14 July 1997 Income Tax Severed Letter EM714456 - Union levies on salary paid under collective agreement

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

		July 14, 1997

J. H. Ivey	HEADQUARTERS
	Manager,              	John Oulton
	Policy & Technical Services			957-2141
	Trust Accounts Division

	Attention: B. Laroque
		971325

Taxation of various payments that are part of a wage package

This is in reply to your memorandum of May 16, 1997, in regard to an inquiry from the XXXXXXXXXX Tax Services Office on the above subject.

The TSO has sought your assistance in responding to an enquiry that it received from XXXXXXXXXX (XCo). XCo's employees are unionized under the "XXXXXXXXXX" Under this agreement, XCo pays a total wage package that includes hourly wages and vacation as well as other payments to the union for: provincial pension, welfare, dental, sub and training funds (the other benefits). Additionally, XCo makes a number of payments over and above the wage package which are described as: contributions to local funds, industry promotion, employer dues and training funds (the employer payments).

According to the hand written note accompanying your submission, the main concern is with the "sub" payment. After our enquiry about more details, the TSO contacted officials in XCo. Based on information obtained by XCo from the union, the "sub" was described as a fund that the union drew from when employees were laid off.

XCo has included the "sub" amount on each employee's T4 as a taxable benefit (as well as the other amounts that form part of the "other benefits"). However, the union does not want the "sub" amount included on the annual T4 as the entire amount goes into a (union managed) fund and paid out later. The union itself wants to issue a T4A that relates to the "sub," presumably for the year in which it makes payments to the employees.

Based on the limited information available regarding the other benefits, including the "sub," it is our view that the employer has correctly included those amounts on the T4 for the year in which the employee earned them. It is our view that these amounts are either part of the employees' salary, wages or other remuneration for the year under subsection 5(1), or are taxable benefits under paragraph 6(1)(a) of the Act. Since it is likely that there are a number of issues that may require action by Audit, including a review of the employer payments, we suggest that you coordinate your response to XXXXXXXXXX with the Audit Directorate.

We hope that the foregoing comments are helpful.

John F. Oulton
for Director
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch