Taxes and the difference between golf and hockey

I was contacted yesterday by Dale Smith with a media inquiry regarding an issue that, since 1971, has come up every few years. When these things come up, I am reminded that stupid tax decisions are gifts that just keep on giving.

Anyway, the inquiry was about a private members bill, Bill C-280, which is an act to amend the Income Tax Act related to golf expenses. Specifically, the proposal is to amend section 18(1)(l)(i) of the income tax act. Given that golf expenses do not even come up in the text of the amendment, it seemed to be causing a bit of confusion.

As I am sure you all understand, you can deduct legitimate expenses that your incur for the purposes of earning an income (section 18(1)(a)). That is, the expenses cannot be of a personal nature. Enter section 18 of the income tax act which details what deductions are NOT permitted from business income. Section 18(1)(l)(i) currently states

Use of recreational facilities and club dues

(l) an outlay or expense made or incurred by the taxpayer after 1971,

  • (i) for the use or maintenance of property that is a yacht, a camp, a lodge or a golf course or facility, unless the taxpayer made or incurred the outlay or expense in the ordinary course of the taxpayer’s business of providing the property for hire or reward, or

The proposed amendment wants to remove the bolded and underlined text above, making golf expenses deductible for tax purposes.

Yes, folks golf fees are not deductible for tax purposes. You can see right from the act that this inclusion dates back to 1971. After much discussion, it was decided that the powers that be that golf is purely a recreational activity. Even if you choose to conduct business as part of the activity, the activity itself is personal. That is, the business is ancillary to the activity. Much like if you and I went out for a run and while running we discussed income tax rules regarding deduction, nothing related to that run is deductible for tax purposes. Running is a personal activity.

OK, seem pretty clear, so what is the problem. Well, in a nutshell loopholes. As you know the income tax act is ripe with special ad hoc rules and those special ad hoc rules beget other special ad hoc rules. The income tax act, in section 67, acknowledges that some expenses can be both personal and business in nature. This includes meals and entertainment. Because of the dual purpose of these expenses, they are only partially (50%) deductible.

So now you see there is ripe for problems. What is a personal expenses vs a combined personal and business expense? Apparently tickets to sporting events, like hockey, are a partially deductible expense as are lift tickets, movie tickets and a host of other expenses. What is the difference between conducting business on the ski hill versus on the golf course? I have absolutely no idea. And there, my friends, is the problem.

But, to me, this is not a reason to make golf fees deductible and why we all need to be wary of special interest groups arguing for preferential tax treatment.. Instead, it is time to carefully and rationally revisit what is a combined personal and business expense and ensure that the expense is truly necessary for the conduct of business. I am not one who believes that all meals and entertainment should be eliminated, like some camps, but Holy Moly Ottawa, you need to be much smarter than this.

And since you have a very intelligent crew advising you already on stupid tax expenditures, might I suggest that you get them to talk to you about this one.


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