Feds ditch memo call­ing for em­ployee-dis­count tax

The Intelligencer (Belleville) - - NATIONAL - ANDY BLATCH­FORD THE CANA­DIAN PRESS

OTTAWA — The fed­eral gov­ern­ment has in­structed the Canada Rev­enue Agency to re­move a con­tro­ver­sial tax pol­icy in­ter­pre­ta­tion that would have seen em­ploy­ees taxed for dis­counts they get at work.

To calm a grow­ing con­tro­versy, National Rev­enue Min­is­ter Diane Le­bouthillier di­rected the CRA on Wednesday to re­move from its web­site the new word­ing at the heart of the de­bate — at least un­til the change has been re­viewed.

Le­bouthillier’s de­ci­sion to re­store the old word­ing came after strong ob­jec­tions from the busi­ness com­mu­nity.

They warned the un­ex­pected rein­ter­pre­ta­tion would lead to new taxes on re­tail work­ers, many of whom earn mod­est wages. In­dus­try groups also said it could cre­ate big ad­min­is­tra­tive bur­dens if em­ploy­ers were re­quired to track staff ben­e­fits.

The con­fu­sion cre­ated by the change ap­peared to sur­prise Le­bouthillier, whose of­fice blamed the CRA for the original de­ci­sion to up­date the word­ing with­out her ap­proval.

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

He said the CRA will hold an in­ter­nal re­view on the word­ing change, which will be fol­lowed by a con­sul­ta­tion on the is­sue with in­dus­try groups. The for­mer word­ing in the agency’s em­ployer’s guide on the is­sue of em­ployee ben­e­fits was to be re­in­stated.

“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.

On Tues­day, Le­bouthillier in­sisted Ottawa was not tar­get­ing re­tail-sec­tor work­ers.

A gov­ern­ment source added Wednesday that the CRA has no in­ter­est in pur­su­ing smaller ben­e­fits ob­tained, for ex­am­ple, by re­tail em­ploy­ees who re­ceive dis­counts on items like cloth­ing be­cause it’s not cost ef­fec­tive for the agency.

The agency’s con­cern is re­ally about in­di­vid­u­als who re­ceive larger, non-mone­tary ben­e­fits that go un­re­ported as in­come, said the source, who was not autho­rized to dis­cuss the mat­ter pub­licly.

One ex­am­ple cited in the CRA’s tax “fo­lio,” which in­cluded the up­dated in­ter­pre­ta­tion, re­ferred to a 2011 Fed­eral Ap­peal Court rul­ing on a case in­volv­ing teach­ers at a pri­vate school. Staff at the school re­ceived 50 per cent dis­counts on tu­ition fees, which at the time amounted to up to $5,000 a year.

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.

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.”

Po­lit­i­cal op­po­nents have also at­tacked the Trudeau gov­ern­ment over the is­sue.

“The Lib­er­als still haven’t taken this ter­ri­ble idea off the ta­ble, but maybe they’re start­ing to re­al­ize that going after low-in­come earn­ers while ig­nor­ing the cor­po­rate elite, is a non-starter for Cana­di­ans,” New Democrat MP Pierre-Luc Dusseault said in a state­ment Wednesday.


National Rev­enue Min­is­ter Diane Le­bouthillier speaks dur­ing ques­tion pe­riod in the House of Com­mons on Par­lia­ment Hill in Ottawa in Septem­ber.

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