Company car culture

Factual Questions
61

IANAA, but…
See, the tax regimen there has not caught up to the North American standard.
If the company gives you (or leases you) a car, it is a taxable benefit, all expenses are the equivalent of salary; you must pay taxes on them. To claim that some of the expenses are business-related, you must keep a log of how many miles you drove on company business. Driving to and from your regular place of employment does not count (commuting is not deductible).

If you were planning on spending that much anyway, then so what? Take the darn car. But for some people, that’s not the car they want. Others want a less expensive vehicle, or a different vehicle, etc. Money is usually better than a benefit.

It used to be that an employer-supplied perk like that (or free housing, or membership in golf clubs, picking up a restaurant tab, or use of the corporate jet for vacation) was not taxable. However, the perception was that these benefits were unevenly accruing to the “fat cats” of business, so should be taxed at the equivalent market rate. Once the car costs you money (admittedly not as much as if you got it yourself), maybe you want the car YOU want instead?

Yeah, you don’t get to keep it. You pay taxes on the lease amount every year. If you buy a better car but keep it for 10 years then maybe you’d be better off if they gave you that value as money instead of a company car - taxes would be the same.

Plus, if you have your own car and need to use it for company business, would it be simpler for the company to write you a cheque for mileage using the Revenue Canada standard rate (IIRC, about 42 cents a kilometer)?

Do the math sometime. Figure on the total cost of lease, insurance, maintenance, registration, etc. on a new car evry 3 years - then figure out whether if the company gave you that same money cash, you could do better on your own?

Where was it, Chrysler, where a state trooper pulled over a guy in a brand new car many years ago? Noted that the odometer in the middle of the continent read “0”; the investigation revealed that execs routinely were allowed to help themselves to a brand new car off the line, disconnect the odometer (now illegal in the USA) and put it back for sale as “brand new” when they returned thousands of miles later.

Even if Ford makes Fords and supplies Fords to its workers (or the fat cats) they still have t pay taxes on the equialent value as income.

62

Actually, commutes are deductible at $1.50 per trip. And all expenses are not the equivalent of salary; only the percentage of the expenses attributable to personal use are includable in gross income.

63

“Caught up to the American Standard”. Because of course you guys are the standard the whole world has to match.

64

In terms of egalitarian tax regimen, Canada, yes, pretty close. The USA, not necessarily.

Do executives in Spain still have their fancy club memberships and car and driver supplied tax-free? A flat in the downtown or a hotel room they can use for free if it’s too late to be chauffeured back to their estate out of town? While youth unemployment is at 25% and the government makes everyone cut back?

That’s the problem that lead to these sorts of benefits becoming taxable. Fine, the company president can have his Rolls and driver, but why should the taxpayer subsidize it in passed up taxes? Why should the bosses get free cars while the front-line workers pay the taxes that subsidize that? (If they are getting something tax-free from the company and you are not - that’s you paying for their benefit. Worse if it’s a write-off from taxable income for the company, too.)

65

OK, in Canada you must keep a log. Any business use is not taxable, so you pro-rate it at the percentage of business vs. personal use.

$1.50 a trip (I assume the USA standard?) works out to about $750 a year. That’s not a huge deduction all in all, considering in some US cities a commute is an hour or so. Does that only apply to company cars, or can the average Joe use that deduction for their own car?

Yes, if the car is really used mainly for real business, it is a legitimate business expense and so not a taxable benefit; just as, if the company buys you a helmet for your job, or safety glasses - what else would they be except business related.

the whole tenor of this thread is that many people see a paid-for car as a bonus and a perk, for home use. In that case, to the extent it is used that way, it is a payment in kind. Why shouldn’t that portion be taxable?

And to get back to the OP - once you ar being given a payment in kind, often it may be better to get the cash instead. For example, if the company gave you a turkey at Christmas (used to happen some places) maybe it’s too much or not enough, maybe it’s not kosher, maybe you’re going to Grandma’s this year… cash is so much simpler.

66

No, that only works for company-supplied transportation. Joe Schmo can’t deduct use of his own car for commuting unless he is traveling “away from home”.

If by “used to be” you mean prior to about 1925, then yes (at least in the US).

67

True. I’d be surprised if the driver made much more than a hundred bucks a month, if that.

68

Taxable benefits generally became taxable about 1980 in Canada IIRC. I seem to recall the same happened in Britain about the time Margaret Thatcher took over.

The article I remember was describing how a senior engineer at a British firm would get about 50,000 pounds. At that point, they were pushing the top tax rate of 83%. It was cheaper to give him a car and driver than a raise that gave him a decent exta take-home cash. Two things she changed - made the perks taxable, and significantly lowered the top tax rate.

So, to get back to the OP question - this is what made the “company car” less desirable. Unless they gave you a raise or the car was heavily used for company business, it was not as sweet a perk.