REASONS
FOR JUDGMENT
Ouimet J.
[1]
This is an appeal by Mark Smith (“Mr. Smith”) in
respect of his 2011 taxation year. The Minister of National Revenue (the “Minister”)
reassessed Mr. Smith to include in his income an amount of $504 pursuant
to paragraph 6(1)(a) of the Income Tax Act (the “ITA”). The
amount of $504 was included in Mr. Smith’s income as a taxable benefit
received in the course of employment and it represents the value of a parking
pass at the Calgary airport that was provided to Mr. Smith by Jazz Aviation
LP (“Jazz”).
II. Issue
[2]
The only issue in this appeal is the following:
Did the Minister correctly
determine that Mr. Smith received a taxable employment benefit in the
amount of $504 for the 2011 taxation year?
[3]
In answering this question, I will conduct an
analysis to determine who was the primary beneficiary of the parking pass, Mr. Smith
or Jazz.
III. The
Relevant Legislative Provisions
[4]
The key applicable provision of the ITA is the
following:
6 (1) Amounts to be included as income from office or
employment — 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, or by a person who does not deal
at arm’s length with the taxpayer, in the year in respect of, in the course of,
or by virtue of the taxpayer’s office or employment,
except any benefit
. . .
IV. The
Relevant Facts
[5]
Mr. Smith, a flight attendant for Jazz,
testified at trial. Mr. Smith also called Kirk Newhook (“Mr. Newhook”), the
Vice-president of Employee Relations for Jazz. The Respondent called Shawnah
Whittaker, the General Manager of Ground Transportation and Parking for the
Calgary Airport Authority.
A. Evidence of Kirk Newhook
[6]
Mr. Newhook has been employed by Jazz since
1993 and has been involved in the scheduling of the flight crews, that is,
pilots and flight attendants. Mr. Newhook has worked in the Jazz operation
center. He has also been involved in negotiating collective agreements, including
the one between Jazz Aviation LP and the Canadian Flight Attendant Union (the
“Collective Agreement”).
[7]
Jazz, a subsidiary of Air Canada, was described
by Mr. Newhook as a feeder airline for Air Canada. Jazz does not sell
tickets for its flights itself. Rather, it carries passengers for Air Canada
and is compensated by Air Canada for this service. Jazz flies between smaller
airports and the larger international airports. Part of its role is to connect
passengers from domestic flights, operated by Jazz, to international flights, operated
by Air Canada.
[8]
Mr. Newhook testified that an important
part of Jazz’s compensation is the on-time performance incentive, the
calculation of which is based on the proportion of its flights that depart on
time. The most significant cost for Jazz is the “flight crew variable wage
cost”, which is to say that its flight crew costs are its highest costs.
Because of Jazz’s role as a feeder airline and because of the on‑time
performance incentive, it is very important to Jazz that flights depart on
time. Therefore, it is important that flight attendants report for work on time.
Furthermore, when a flight cannot depart on time because a flight attendant has
not reported for work, there can be a cascading effect because other flights
are delayed as a consequence.
[9]
According to Mr. Newhook, since the flights are
staffed with the bare minimum crew required in order to fly, if a flight is
short a flight attendant it cannot depart. Therefore, Jazz has at all times a
number of “reserve” flight attendants who must be able to report within two
hours of being called. When a flight attendant does not report, the operation centre
may move a flight attendant from a later flight to the one in need of an
attendant and then call the “reserve” attendant to report for the later flight.
Articles 5.23 and 5.24 of the Collective Agreement provide reserve duty and
airport reserve duty for flight attendants so that there are people standing by
to replace flight attendants as needed. Jazz typically has about ten percent of
its required work force on reserve duty, depending on the day of the week. This
is Jazz’s insurance policy against delays, cancellations and any failure by
flight attendants to report for work. Those on reserve duty must be available
for the twenty-four hour period during which they are scheduled to be on
reserve duty.
[10]
In recruiting new flight attendants, Jazz looks
for people who will be reliable and flexible. Throughout the training and
review process, Jazz monitors the recruit’s flexibility and reliability.
Flexibility is important because Jazz wants flight attendants who are capable
of changing schedules as needed. Reliability is important because Jazz needs
its flight attendants to be punctual. Jazz also promotes a culture of on-time
performance by providing to employees bonuses based on “on-time” performance. According
to Mr. Newhook, if employees are not reliable, those persons are likely to
lose their job.
[11]
Mr. Newhook said that Jazz has decided to let
the flight attendants decide on the mode of transportation they use in order to
be punctual. However, according to Mr. Newhook, Jazz has also decided to
continue providing a parking pass to its flight attendants, despite the
potential for it to be a taxable benefit, because Jazz does not want its flight
attendants to use less reliable alternatives that would result in more stress
on the system because of delays.
[12]
Mr. Newhook confirmed that Jazz’s flight
attendants are not required to have a car or driver’s licence as a condition of
employment. According to Mr. Newhook, having a car is not a condition of
employment because a new flight attendant is likely to make about $23,000 a
year. Since a car is a significant expense, it would be difficult to recruit
people if having a car was a requirement. In any event, pursuant to Article
7.04 of the Collective Agreement, flight attendants are provided with a parking
pass paid for by Jazz. Mr. Newhook testified that this provision was
already in the Collective Agreement when he joined Jazz in 1993 and that he did
not know why Article 7.04 was put in. Article 7.03 of the Collective Agreement
stipulates that Jazz will provide company transportation, cabs, limos, or other
suitable transportation to flight attendants who are required to report for
duty, or who arrive back from a trip, between the hours of 00:30 a.m. and 04:30
a.m. Jazz will also sometimes pay for taxis, for example, late at night to take
employees to their parked car or when a flight attendant is being called in to work
on a day off and has no other way to get to work.
B. Evidence of Mark Smith
[13]
Mr. Smith has been a flight attendant for
approximately twenty-five years. He is based out of the Calgary airport and
resides in Calgary.
[14]
In 2011, Mr. Smith commuted to work by driving
to the Calgary airport and parking in the “Green Lot”. This drive took him
approximately twenty‑five minutes without traffic. Mr. Smith
testified that there was no direct public transportation route from his home to
the airport in 2011. He never carpooled or took a taxi to work. His parking
pass for the Green Lot was paid for by Jazz and the cost of the parking pass
was $40 per month plus GST.
[15]
Mr. Smith also confirmed that he did not have to
use his car to perform his work; he only used it to commute to work. Mr. Smith testified
that, if Jazz did not pay for the parking, he “would explore all options
available”, without saying what they might be, other than paying for it out of
his own pocket.
[16]
Mr. Smith submitted in evidence at trial his
Payroll Summary for the 2011 calendar year. The Payroll Summary shows the times
at which Mr. Smith was on duty and off duty. According to the Summary, he
did not have what could be called a “normal” schedule; his hours of work fluctuated
from week to week and month to month. Mr. Smith could also be required to
begin work early and finish late. In 2011, for example, he was required to start
work as early as 5:00 a.m. and to finish as late as 11:36 p.m.
[17]
It was important for Mr. Smith to report for
work on time. There was a three-strike rule: if Mr. Smith failed to report to
work on time, he would be disciplined. If it occurred three times, he would be
terminated.
[18]
Mr. Smith testified that he used his parking
pass two or three times for personal purposes, such as flying for a vacation.
He did not reimburse Jazz for this use of the parking pass.
[19]
According to the evidence submitted at trial, there
was no public transportation to the airport available for early morning
flights. However, this evidence was based on the 2017 public transportation
schedule, not the 2011 schedule. There was also evidence that the precise
routes examined at the hearing would not have been available in 2011 because
the routes and stations have since changed.
[20]
Mr. Smith submitted a Calgary Transit Map from
2011. This map shows two buses going to the Calgary Airport: routes number 430
and number 57. The schedule for route number 430 showed the earliest bus
arriving at the airport at 5:53 a.m. on weekdays and the last bus leaving the
airport at 12:23 a.m. on weekdays, with a more limited schedule on weekends.
The schedule for route number 57 was not submitted.
[21]
In addition, a new airport route, number 300,
was launched on June 27, 2011. The schedule for route 300 showed that on all
days of the week the earliest bus arrived at the airport at 5:25 a.m., and the
last bus left the airport at 12:05 a.m. However, the evidence from 2017
suggests that, from where he resided in 2011, it would not have been possible for
Mr. Smith to use the 300 route at that time in the morning because he needed to
catch a connecting bus.
C. Evidence of Shawnah
Whittaker
[22]
Ms. Whittaker is the General Manager of Ground
Transportation and Parking for the Calgary Airport Authority. As the general manager,
she is in charge of all parking at the Calgary airport and all aspects of
ground transportation to and from the airport. Ms. Whittaker has worked for the
Calgary Airport Authority in the Ground Transportation and Parking Department for
the past 20 years approximately.
[23]
Ms. Whittaker testified that all persons
employed at the Calgary airport can obtain a parking permit. To her knowledge,
most flight attendants working at the Calgary airport are provided with parking
by their employer, including those working for Jazz.
[24]
Today, there are a number of parking lots at the
Calgary airport. Generally, the closer the lot is to the terminal, the more
expensive the parking is. However, in 2011, the only options for a Jazz
employee were the Green Lot and the White Lot. Jazz provided parking for its
employees in the Green Lot. The Green Lot has over 2500 parking spaces. It
never fills up completely. The cost to park in that lot in 2011 was $40 ($42
with GST). The lot was accessible twenty-four hours a day, seven days a week. As
for the White Lot, which is known as the corporate lot, it is heated and much
more expensive, and cost $240 per month in 2011.
[25]
Typically, in 2011, if persons who worked at the
Calgary airport wanted a parking space at the airport, they had to fill out a parking
permit application and submit it to the parking office. In 2011, when it was the
employer who paid, that employer had to sign off on the parking and was billed directly.
However, it was open to all who worked at the Calgary airport to pay for their
own parking permit when their employer did not provide one. In addition,
employees who wanted to obtain a parking permit in a closer lot at a higher
price could do so, but had to pay out of their own pocket. In that case, the
Calgary Airport Authority did not subtract the amount that the employer was willing
to pay for the parking space.
V. Analysis
[26]
As stated by the Supreme Court of Canada in Savage,
[1]
the rule is that any material acquisition in respect of employment which
confers an economic benefit on a taxpayer falls within paragraph 6(1)(a)
of the ITA and therefore is a taxable benefit, unless there is an exemption. Justice
Dickson stated the following in that decision:
I agree with what was said by Evans JA in R. v.
Poynton, [1972] 3 O.R. 727 at p. 738, speaking of benefits received or enjoyed in respect of, in the course
of, or by virtue of an office or employment:
I do not believe the language to be
restricted to benefits that are related to the office or employment in the
sense that they respresent [sic] 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.
[27]
In McGoldrick,[3] the Federal Court of
Appeal (“FCA”) stated that one exception to the rule is where the material
acquisition at issue was provided to the employee primarily for the benefit of
the employer. If this is the case, even if the employee enjoyed a personal
benefit from the use of this acquisition, that benefit is not taxable:[4]
9 As a general rule, any material acquisition in respect of employment
which confers an economic benefit on a taxpayer and does not constitute an
exemption falls within paragraph 6(1)(a) (see The Queen v. Savage,
83 DTC 5409 at 5414 (S.C.C.)). . . . Where something is 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 (see Lowe
v. The Queen, 96 DTC 6226 at 6230). . . .
[28]
In the present case, Mr. Smith argued that the
parking pass at the Calgary airport was provided to him by Jazz primarily for
Jazz’s benefit. The Respondent argued that it was Mr. Smith who primarily
enjoyed the benefit of the parking pass.
[29]
In light of what is stated above, in order to
determine whether the value of the parking pass provided to Mr. Smith by Jazz was
a taxable benefit, this Court has to determine, on the balance of probabilities,
if Mr. Smith was the primary beneficiary of the parking pass or if the primary
beneficiary was Jazz, the employer.[5]
A. Benefit to Jazz
[30]
In his testimony, Mr. Newhook said that it was important
for Jazz that its flight attendants report to work on time for two main reasons:
a) An important part of Jazz’s compensation was the on-time performance
incentive, which was calculated on the proportion of flights that departed on
time.
b) Jazz flights are staffed with the bare minimum crew required in
order to fly. If a flight is short a flight attendant, it cannot depart and
this has a cascading effect because other flights might have to be delayed as a
consequence.
[31]
Furthermore, Jazz’s operational requirements
made it important that flight attendants be reliable and flexible for various
other business-related reasons.
[32]
On the evidence, I cannot conclude that Jazz
paid for parking passes because it believed that it would thereby make flight
attendants, including Mr. Smith, more reliable and flexible.
[33]
According to Mr. Newhook, given how important it
was for Jazz that its flight attendants report to work on time, Jazz put in
place a measure to ensure that, if a flight attendant did not report to work on
time for any reason, that flight attendant could be replaced without there
being any repercussions on Jazz’s flight schedule. This measure or “insurance
policy” consisted in Jazz scheduling approximately ten percent of its required
work force to be on “reserve” duty. This requirement is found in Articles 5.23
and 5.24 of the Collective Agreement.
[34]
Pursuant to Article 7.03 of the Collective
Agreement, Jazz had to provide company transportation, cabs, limos, or other
suitable transportation to flight attendants required to report for duty, or
who arrived back from a trip, between the hours of 00:30 a.m. and 04:30 a.m. Pursuant
to Article 7.04 of the Collective Agreement, Jazz had to pay for its flight
attendants’ parking passes. Mr. Newhook did not testify that Articles 7.03
and 7.04 were measures or insurance policies against failure by flight
attendants to report to work on time as he did with regard to Articles 5.23 and
5.24. What Mr. Newhook said about Article 7.04 was that it was historically included
in the Collective Agreement, meaning it was there before he joined Jazz in
1993.
[35]
Mr. Newhook also said that Jazz had decided to
let the flight attendants decide what mode of transportation they would use in
order to be punctual. Mr. Newhook’s evidence was not that Jazz paid for
the flight attendants’ parking passes because of any commercial realities of
the airline industry or any factors specific to that industry, as argued by Mr.
Smith’s counsel.
[36]
It is noteworthy that, despite the fact that it
was important for Jazz that its flight attendants be reliable and flexible and that
they report to work on time, the evidence does not show that flight attendants were
required under the Collective Agreement or otherwise to commute to work by car or
even to have a driver’s licence.
[37]
This does not mean, however, that Jazz did not
receive any benefit from its flight attendants using the parking passes. I must
therefore look for evidence of correlation between the use of the parking passes
and any benefit to Jazz.
[38]
Mr. Newhook said in his testimony that Jazz had
decided to continue paying for the parking passes despite their potentially
constituting a taxable benefit. According to Mr. Newhook, this was because Jazz
did not want its flight attendants to use less reliable alternatives. I was not
provided with any evidence to support a conclusion that flight attendants using
a car to commute to work at the Calgary airport were more reliable than those
using other means of transportation to do so. In the 2011 taxation year, the
Collective Agreement which required Jazz to pay for the parking passes was in
place. In the 2011 taxation year, whether they were a taxable benefit or not,
Jazz had to pay for the parking passes pursuant to the Collective Agreement.
[39]
After reviewing the evidence, I have concluded
that I was not presented with any evidence of a correlation between the use of
the parking lot at the Calgary airport by flight attendants and the existence
of a benefit to Jazz. The evidence did not show that flight attendants who
commuted to the Calgary airport using their own car were more reliable and flexible
than those using other means of transportation. On the evidence, I conclude
that Jazz received the same level of service from its flight attendants, no
matter how they chose to commute to work.
[40]
In the case of Mr. Smith, he had to commute to
the Calgary airport by car. Therefore, he had to have a parking pass in order
to work for Jazz out of the Calgary airport and, obviously, in order to report
to work on time. Therefore, Mr. Smith’s using his parking pass allowed Jazz to
have Mr. Smith as an employee.
[41]
The evidence of Mr. Smith was that he commuted
to work by driving to the Calgary airport because he could not use public
transportation, as it was not available at the hours that he needed it. In some
instances, public transportation was available but would have been impractical
for Mr. Smith to use.
[42]
Mr. Smith testified that, if Jazz had not paid
for the parking pass, he would have considered other options. While he stated
that he would have considered other options, he did not mention what they were,
with the exception of the option that consisted of paying for a parking pass out
of his own pocket. On the evidence, I fail to see what the other options might
have been besides paying for the parking out of his own pocket. In my opinion
and according to the evidence, the distance between his house and the Calgary
airport combined with his work schedule left Mr. Smith with only one choice for
commuting to work: use of his own car and use of the parking made available to
him at the airport, whether Jazz was paying for it or not.
[43]
In the end, I was not presented with evidence of
any correlation between the use of parking at the Calgary airport and a benefit
to Jazz either for the flight attendants in general or for Mr. Smith
particularly. Since the evidence is not that Mr. Smith did not perform the
same tasks and duties as other flight attendants, I cannot conclude that
the work of Mr. Smith in particular provided any specific benefit to Jazz in
comparison with the work done by any other flight attendant. Furthermore, there
is no evidence of the cost associated with replacing Mr. Smith upon a hypothetical
termination of his employment; nor is there any evidence that he would be
difficult to replace.
[44]
Finally, Mr. Smith’s counsel submitted that paying
for the parking pass allowed Jazz to further the attainment of its goal of
on-time performance and allowed its flight attendants to be more reliable, flexible
and punctual. This resulted in increased profits and decreased costs and was
good for Jazz’s “bottom line”. He further argued that flight attendants being
more reliable, flexible and punctual improved Jazz’s on-time performance and
therefore increased its compensation from Air Canada. I was not presented with any
evidence that supports these conclusions or that quantifies the effect on
Jazz’s profits or costs of the use of a parking pass by Mr. Smith and/or other
flight attendants.
[45]
In light of my analysis of the evidence, I
cannot conclude that Jazz received any benefit from Mr. Smith’s use of the
parking pass provided by it.
B. Benefit to Mr. Smith
[46]
As previously mentioned, I have concluded that
Mr. Smith had to use his car, and therefore had to have a parking pass, in
order to work for Jazz out of the Calgary airport, and this would have been the
case whether Jazz was paying for the parking pass or not. Because of this and given
the evidence, I have concluded that Mr. Smith received only one benefit
from the fact that his parking pass was being paid for by Jazz. That benefit was
an economic benefit that is measurable in monetary terms. The value of the
benefit is the total value of the parking pass for the 2011 taxation year, that
is, $504. Mr. Smith would have enjoyed all other potential benefits
arising from the use of the parking pass in any event as he would have used such
a pass even if Jazz had not paid for it. If the evidence had been that he would
have taken the bus, for example, if Jazz had not paid for the parking pass, my
conclusion would not have been the same since, in that case, he would most
probably have enjoyed other benefits arising from the use of a car instead of
the bus.
VI. Conclusion
[47]
On the evidence, I have come to the conclusion that,
on the balance of probabilities, the primary beneficiary of the parking pass at
the Calgary airport was Mr. Smith. Mr. Smith received an economic benefit that
was measurable in monetary terms. The value of the benefit is the value of the
parking pass for the 2011 taxation year, that is, $504.
[48]
I cannot conclude that Jazz paid for the parking
pass for any business purpose. The obligation to pay for the parking pass is
found in the Collective Agreement, but no explanation was provided to me as to
why it was included in the Collective Agreement. The only conclusion I can reach
is that Jazz paid for the parking pass simply because it was required to do so pursuant
to the Collective Agreement. As for a potential increase in the reliability and
flexibility of flight attendants, including Mr. Smith, by virtue of their
commuting by car to their place of work, the evidence did not show that there
actually was such an increase. In the end, the evidence did not show that Jazz
received any benefit at all from Mr. Smith’s use of the parking pass.
[49]
For these reasons, the appeal is dismissed,
without costs.
Signed at
Ottawa, Canada, this 21st day of April 2017.
“Sylvain Ouimet”
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