By Stephen Hawboldt
Ignoring staff, legal, and tax advice, Annapolis County councillors at their January committee of the whole council decided to seek a formal ruling from the Canadian Revenue Agency (CRA) on whether their travel expenses to attend required meetings are part of their taxable income.
Councillors are currently paid 46 cents per kilometer for travel costs to attend monthly sessions of council and committee of the whole council. The costs of meals may also be claimed. Attendance at most of these meetings is a requirement to maintain their elected position. Travel costs to non-required meetings and events are paid at the same rates.
During a councillor salary review in 2012, staff discovered that travel costs might be taxable. One third of the salary paid to councillors is tax exempt to cover the costs of attending the functions that their job as councillor requires. The travel costs to attend these required meeting is in addition to the current exemption.
To clarify the situation, the county officials sought advice from their own auditors. Service Nova Scotia was also asked for their input and informal inquiries were directed to CRA. All of these agencies concluded that the travel costs to attend required meetings were a taxable benefit. The municipal solicitor has supported this conclusion.
The issue peaked at the end of the calendar year, when councillors received substantial payroll deductions on their December pay cheques. Councillor Frank Chipman, who had a telephone conversation with a staff person at CRA, questioned the information provided to council and felt a formal ruling is required. After a debate of nearly an hour, councils unanimously voted to seek a formal ruling from CRA.
A formal ruling is not without risk or costs. Staff reported that in a similar case involving a travel expenses for school board members somewhere else in the country, the CRA ruled that the travel costs were taxable. Staff also said that the information that must be submitted to CRA for this formal ruling could trigger tax audits of individual councillors that could go back several years. If the expenses are deemed taxable, current and past councillors could face tax penalties, according to staff.
The cost of a formal ruling from CRA would be borne by county taxpayers. This would include advance payment of several hundred dollars plus any extra costs for CRA staff time. In addition, county staff would likely be required to provide extensive documentation requiring an undetermined investment of staff time and cost.
County council was to make its final decision at their regular council session this month.