Feds ditch memo calling for controversial employee-discount tax, pending review

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.

Just Posted

WATCH: Finishing touches being put on Servus Arena

The finishing touches are being put on Red Deer’s newest arena. The… Continue reading

Suspect in police chase in court

RCMP opened fire twice while trying to arrest suspects in vehicle chase in October

New temporary beds will immediately help Red Deer homeless

The 20 new temporary beds approved for Safe Harbour’s warming centre cannot… Continue reading

Red Deer RCMP are seeking man posing as a police officer

Suspect is large, in his 30s, with red hair and beard

Update: “Someone knows something” – police

Motorist dies near Ponoka after loose tire collides with vehicle near Ponoka

Red Deer police seize rifles and shotguns from storage locker

A man and a woman facing nearly 200 charges after 29 firearms seized last month

Notley criticizes MLA who fired staffer after sex harassment complaint

Notley says if Jason Nixon was her house leader he’d be out of a job immediately.

Red Deer needs to find a solution to syringe debris: city manager

City will consider the problem during the 2018 operating budget talks

WestJet Christmas video turns children’s wishes into reality

This year’s annual video took a new spin on the 12 days of Christmas

VIDEO: Replay Red Deer Dec. 10

Watch news highlights from Red Deer and Central Alberta

VIDEO: B.C. to end geographic area rent increases, close fixed-term lease loopholes

Both clauses allowed landlords to raise rents above the max annual allowable rent increase

UPDATE: Train hits hydro pole, causes outage near Deltaport

No injuries reported but traffic in and out of Deltaport is blocked

A Red Deer daycare coordinator wins provincial award of excellence

Nicole Morrell is a coordinator at Johnstone Daycare

Holiday shopping season picking up in Red Deer

With 18 shopping days left until Christmas, Red Deer businesses are cautiously… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month