Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
DM'S OFFICE (2) 94-1125D, 94-07907M, 94-1164D, 94-1605D
ADM'S OFFICE (3)
RETURN TO RULINGS, ROOM 303, MET. BLDG.
SUBJECT OR CORPORATE FILE
December 13, 1994
I am writing in response to your letters of July 19, and October 10, 1994, concerning the taxation of members of Parliament and benefits received or enjoyed by the incumbent of the position of Governor General of Canada. I also wish to thank you for your letter of August 5, 1994, to which you attached a copy of your letter to the Minister of Finance. I apologize for the delay in replying.
You requested further clarification on the issue of travelling expenses, paid by the Government of Canada, for family members of a member of Parliament including a nanny hired to care for the member's children. You ask whether the payment of such expenses is a taxable benefit when family members accompany the member of Parliament when travelling on government business.
The travelling expenses of a member's family, including a nanny who cares for the member's child or children, would be considered a personal expense of the member even if the member was travelling on government business for that particular trip. Accordingly, where such expenses are paid by the Government of Canada, the payment of such travelling expenses would normally constitute a taxable benefit to the member. No taxable benefit would be conferred on the member, however, where the member's spouse was, in fact, engaged primarily in government business activities on behalf of the government during the trip.
If I understand the issue raised in the fourth paragraph of your letter correctly, you are seeking clarification of the tax implications where a political party reimburses a member of Parliament for a particular expense. You ask how the Department could be assured that the reimbursed expense had not been paid for out of the member's tax-free allowance and thus that no double dipping had occurred.
An allowance, as defined by the courts, is a payment for which the recipient does not have to account; while the amount of an allowance is typically set to cover the expenses which it is intended to cover, the person in receipt of the allowance is not obliged to use the allowance for any particular purpose. Consequently, a taxable benefit does not arise when a political party pays for or reimburses a member for an expense incurred in performing the duties required of a parliamentarian even though the member is also in receipt of an allowance fixed by statute. However, where a member seeks to deduct such expenses for tax purposes from the salary received as a member of Parliament, it would be necessary for the member to establish that the expenditure was incurred over and above any reimbursement of that expense.
Your next question deals with the exemption in the Income Tax Act for the income earned from the office of the Governor General of Canada. You ask whether there is a ceiling on the exemption and whether the benefit derived from the payment of expenses of the Governor General's family members would be included in the tax-exempt portion. Any benefit derived by the incumbent from the position of Governor General of Canada would form part of the income of that office. The exemption applies to the entire amount of income earned from the office of the Governor General of Canada which includes the value of all or any benefit (including a benefit conferred on or relating to a family member) received in respect of that office which would otherwise be taxable under the Act.
It would appear that my comments concerning the issues raised in your June 7, 1994 letter were not specific enough and so I would like to offer further clarification. As I understand it, you are asking what test is used to determine if a member of Parliament can claim expenses for income tax purposes. As you have stated, an individual carrying on business can generally deduct reasonable expenses to the extent they are incurred to earn income from that business. The test for an employee or an officer, including a member of Parliament, is more restrictive. For example, in the appropriate circumstances an employee or officer may deduct amounts expended for travelling in the course of the taxpayer's employment. For a member of Parliament such travel would be limited to travel incurred in carrying out the duties required of that member by Parliament and would only be deductible if all the other conditions for deductibility of an expense by an employee were met.
Mr. Paul Fuoco, Chief of the Personal and General Section of the Rulings Directorate is aware of our correspondence and would be pleased to answer any further questions you may have concerning the issues you have raised. Mr. Fuoco may be reached by writing to 88 Metcalfe Street, Ottawa, Ontario K1A 0L8 or by telephoning collect at 0-613-957-2141.
I trust that these comments will clarify the outstanding issues raised in your correspondence.
Pierre Gravelle, Q.C.
October 20, 1994
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