] The appeal was heard under the
Court's Informal Procedure.
Facts
[3] Many of the facts are not in
dispute. Mr. McGoldrick is an employee of Casino Rama Services
Inc. ("Casino Rama") located near Orillia, Ontario.
Casino Rama is a large casino complex with over 2,000 full-time
employees.
[4] The employer provided one meal per
shift at no charge to employees such as Mr. McGoldrick and
reported the cost as a taxable benefit on T4 slips. It also
provided other "perks" such as entertainment events and
free hams and turkeys on holidays and similarly reported the cost
as a taxable benefit. The amount of the taxable benefit was
calculated by dividing the total cost of providing the benefits
by the number of employees entitled to take advantage of them. In
Mr. McGoldrick's case, approximately $4.50 per day, or just
under $1,000 per year, was reported in respect of all these
benefits.
[5] Most of the testimony related to
the provision of the free meal per shift. Employees had an
opportunity to eat free of charge at the staff cafeteria, the
Turtle Island Café, on their half hour break. They were
generally not allowed to bring food onto the premises for
sanitation reasons and Casino Rama's location made it
impractical to eat offsite. Further, employees were not allowed
to leave the premises during shifts without permission.
Accordingly, employees had no alternative for meals, other than
vending machines located in lounges. The testimony of the Vice
President, Human Resources of Casino Rama was that the provision
of meals was for the employer's benefit as it enhanced the
attractiveness of the casino.
[6] Mr. McGoldrick did not like eating
at the Turtle Island Café but because there was no
alternative he ate there on most days. He also did not enjoy the
entertainment events and only occasionally attended them. He did
not comment on the quality of the turkeys and hams so I assume
they were satisfactory.
Issue
[7] The issue is whether the provision
of meals and other "perks" constitutes a taxable
benefit for purposes of paragraph 6(1)(a) of the Income Tax
Act, R.S.C. 1985 (5th Supp.), c. 1 (the
"Act"). The provision of meals is the main issue
and much of the $4.50 per day taxable benefit related to it.
[8] The quantum of the benefit was not
at issue and the parties did not make submissions on it. For the
most part the calculation of the benefit appeared to be
reasonable assuming that these items constituted taxable
benefits.
Submissions of Parties
[9] Mr. McGoldrick submits that the
provision of free meals is in essence a reimbursement for
depriving him of his right to bring food to work. It was
suggested that a reimbursement is not a taxable benefit based on
cases such as The Queen v. Hoefele, 95 DTC 5602
(F.C.A.).
[10] The Crown suggests that Mr. McGoldrick
saved money by being provided free meals and that meals, being an
ordinary every day expense, is a taxable benefit. It was
submitted that the fact that Mr. McGoldrick did not want the
employer to provide meals is irrelevant as the courts have held
that employee benefits unilaterally provided are still
taxable.
[11] The Crown referred to the following
cases: Blanchard v. The Queen, 95 DTC 5479 (F.C.A.);
The Queen v. Hoefele; Dionne v. The Queen, 97 DTC
265 (T.C.C.); Tremblay v. The Queen, 2000 DTC 2414
(T.C.C.); Leduc v. R., [1996] 1 C.T.C. 2873 (T.C.C.); and
Dunlap v. The Queen, 98 DTC 2053 (T.C.C.).
Analysis
[12] The relevant part of paragraph 6(1)(a)
of the Act reads:
(1) There shall be included in computing the income of a
taxpayer for a taxation year as income from an office or
employment such of the following amounts as are applicable:
(a) Value
of benefits - the value of board, lodging and other benefits
of any kind whatever received or enjoyed by the taxpayer in the
year in respect of, in the course of, or by virtue of an office
or employment, ...
[13] As a preliminary matter, paragraph
6(1)(a) refers to a benefit "received" or
"enjoyed." Based on Mr. McGoldrick's view of the
Turtle Island Café, he perhaps did not "enjoy" a
benefit from the use of this facility. Therefore the question is
whether a benefit has been "received."
[14] The determination of whether an
employee has received a benefit can be difficult. As Bowman J.
(as he then was) stated in Pezzelato v. The Queen, 96 DTC
1285 (T.C.C.), at page 1288:
It is easy to point to extremes at either end of the spectrum,
but the cases that come with increasing frequency before the
courts are not at either end. They fall somewhere in between. The
courts must decide on which side of the line each case falls.
[15] A useful starting point for determining
whether something constitutes a taxable benefit for purposes of
paragraph 6(1)(a) is the following passage cited by the Supreme
Court of Canada in The Queen v. Savage, 83 DTC 5409 which
is taken from the judgment of Evans J.A. in R. v. Poynton,
72 DTC 6329 (Ont. C.A.), at page 6335:
I do not believe the language to be restricted to benefits that
are related to the office or employment in the sense that they
represent a form of remuneration for services rendered. If
it is a material acquisition which confers an economic benefit on
the taxpayer and does not constitute an exemption, e.g.,
loan or gift, then it is within the all-embracing definition of
s. 3.
[16] This is a very broad test which would
encompass free meals provided to employees. Use of the staff
cafeteria by Mr. McGoldrick results in a material acquisition
that confers an economic benefit equal to the value of the meals
received.
[17] Notwithstanding the breadth of this
general statement, courts have tended to recognize that where
something has been provided to an employee primarily for the
benefit of the employer, it will not be a taxable benefit if any
personal enjoyment is merely incidental to the business purpose:
Lowe v. The Queen, 96 DTC 6226 (F.C.A.).
[18] This approach was taken, in essence, in
a recent decision of the Quebec Court of Appeal that decided that
a reimbursement of meals during overtime work was not a taxable
benefit. The reasoning of the court was that a meal expense would
not otherwise have been incurred and the small expense of
producing a meal at home should be ignored: Deputy Minister of
Revenue for Quebec v. Confederation des Caisses Populaires et
d'economie Desjardins du Quebec, 2002 DTC 7404 (Que. C. A.).
The reasons of Delisle J. state at paragraph 34:
(translation)
There is here, no taxable advantage that the employee has to
include in the calculation of his income. The meal or
transportation expenses reimbursed would not normally have been
incurred. While it can be said that the food the employee would
have consumed at home is still intact, such as his subway ticket,
still the inconvenience of the expense outweighs that small
saving.
[19] A similar approach was taken, but not
in the context of meals, in the case of Chow v. The Queen,
2001 DTC 164 (T.C.C.). That case held that a free parking spot
provided by an employer did not constitute a taxable benefit.
[20] The testimony of the Vice President,
Human Resources of Casino Rama was that the required use of the
Turtle Island Café was for the benefit of the employer. If
the personal element is incidental, it should not constitute a
taxable benefit. In my view the personal element is not
incidental. The fact that Mr. McGoldrick did not like eating at
the Turtle Island Café should not be determinative. Also,
the amount of the expense saved is not immaterial compared with
the amount of the taxable benefit and it should not be
ignored.
[21] Mr. McGoldrick submits that the Federal
Court of Appeal decision in Hoefele is applicable in that
it held that a taxpayer is not enriched where he is being
compensated or made whole. Mr. McGoldrick stated that he was
being made whole for being deprived of his right to bring a meal
to work.
[22] This line of reimbursement cases can be
distinguished because they all concerned the reimbursement of out
of pocket costs. They can also be distinguished because they did
not involve a reimbursement of ordinary every day expenses. The
judgment of Linden J. A. in Hoefele makes this
distinction, at paragraph 11:
Therefore, the question to be decided in each of these
instances is whether the taxpayer is restored or enriched. Though
any number of terms may be used to express this effect--for
example, reimbursement, restitution, indemnification,
compensation, make whole, save the pocket--the underlying
principle remains the same. If, on the whole of a transaction, an
employee's economic position is not improved, that is, if the
transaction is a zero-sum situation when viewed in its entirety,
a receipt is not a benefit and, therefore, is not taxable under
paragraph 6(1)(a). It does not make any difference whether
the expense is incurred to cover costs of doing the job, of
travel associated with work or of a move to a new work location,
as long as the employer is not paying for the ordinary, every day
expenses of the employee.
[23] I have come to a different conclusion
with respect to the entertainment events. They were only
occasionally attended by Mr. McGoldrick and in this case I do not
believe that a benefit has been "received."
[24] No evidence was provided with respect
to the hams and turkeys and accordingly I conclude that the cost
in respect of these items is taxable.
Conclusion
[25] The appeal is allowed and the
assessments are referred back to the Minister for reconsideration
and reassessment on the basis that the cost of entertainment
events is not included in computing income and that the cost of
free meals and hams and turkeys is included in computing income
pursuant to paragraph 6(1)(a) of the Act.
Signed at Ottawa, Canada this 5th day of September, 2003.
J.M. Woods J.
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