Feds ditch discount tax

Photo: The Canadian Press

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.

Late Wednesday, Prime Minister Justin Trudeau weighed in on the issue.

"Let me be blunt: we are not going to tax anyone's employee discounts," Trudeau wrote on Twitter.

"Minister (Lebouthillier) has asked the CRA to fix this."

A spokesman for Lebouthillier said earlier Wednesday that 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," John Power wrote in an email.

"We are deeply disappointed that the agency posted something that has been misinterpreted like this."