Feds respond to employee tax uproar Controversial new wording will be removed from website
Thursday, October 12, 2017 Business
The federal government appears to be doing away with a controversial tax policy interpretation that would have seen employees taxed for work discounts.
Amid growing controversy, a spokesman for National Revenue Minister Diane Lebouthillier said Wednesday 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 change, which will be followed by a consultation with industry groups, he added.
The former wording in the employer’s guide on 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 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 update noted no amount will be included in the employee’s income if the discount is also available to the general public or 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 workers.
Karl Littler, vice president of public affairs for the Retail Council of Canada, welcomed the decision to remove the change.
“Obviously, that’s a pretty positive development from our perspective,” Littler said. “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.”
The change was made by the cRa, not national Revenue Minister Diane Lebouthillier, says a spokesperson.