Liberal Government Scraps Tax On Employee Discounts Amid Swift Backlash


The updated CRA guidance document for employers, known as a tax folio, states that when an employee receives a discount on merchandise due to their employment, "the value of the discount is generally included in the employee's income".

While initial reports suggested the government would be taxing employee discounts, a spokesperson for National Revenue Minister Diane Lebouthillier said Wednesday afternoon the government was pulling back the new language pending further review and consultation.

The Trudeau government insists that employee discounts will not be taxed despite an updated Canada Revenue Agency document that suggested they will be.

However, a source in her office says the decision to change the wording in the document was made by the CRA without the minister's approval.

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Retail Council of Canada vice-president Karl Littler recently told a parliamentary committee the change could create an "administrative nightmare" for employers who would normally offer retail staffers discounts on goods, or give hospitality workers a free meal. "We are not going to be doing anything to hurt retail workers", he said.

"These are people who work really hard and don't make a lot of money".

A July 2016 update to a guidance document for employers about what employee merchandise benefits are considered taxable came to light earlier this week, prompting concern among mainly retail stakeholders that the CRA's updated interpretation of the law would result in major headaches for employers come tax time because they'd have to claim employee discounts on merchandise that weren't explicitly required to be claimed previously. Indeed, subsection 6 (1) of the act states that income should include the value of "benefits of any kind whatever received or enjoyed by the virtue of the taxpayer's office or employment", with few exceptions. "This document was not approved by the minister and we are deeply disappointed that the agency posted something that has been misinterpreted like this", said a statement. 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. The difference between the price paid and the fair market value of the software should count as income.