Friday, October 13, 2017

Think yourself lucky you are not taxed on employee discounts

Yet another storm-in-a-teacup concerning Canadian tax law. The Liberals are frantically down-playing a recent announcement that the Canadian Revenue Agency (CRA) wants to tax employee discounts. Justin Trudeau himself is on record as vowing that no such tax will ever be implemented, and that the CRA has drastically overreached itself in even hinting that there might be.
Politicians across the board have been falling over themselves to appear outraged and horrified that staff discounts for department store workers or reduced-price burgers at the end of a fast-food server's shift could ever be considered taxable.
And yet, technically, they most definitely are. As Globe and Mail columnist Tony Keller points out - albeit in a rather wordy, repetitive and long-winded way - the Canadian tax code, like that of most other western democracies, explicitly states that non-cash benefits in lieu of regular wages and salaries should be considered taxable. For example, if an employer gives an employee a $50,000 boat in place of $50,000 salary, it would be, and is, taxable. An employee who receives $500 in free groceries each week is taxed on the taxable benefit accruing. And that is all as it should be: there is, after all, no essential difference between such a benefit and normal earned income.
The only difference between the boat example and the burger example is one of scale and practicability. While the burger should technically be taxed too, the onus of reporting and auditing such a tax would be prohibitive, and the possibilities for the inevitable evasion of such a rule too extensive. The real reason such benefits are not taxed is because it is not worth the cost of collecting, processing and policing such small amounts. What is not clear is just where the cut-off should be - what kind of a discount is too small to be worthwhile taxing and what IS worthwhile - the tax code does not make that clear.
Given that, the outrage that has met the CRA's proposal seems excessive. Those who do benefit from such employee discounts and perks are not being taxed on them for incidental and administrative reasons, it is not a God-given or natural right as some seem to be implying. And they should be very cognizant that others, who receive larger benefits or perks, ARE in fact being taxed. In short, they should think themselves lucky, and not push that luck too far.

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