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 October 30, 1998 Volume 6, Number 5

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Revenue Canada sees tax revenues in current U of S parking rates

U of S employees who rent stalls from the employer should know within weeks if they'll be paying higher parking rates or more taxes to Revenue Canada next spring.

Revenue Canada has been looking at parking rates U of S employees pay and wondering if there are tax dollars to be had.

The federal agency assumes that an employer will charge a "market rate" for parking spaces. It considers the difference between what it deems a fair market value for these employer-provided parking spaces and what U of S employees now pay - $92 a year for a hot stall; $42.80 for a cold one - as a taxable benefit.

If Revenue Canada uses comparisons with downtown rates, the monthly rate could be $66 a month.

Moreover, Revenue Canada has indicated that any tax bite could be retroactive to 1996.

Laura Kennedy, associate v-p (financial services), says the University disagrees with Revenue Canada's notion of market value, arguing that the University creates its own market.

"For example, if we could increase the number of stalls, this would decrease demand and thus reduce parking rates."

She also argues that our stalls are not comparable to downtown stalls, noting the distance that many U of S employees must walk between a remote parking lot and the building they work in. The condition of the lots is also inferior to the downtown ones, she adds.

The University and Revenue Canada have been discussing the issue for about a year.

At the last meeting, Revenue Canada agreed to negotiate the value of the tax benefit based on the University's cost of maintaining and operating its parking lots, not on external or downtown criteria.

Tony Whitworth, v-p (finance & administration), says this is a "breakthrough" that will allow the University to develop an objective and defensible case.

"The cost base approach, whereby a producer of goods or services can provide these at cost to employees, has precedent in tax case law. It also provides a reasonable basis on which to develop parking fee policy guidelines that can co-exist with the Faculty Collective Agreement."

The University's parking rates are currently covered by the Collective Agreement and are calculated so that the University can recover its expenditures over a three-year period.

So whether campus parking rates will be increased to meet a newly agreed upon market value for this University land use (which revenue would flow back to the University); or whether the bargaining units negotiate a preference for paying a taxable benefit to Revenue Canada (with, of course, less flow-back to the University), it seems likely that U of S employees will be paying more for parking.

Kennedy notes that any taxable benefit determined by Revenue Canada will be payable by the employees.

On the other hand, Revenue Canada has given the University the option of paying the full three years' cost (i.e., 1996-98) on behalf of the employees.

"For roughly 2,000 employees over a three-year period, this is a significant cost," Kennedy comments. "And as everyone knows, the University has limited resources."

Sharon Cochran, associate v-p (human resources), says that meetings have been scheduled with each of the bargaining units on campus to explain the situation. The University's Board of Governors will also be briefed on the issue at its October 30 meeting.

It's expected that the issue will be resolved by the end of November.

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