Delimiting the Concept of Income: The Taxation of In-Kind Benefits

41 Pages Posted: 4 May 2005

See all articles by Kim Brooks

Kim Brooks

Dalhousie University - Schulich School of Law


The issue of which in-kind benefits should be taxed and how these benefits should be valued have concerned tax legislators, administrators, and academics since the introduction of the personal income tax system. Building her theoretical analysis on the income concept advanced by Henry Simons and relying on traditional tax policy notions of equity,neutrality, and administrative practicality, the author asserts that employees must be fully taxed on employer-provided in-kind benefits. To this effect, the article offers guidelines for distinguishing between taxable in-kind benefits and non-taxable conditions of employment. The author argues that the correct method of valuation of in-kind benefits is their fair market value, rather than the cost to the employer or the subjective value of the benefit to the employee. The article proceeds by revealing inconsistencies, inequities, and inefficiencies that have resulted from the manner in which Canadian tax administrators and courts have delineated taxability of in-kind employee benefits. Discussing such in-kind benefits as educational courses, employee trips, clothing, subsidized parking, and discounts on goods and services, the author makes suggestions that may be utilized to develop a matrix of detailed and consistent rules on the taxability of these and others in-kind benefits.

Keywords: fringe benefits, in-kind benefits, non-cash compensation, employee taxation

JEL Classification: H20, H24, K34

Suggested Citation

Brooks, Kimberley, Delimiting the Concept of Income: The Taxation of In-Kind Benefits. Available at SSRN:

Kimberley Brooks (Contact Author)

Dalhousie University - Schulich School of Law ( email )

6061 University Ave
Weldon Law Building
Halifax, Nova Scotia B3H4H9

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