Government backs down on staff discount tax

Wording change on CRA website will be pulled

The federal government appears to be doing away with a controversial tax policy interpretation that would have seen employees taxed for discounts they get at work.

Amid a growing controversy, a spokesman for the National Revenue Minister Diane Lebouthillier said Wednesday that the government will pull the new wording at the heart of the debate from the Canada Revenue Agency website.

He said the CRA made the original decision to change the wording, not Lebouthillier.

“This document was not approved by the minister and we are deeply disappointed that the agency posted something that has been misinterpreted like this,” John Power said in an emailed statement.

The CRA will hold an internal review on the wording change, which will be followed by a consultation on the issue with industry groups, he added.

The former wording in the employer’s guide on the issue of employee benefits was to be reinstated as early as Wednesday afternoon.

The decision to restore the old wording came after strong objections from business associations that warned the change would lead to new taxes on retail

THE AGENCY ISSUED A GUIDANCE DOCUMENT THAT DOES NOT REFLECT OUR ... INTENTIONS.

workers, many of whom earn modest wages.

The industry groups said the new wording would have created significant administrative burdens for employers, who would be required to track employee benefits.

Political opponents also attacked the Trudeau government over the issue.

The controversial update to the CRA documents first appeared in a tax folio and was later added to the agency’s employer’s guide.

The change stated that when an employee receives a discount on merchandise because of their employment, “the value of the discount is generally included in the employee’s income.”

It also said the value of the benefit is “equal to the fair-market value of the merchandise purchased, less the amount paid by the employee.”

However, the updated document noted that no amount will be included in the employee’s income if the discount is also available to the general public or to specific public groups.

“The agency issued a guidance document that does not reflect our government’s intentions and the minister of national revenue has instructed officials to clarify the wording,” Power said.

Lebouthillier insisted in a statement Tuesday that Ottawa was not targeting retail-sector workers.

Karl Littler, vice president of public affairs for the Retail Council of Canada, welcomed the government’s decision to remove the change.

“Obviously, that’s a pretty positive development from our perspective,” Littler said in an interview.

“It does seem to us that there’s some kind of assertion of political oversight over the file at this point at the ministerial level ...

“It doesn’t end the issue because we’ve got to have the consultation process, but it certainly changes things from where they were, which (was) extreme level of uncertainty.”