Feds undo change that would tax employee discounts
OTTAWA— 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 spokesperson for 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.
Spokesperson John Power said the CRA made the original decision to change the wording, not Lebouth- illier. “This document was not approved by the minister and we are deeply disappointed that the agency posted something that has been misinterpreted like this,” he 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, Power 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 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.
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 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 gov- ernment’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 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.”