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Canada Revenue Agency plans to tax employee discounts

Click to play video: 'Should employee discounts be taxed as income?' Should employee discounts be taxed as income?
Should employee discounts be taxed as income? – Oct 10, 2017

An employee perk could soon have a hidden cost.

Canada Revenue Agency plans to start taxing people on their employee discount if it’s not available to the public.

“Who are they going after here? Are they really arguing that the kid flipping burgers down the road here isn’t paying his fair share? Is he really saying that the teenager getting the deal on basketball shoes isn’t paying her fair share? This is crazy,” Todd MacKay, Canadian Taxpayer Federation Prairie Director, said.

Businesses are worried the change will create an administrative nightmare, Marilyn Braun-Pollon, Canadian Federation of Independent Business vice president, said.

“This is something they’ve been able to attract and retain employees with these types of discounts, and also it will also be another tax for lower income Canadians,” she said.

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The tax changes will likely deter some employers from offering a discount, MacKay said.

“A lot of employers will look at this and say ‘look, if I have to do all this paperwork, it doesn’t make sense to give the discount’,” MacKay said. “So instead losing a few bucks through taxes, those kids could lose the whole discount entirely. That becomes a big deal.

“In reality it’s not going to work. If they create this kind of burden on employers, particularly small businesses, they’re just going to take away these benefits and the government’s not going to get taxes on zero benefits,” MacKay said.

MacKay is also concerned that those who work in retail clothing stores who are required to wear company clothes might not be able to afford the bill.

Economics professor Jason Childs said the tax change could increase employee theft.

“If you’re a restaurant worker, and you’re like, ‘I can’t afford to pay the income tax on the employee discount, I’m just going to swipe this burger on the way by,’ that’s a problem,” he said.

Childs is also concerned the government will be taxing a benefit where cash didn’t change hands.

“How am I supposed to give a share of the value? If I could mail a quarter of my cheeseburger to Justin Trudeau to pay the tax, that would be fine,” Childs said. “But he doesn’t want a quarter of my cheeseburger, he wants cash. So I’ve got to take cash from somewhere else. That means I have to reduce spending elsewhere.”

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The extra paperwork will likely be a bigger burden for small businesses, making it more difficult for them to compete, Childs said.

“It creates what’s called economies of scale and it’s really just handing the keys to the kingdom to large multi-national and national corporations,” he said.

Opposition Leader Andrew Scheer calls the change mean-spirited and petty.

“You’ve got a government that’s desperate for cash, they’ve got massive deficits with no plan to get back to balanced budgets, and they’re literally going after everything,” Scheer said.

In a statement, Revenue Minister Diane Lebouthillier did not say she would change or even review this new interpretation though she did say she was not targeting those in the retail sector and would work to clarify the issue.

The tax changes are expected to take effect Jan. 1.

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