PIPSC submits comments on draft legislative proposals related to salary overpayments
PIPSC recently submitted comments to Finance Canada’s public consultation into draft legislative proposals related to salary overpayments.
The Institute has assessed whether, and/or the degree to which, the proposed changes will assist its members facing negative tax consequences arising from Phoenix pay overpayments.
Overall, it is our view that the proposed amendments will assist Institute members with some of the negative tax consequences they have faced resulting from overpayment; however we do have a few concerns, as outlined below.
- Condition of relief
The conditions set out in s. 153(3.1), that overpayments are as a result of “administrative, clerical or system error”, require clarification that all Phoenix-related errors are captured by this definition.
- Election of employer
Section 153(3.1)(c)(i) requires that the employer elect in a prescribed form to have section 153(3.1) apply to the excess amounts. This provision requires unilateral action of the employer, failing which, the employee may not avail themselves of the relief, and an employee would have to repay the gross amount to the employer and then recover overpaid deductions from the CRA. Similarly, the three year window will require employee to negotiate repayment arrangements with their employers under this deadline. This may put time pressure in some individual cases, and indirectly puts a form of leverage in the hands of the employer. Although consistent with current ITA rules and CRA policy, these two conditions are not consistent with the “maximally flexible” repayment approach previously directed by the Treasury Board. It places a condition at the discretion of the employer, who may unreasonably refuse to cooperate.
In this context, the Institute believes that the employer should be required to apply s. 153(3.1) where an employee requests it.
- Length of arrangement for repayment
An employee is required to have made repayment or to have made arrangements to make repayment within the end of the third year following the calendar year in which the overpayment was made. Section 153(3.1)(c)(ii) states that an individual (employee) must have “repaid, or made an arrangement to repay” the total excess payments less the excess amount. The Institute is seeking confirmation of its interpretation of that condition, that the repayment schedule itself must be in place within the three year window, but that the schedule of repayments may exceed that window. This will accommodate members who have multiple or large overpayments to repay. This treatment would be consistent with the Treasury Board directive that employers make “maximally flexible” arrangements with their affected employees.
(4) Unknown Further Criteria
The Minister can make additional criteria by regulation which may narrow the scope of s. 153(3.1).
We will continue to monitor these important legislative changes and will update you on developments as they occur.