When an individual acquires a share under an employee stock purchase plan, and pays less for the share than would an ordinary investor acquiring an identical share at the same time on the open market, the Income Tax Act treats the difference as a taxable employment benefit.
The fact that an individual acquires company shares under an employee stock purchase plan at a discount is clearly a benefit that the individual enjoys by virtue of his or her employment status. The taxation of such benefits ensures that the tax system treats all financial benefits received by virtue of one’s employment–whether paid in cash or in some other form–on a fair and equitable basis.