MPs, business groups, labour unions make suggestions for 2018 fiscal year
Between now and the end of spring, the federal government and most provinces/territories will release their revenue and spending plans for the fiscal year.
Depending on what happens, payroll professionals may have to implement income tax rate changes, new taxable benefit rules, minimum wage adjustments or other payroll-related tax changes.
Of all the budgets, the federal document often has the most payroll-related changes since Ottawa is responsible for the federal Income Tax Act, the Canada Pension Plan (CPP), employment insurance (EI), and source deduction remittances and reporting.
While the Finance Ministry mostly keeps the content of the federal budget secret until the finance minister tables it (no date has been announced yet), the House of Commons Standing Committee on Finance recently released a series of budget recommendations. The wish list is based on submissions it received last summer and fall during pre-budget consultations.
The 92 recommendations cover a variety of topics, some of which could affect employers. They include:
• The government should introduce pay equity legislation for federally regulated workplaces and work with the provinces/territories, as well as the private sector, to close the gender pay gap in Canada.
The federal government has said it plans to table “proactive” pay equity legislation by the end of 2018. A proactive approach focuses on ensuring that employers are complying with pay equity rules rather than relying on employees to make complaints about wage discrimination.
During pre-budget consultations, groups such as the Canadian Labour Congress (CLC) called for pay equity changes.
“The 2017 budget noted that Canada has one of the highest gender pay gaps among OECD countries. However, the budget did not include any measures to ensure equal pay for work of equal value,” said the CLC.
“Budget 2018 should announce that the federal government will introduce pay equity legislation immediately, as per the recommendations of the 2016 Report of the Special Committee on Pay Equity,” it said.
• The government should review the Social Security Tribunal and consider restoring the EI Boards of Referees, the EI Umpire, the CPP and Old Age Security (OAS) Review Tribunals, and the Pensions Appeals Board. The previous government replaced those bodies with the Social Security Tribunal in 2013.
Labour groups have complained that the tribunal is ineffective and that it dehumanizes the appeals process.
“This tribunal system is poorly structured, poorly managed, and does not respect basic notions of fairness and justice,” the Canadian Union of Public Employees told the committee.
• The federal and provincial/territorial governments should work together to introduce a national prescription drug program.
• The government should make the Temporary Foreign Worker program more efficient. It should also make it easier for employers in good standing to hire workers under its Seasonal Agricultural Worker Program.
• The government should work with stakeholders and make targeted investments to strengthen apprenticeship and training programs to reflect economic changes, including supporting green trades.
The committee did not recommend all of the suggestions that business and labour groups put forward. Among the recommendations not accepted were the following:
• The Confédération des syndicats nationaux (CSN),a Quebec-based trade union organization, called for the government to reduce a deduction that individuals may claim for stock option taxable benefits. Employees who receive stock option taxable benefits can claim 50 per cent of the taxable benefit under certain circumstances.
•Restaurants Canada suggested that the government implement a 12-month EI premium holiday for businesses that hire young people, as promised during the 2015 election campaign.
• The Canadian Chamber of Commerce recommended that the government reduce EI premiums to $1.49 per $100 of insurable earnings, as the previous government promised to do as of 2017.
• The Canadian Federation of Independent Business called for changes to the way EI premiums are structured. It recommended either a 50/50 split between employers and employees or a permanently lower rate for small businesses.
• TheQuebec Employers’ Council suggested an EI contributions credit for training expenses, focused on formal training associated with new investments.
• The CLC called for the government to increase the EI benefit rate from 55 per cent of insurable earnings to at least 60 per cent. It also recommended that there be one national eligibility standard for regular benefits, set at 360 hours. The current threshold to qualify for regular benefits ranges from 420 hours to 700 hours, depending on the economic region of the country.
• An organization called Canada Without Poverty recommended that the government set national wage standards with a goal of implementing a living wage, indexed to the consumer price index. The CLC also called on the government to implement a federal minimum wage, something it has not had since the 1990s.
• The CLC recommended that the government change the rules for EI sickness benefits to help workers coping with episodic or long-term illnesses by allowing them to top up the benefits.
Whether Finance Minister Bill Morneau accepts any of the recommendations from the committee or the other groups will not be known until he releases the 2018 budget. So far, he has revealed little about what may be in the budget other than providing some general themes.
In an interview with the Canadian Press in December, Morneau said he was considering budget measures that would help women achieve greater economic prosperity, assist workers in obtaining the skills needed for increasingly automated workplaces, and use science to benefit the economy.
He did not say whether the government would make any changes affecting payroll deductions, beyond the CPP measures already planned for 2019.
Prior to last year’s budget being released, there was speculation that the government would implement taxable benefit changes aimed at making the tax system fairer. Media attention focused on the possibility that employer-paid premiums for employee health and dental plans would become taxable.
However, when Morneau tabled the budget, he ignored health premiums and proposed changes to other taxable benefits and allowances. The changes included eliminating a deduction that employees could claim for taxable home relocation loans that they received from their employer, beginning in 2018.
He also announced that in 2019, the government would eliminate tax exemptions for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office-holders.
Further changes to taxable benefits could be included in this year’s budget. Last fall, there was a lot of publicity around possible changes to the tax treatment of merchandise discounts provided to employees.
During the finance committee’s consultations, the Retail Council of Canada said it was worried that the Canada Revenue Agency (CRA) would start treating employee discounts as a taxable benefit in 2018. The change would have been a departure from the CRA’s long-standing practice of allowing employers to sell merchandise to their employees at a discount without workers incurring a taxable benefit, unless the selling price was below cost.
In response, the government said the rules for merchandise discounts would not change. The CRA later announced that it would review its Income Tax Folio S2-F3-C2, Benefits and Allowances Received from Employment, which made reference to the rule change.
