Taxing a ..

TAX ON A WHITE ELEPHANT
A comparison between the conferring of a perk
to an employee and the real benefit conveyed.
By Victor Drummond ©
August 2008

What it means to possess a white elephant:- receiving a gift of a white elephant from a monarch was both a blessing and a curse: a blessing because the animal was sacred and a sign of the monarch's favour, and a curse because the animal had to be kept and could not be put to practical use to offset the cost of maintaining it.
To levy a tax on the recipient of a “White Elephant” based upon the Fair Market Value of a White Elephant gift would then really put the icing on the cake.

The owner of a White Elephant has an obligation to be grateful to the donor while becoming burdened with a sacred beast that requires food, shelter and daily sanitary maintenance but can not be used to perform useful labour.

You wouldn’t expect there would be even one Canadian caught in such a predicament.

There are, however thousands of honest, hard-working Canadians placed in exactly that kind of situation.

What was intended -- by their employer – to be a financial reward for above average performance – was converted to a punishing liability by way of flawed legislation that taxed opportunity rather than reality and then blocked the victim from realizing direct corrective action.

Victimized Canadians did not actually receive a living animal as a gift from a benevolent monarch.

What they did receive was a perk from an appreciative employer who fully intended the item offered to be a reward.

So by what mischief did an intended reward become a financially destructive curse?

The transition began with a piece of defective legislation which provided the Canada Revenue Agency, (CRA), a basis for taxing the employer’s reward immediately it was delivered to the employee.

There was no real problem if the recipient sold -- or converted -- the received gift at the time it was delivered. In which case the tax levied was offset by the real, sale/conversion, value of the gift.

A big problem arose, however, when the recipient failed to sell, or convert the gift, at time of delivery and the exchange value of the gift declined while still in possession of the employee.

In the latter case the gift was well on its way to becoming a “White Elephant”.

The gift recipient was levied taxes on the estimated value of the gift at time of delivery.

Legislation that produced this result also split the characteristic of the gift into two mutually exclusive classifications, i.e. (1) A taxable benefit and (2) A Capital equity.

It was ruled that any tax levied on the gift at time of delivery, (a taxable benefit), could not be offset by any loss suffered when the gift was later sold, (a Capital equity transaction). In other words the tax levied on the gift at the time of delivery became a sacred “White Elephant”.

To compound the problem victims were allowed to defer payment of taxes imposed on the reward -- that was now a curse -- with the added liability of having the tax deferment cancelled should the employer go out of business, or the recipient disposed of the gift, or the recipient moved out of Canada.

For the thousands of Canadians who ended up in this situation their employer’s reward has been totally converted to the greatest “White Elephant” in modern history.

Can anyone justify the imposing of a horrendous tax on strictly potential -- but unrealized gain?

Can anyone justify imposing a tax that equals – and often exceeds – the victims total real income for the taxation year?

Can anyone justify the dual classification -- of the same reward -- that only serves to prevent the “White Elephant” victim from recouping any part of the taxable benefit taxes levied?

Can anyone justify the levying of horrendous taxes based upon a one-sided unproven assumption?

If anyone wishes to challenge -- one or more of the foregoing questions -- feel free to post your comment(s) to this article.

On the other hand – if you feel -- as I do -- that taxes are only justified where real income is present – then make your support of “Canadians for Fair and Equalized Taxation”, (CFET), be known.

Visit http://cfet.ca Sign the petition – Identify your support by using the inquiry@cfet.ca link and even become a member of this rapidly growing group.

CFET has no membership fees and is non-partisan. They are strictly a group dedicated to restore the basic rights of all Canadians to Fair/Equitable treatment.

Contact your Member of Parliament and express your support of the CFET “Fair Tax” Objective.

Ask your family, relatives and friends to follow your example.

When common sense -- and the obligation to defend the right of “All honest, hard-working Canadians” fails to inspire our elected representatives to take appropriate corrective action – grass roots protest may just be the means to obtain justice.

See you at the next federal election voting polls O’Grady.

Victor Drummond ©