Last week’s federal budget will remove a long-standing tax exemption on one-third of the salaries for municipal councillors.
Since 1990, the Municipal Act has provided that one-third of the salary paid to an elected member of council was deemed to be for “expenses incurred in the discharge of the member’s duties,” and not subject to income tax.
The act also states the bylaw confirming council’s intention to accept the tax break must be reviewed at a public meeting at least once during each four-year term of council.
The change will not impact current councils, as it comes into effect in 2019 and a municipal election is scheduled for 2018.
Wellington County Warden Dennis Lever said treasurer Ken DeHart was advised of the measure in an email from the Canadian Payroll Association following the rollout of the budget on March 21.
An April 2015 report by DeHart to Wellington County council showed making council salaries fully taxable would have reduced the warden’s net pay at that time by $14,317 and reduced each councillor’s net pay by $3,725.
Converting councillors’ pay to fully-taxable remuneration would also increase the employer portion of Canada Pension Plan (CPP), OMERS and Employer Health Tax contributions.
In addition, the report noted, the county is currently eligible to receive a GST/HST rebate on a third of the remuneration paid as these are considered expenses and not salaries. The total cost of increased employer contributions and loss of GST/HST rebate would be $50,374.
Making council remuneration fully taxable, but adjusting gross salaries to maintain the same net pay to councillors would require a considerable increase, the report concluded.
“The current salary for the warden is $89,414 and councillors is $32,868. If council were to convert the remuneration to 100% taxable while maintaining the same level of net pay after taxes, the annual salary would need to be increased to $123,510 for the warden and $38,512 for a councillor,” the report stated.
“This option would increase the cost of remuneration to the county by $188,233 including employer portion of benefits and loss of GST/HST rebate.”
The report concluded there is “no financial incentive” to move away from the tax-free allowance and council voted at the time to maintain it.
Stating council remuneration “certainly isn’t excessive,” Lever told the Advertiser, “It’s going to cost the taxpayers more to get to the same money.”
While various municipalities handle expenses in different fashions, Lever said one example of expenses covered by the “tax-free allowance” could be travel.
“In Puslinch, people driving … don’t get mileage, unless you go out of the municipality,” he explained.
“I know I’m out of pocket on a regular basis.”
Lever said more information on the changes will likely be provided to county council on March 30.
