The Liberal Government of Prime Minister Justin Trudeau has created a new controversy with a proposal to tax the discounts many employees receive at their place of work – a move that could impact as many as two million people who work in Canada’s retail sector.
Opposition politicians, business owners and industry associations cried foul after the Canada Revenue Agency (CRA) issued guidelines to business owners that could pave the way for new taxes on merchandise purchased with an employee discount – such as those given to workers in the retail sector who frequently get price breaks on clothes, shoes and other items sold where they work.
In a document posted on its website, CRA said that discounts for merchandise should be treated as a “taxable benefit.” The tax collection agency said that when an employee receives a discount on merchandise — as a benefit of their employment — the value of the discount should be included in the employee's income at tax time. According to CRA’s website, the change is effective as of the current 2017 tax year, along with another major change to the tax code — the elimination of the public transit tax credit.
The Retail Council of Canada, which represents Canadian retailers large and small, was quick to condemn the new proposal, saying it would be a “potentially horrendous burden” for both employers and employees who will have to maintain reams of paperwork to keep track of discounts and taxes owing.
This latest tax controversy follows on Ottawa’s proposal to close tax loopholes that it says give small-business owners an unfair tax advantage – a move that has drawn criticism from groups ranging from dentists to farmers. Yet, federal ministers continue to defend tax changes that are drawing increasing condemnation across the country. Late Tuesday, National Revenue Minister Diane Lebouthillier said there have been no changes to the laws governing taxable benefits to retail employees, and that Ottawa is not singling out any one sector of the economy.
Canada's two million retail workers often receive generous discounts at their place of work, with some companies offering as much as 50% off regular prices. Such discounts are viewed as a perk to working in a sector that offers low pay, irregular work hours and few other benefits. The difference between the fair market value of the merchandise purchased and what the employee paid is what will have to now be claimed on a tax return. For example, if an employee buys a $100 sweater for $50, then the employee would have to claim the $50 difference as income and pay tax on it.
Pierre Poilievre, the Conservative finance critic, said it's “insanity” that workers will now have to document all the discounts they receive on merchandise each year under the new interpretation of the tax code.
"Hardworking, low-income, wage-earning retail workers should not have to pay tax on the small employee discounts they receive. This tax will actually cost more to administer and enforce than it will raise in revenue but it's perfectly consistent with Justin Trudeau's uncontrollable addiction to spending,” said Mr. Poilievre. “He's running out of other people's money and now he's asking CRA to find him more.”
