UPDATE ON THE TAXABILITY OF PHOENIX DAMAGESJanuary 13, 2021
Treasury Board has provided PSAC with a letter from CRA setting out its preliminary view that the general damages in the Phoenix settlement agreement are taxable. This letter, which was prepared at Treasury Board’s request and without PSAC’s input, is not a formal tax ruling and PSAC is contesting this conclusion.
PSAC maintains that general damages paid to all employees for “stress, aggravation, and pain and suffering” and for the late implementation of collective agreements are non-taxable, as CRA has acknowledged other specific damages in the settlement should be treated.
We carefully negotiated an agreement that reflects a wide range of impacts suffered by PSAC members, including the significant emotional toll that the implementation of the Phoenix Pay System had on them. The tax treatment of the general damages should reflect the purpose of that compensation. The letter from CRA contains numerous critical factual errors and misapplies the relevant income tax principles on this issue.
We have communicated with both Treasury Board and the CRA about our concerns and will continue to work to resolve these issues. Our goal is to ensure PSAC members receive the full compensation they deserve and that we avoid any time consuming and complex tax disputes for individual members.
The resolution of these issues is of extreme importance to PSAC and we will continue to update members as we work to bring this to a conclusion. We will also update members as soon as we receive a projected timeline from Treasury Board as to when members can expect to receive their payments.