Amid uproar, feds back off employee-discount tax and call for consultations

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Amid uproar, feds back off employee-discount tax and call for consultations

Employers could face a fresh tax headache - or have to put an end to employee discounts - if the Canadian Revenue Agency enforces tax on workplace freebies.

The CRA had said on its website that when an employee receives a discount on merchandise, the value of the discount should be included in the employee's income at tax time. Later on Wednesday, Prime Minister Justin Trudeau told his Twitter followers that his government has no intention to "tax anyone's employee discounts".

Those organizations might look to scrap those discounts rather than face the challenge of tracking who owes what.

In the contentious document at the heart of this, the CRA advised employers that, in certain instances, employee discounts count as part of income and the Agency considers them fair game to tax. There have been no changes to the laws governing taxable benefits to retail employees.

The guidance provided the following example: Employees receive a large discount that's not available to the general public to buy software for personal use from their employer's supplier.

But, if the store that offers employees a 60 per cent discount, also offers the public a 60 per cent off sale at any point in that year, the employer would no longer be required to report it.

In a statement sent to the media in Ottawa, Minister of National Revenue Diane Lebouthillier's press secretary said the minister is "deeply disappointed" at the bureaucrats who came up with the plan to tax employee discounts.

When did the change happen, and why?

There has been some confusion around the CRA's update on employee discounts and if it is a new law for retail workers. The update was prompted by the tax court ruling in 2011 that the CRA's old guidance for employers was inaccurate and had to be updated.

Hopefully that clarification continues heading into the 2018 tax season.

What will the impact be?

However, they say retail sector employers shouldn't expect to find themselves subject to a CRA audit over their reporting on employee benefits. "It's not clear what they're trying to do", says Littler, noting the administrative burdens of complying with the guidance.

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