Lethbridge Herald, The (Newspaper) - November 25, 1972, Lethbridge, Alberta
28 THE LETH8RIDGE HERALD Salurduy, November 25, 1972 Fringe benefits are taxable By I. II. ASPEK Only a few years ago, it was a common siglil in Ihe United States to observe grown men and women sitting in restau- rants or in their cars, scratch- ing hurriedly some notes into a small black book. They were the products of the United States government's tax crack- down on expense-account living. During the early 1960s the business executive, salesman and just about anyone else who claimed tax deductions for en- tertaining, business promotion, travel and the like, were re- quired to substantiate in detail all claims for deductions of this kind. Failure to do so meant, (hat where they were reim- bursed by their employer or re- ceived an expense allowance, it would be treated as a taxable fringe benefit from their em- ployment. For a while It became almost a ritual. Every little black book contained details of ex- penditures, such as "date, time, place and amount of expense, for whom, what purpose, and what it was designed to accom- plish." The tax department fi- nally relented when they dis- covered that when these tax- payers kept meticulous records, their claims for tax deductions legitimately exceeded that which they had customarily claimed under the looser sys- tem. Canada narrowly missed go- Ing through the same book- keeping experience, which was proposed in the tax reform sys- tem, but scrapped when govern- ment thought better of it. TIGHTER RULES Nevertheless, the new tax regulations have tightened the rules on expense accounts and other fringe benefits and tax- payers would do well to ac- quaint themselves with the guidelines the government in- tends to enforce. The failure to report and pay tax on a taxable fringe benefit can not only pro- duce subsequent fines, penalties and Interest costs, it allows the revenue department to go back and reassess one's income for the entire year in question even though the traditional four year time limit on the assessment has passed. In order to Inform taxpayers as to its intentions, attitudes and Interpretations of the new tax law, the government has published an interpretation bulletin covering the dos and don'Ls in this area. While such bulletins don't have the force of law, they are instructive as to governmental thinking. One of the most overlooked and abused rules is that which requires an employee to report and pay tax on the value of any free food or lodging provided by his employer. Thus the hotel staff which Is given free meals or food at nominal cost must keep track of It and pay tax as though the value had been re- ceived in cash. The same applies to the thou- sands of cleaning women who are given free lunch on the job. As well, live-in domestic help is expected to report and pay tax on the value of Ihe room and board they receive, just as farm laborers are required to pay lax on the value of room and board provided by their employer. HOW MANY OBEY? How many obey the law? Not many, but they are taking a chance on being prosecuted, even though they probably don't know the law even exists. More- over, the employer could face charges for failing to provide the employee with a detailed cost breakdown of room and board benefits. At this time of year, tax- payers should also be pondering the rule wliich requires employ- ees to record any Christmas gifts they receive from their employer, because they are tax- able if the employer himself claims a deduction. Even when the employer does not claim a deduction for the Christmas gift, if it's worth or bet- ter, the employee must declare and pay tax on the gift. This applies not only to gifts of cash, but to all gifts of merchandise or the like. When the new tax return forms are issued, they'll prob ably list all the new areas of reporting, including the require- ments to disclose the use of em- ployer's car, holiday trips and prizes won for special services to his employer. As well, the employee is required to pay tax on any medicare and hospital- plan premiums paid by his em- ployer under a provincially-ad- ministered health plan. As well, certain other premiums for non- group sickness, accident, dis- ability and income maintenance plans are taxable as though paid directly to the employee. BRIGHT SIDE On the brighter side, where a merchandising company allows employees a price discount, not below its cost, that "whole- saling" benefit isn't taxable. Nor Is the subsidized meal In a company cafeteria, unless the price charged is nominal, the value of uniforms or special clothing for workers, the use of Letter required KUALA LUMPUR, Malaysia (AP) The education ministry said It will begin requiring stu- dents wishing to study abroad to get a "letter of recommenda- tion" from the ministry. The re- quirement was explained as a way of keeping track of the stu- dents and making sure they are qualified. Enrol Now for these Career Programs DINING ROOM SERVICE January 3) This 12-week program prepares sludenls for work In many types of food-serving establishments, which Increasingly recognize the importance of iTrict health practices, economy, efficiency, com- petency, and good grooming. WELDING PROGRAMS (Start December 4) Almost every industry relies directly or indirectly on welding of metals. The demand for fully trained operators has grown until al present there is a definite shortage. SAIT offers the fol- lowing short programs as an aid to those seeking apprenticeships, and for those desiring a know- ledge of welding for a hobby or to assist them in iheir present occupations. Arc Welding Gas Welding Combined Welding SOUTHERN ALBERTA INSTITUTE OF TECHNOLOGY I30H6U1 Avonua company recreation facilities, or interest-free loans considered to be taxbale employee benefits. Interestingly enough, while an employer's contributions for an employee 'o a provincially-ad- ministered health-care plan are taxable in each employee's hands, the employer's contribu- tions for his employee to a pri- vate health plan are not taxable benefits. While it may be argued that these rules lack generosity, they are obviously very clear. Because of the taxability of most important fringe benefits, few of which Ihe employee really considers to be a genuine benefit for which he credits his employer, many companies are reviewing their thinking in this area. It would not be surprising, be- cause of the immense book- keeping job faced by the em- ployers, to see, as the trend to- ward greater taxability of fringe benefits gathers momen- tum, a counter trend by em- ployers toward larger salaries and fewer fringe benefits. (Mr. Asper is a Winnipeg law- yer) North television programs delayed OTTAWA (CP) Plans to start producing television pro- grams in the North are being held up by the federal govern- ment while spokesmen for northern residents are criti- cizing the CDC for delays. At the same time, the CBC it- self appears divided on what should be done to develop pro- gramming by and for north- erners. A studio for Yellovvknifc has been proposed, a CBC offi- cial said here. The situation arises from the recent launching of the Cana- dian telecommunications satel- lite Anik-1, which will bring live television to the North. The problem is that virtually all the television will be south- ern programming until northern television facilities are estab- lished. Tony Belcourt, president of the Native Council of Canada, said that the CBC has a respon- sibility to provide northern- produced programs but CBC of- ficials claim they have money problems. "But they don't seem to have money problems flying in all kinds of equipment to follow the Queen around the North or send two complete crews to the Mex- ican (Olympic) Games. They are not really sincere. They are just playing lip serv- ice to the people of the North." But CBC Vice-president Ron Fraser said in an interview Thursday that the CBC has asked the government for money to begin northern serv- ices. That request has been "de- ferred for further study" by the treasury board, Mr. Fraser said. He descibed the CBC pro- posal as being for a "modest production facility to start followed by two or three more in other northern centres. "What we wanted to start with was a small studio facility in Ycllowknifc." But another CBC official, In an interview, played down the value of a Ycllowknife studio. Andrew Cowan, director of CNC northern services said the Yellowknife studio advocated by some commentators "has be- come a kind of token and frankly, I don't think it's very important." no innmumon CHARGE onHomc CKTCnilOfl moncf. IT'S ADD-A-PHONE TIME. SAVE S10-ORDER YOURS BEFORE DECEMBER 22 Erlcofon INCLUDED IN THIS SPECIAL OFFER: DECORATOR PHONES' Chttlphenii Cendltillck Phonei Add a phone. Add a smile. Add new convenience in color from cool ivory to razmataz red! Switch to two-phone living with a sleek, streamlined CONTEMPRA or one of AGT's other exciting extension phone Call your nearest AGT business come in and see the full selection. Order your extension phone before December 22 and save the regular installation charge! Servlcm Customer! hfin choree or DiikPhtni.