By Ken Pole | December 20, 2016 Estimated reading time 4 minutes, 19 seconds.
The Canadian Business Aviation Association (CBAA) is evidently making headway in its long-running discussions with the Canada Revenue Agency (CRA) about a lack of predictability and uniformity in the tax treatment of corporate aircraft.
While the issue has been evolving over several years, with the CRA publishing and removing an array of income tax bulletins, the industry suddenly found itself dealing with a new assessment approach last year that substantially increased the taxable benefit accruing from non-business use of corporate aircraft.
“The previous interpretation of fair market value to determine a taxable benefit amount was that if an owner uses his business aircraft for personal use, the taxable benefit was assessed as the equivalent of the cost of a first class airline ticket,” noted Rudy Toering, CBAA president and CEO.
That simplistic approach was arbitrarily increased by a factor of 10 or more.
Meetings with senior CRA staff followed, the latest at the end of November, and Toering told Skies it was “overall, extremely positive.”
He added: “The CRA senior staff (Director and Director General) and technical staff were and continue to be extremely interested and professional in finding a solution that is fair and workable for both the Government of Canada and Canadian taxpayers.
“It’s given us an opportunity to really explain to them how business aviation operates and they’ve been very receptive to that kind of conversation.”
While optimistic about “a good solution that’ll support our members and provide the predictability that we’re looking for,” Toering demurred when asked to define a “good solution.”
“That in itself is a long document,” he replied. “These are all technical things that we are still in the process of going through with the CRA.”
Revenue Minister Diane Lebouthillier’s staff met with CBAA early on in the discussions to provide advice on the best way forward.
“We have kept true to the advice to work with the CRA for a solution,” said Toering.
In the meantime, the CBAA has been telling its members that they should not expect results overnight. Even so, Toering said on Dec. 5 that, “we’re very optimistic” and he hopes to have another session with the CRA team before the end of the year. “Whether or not we have a solution by then is questionable, but certainly both sides are open to progress as quickly as possible.”
CBAA members understandably aren’t shy about bringing issues to Toering’s attention, either. “We encourage them to get in touch with us about . . . any of these activities that seem to be out of line.”
Asked whether there are any indications CRA auditors are not applying tax policies uniformly, he replied that “the word ‘predictability’ means that everyone’s on the same page, addressing issues in the same fashion. It’s very important for our members and for investors in business aviation to have that sense of, ‘Okay, if I’m going to go into the purchase of this particular aircraft, I want to know exactly how I’m supposed to be handling it from a tax perspective, etc.’ That’s not unreasonable.”
While Toering might have liked to have a Christmas surprise for his members, he wasn’t quite calling for a sleigh and reindeer.
“It would certainly be a nice present,” he agreed. “I know that the CRA is trying their utmost to make progress but I am not sure we will have a decision before then.”
