PSAC contesting CRA determination that payments of Phoenix damages are taxable

Members of the Public Service Alliance of Canada affected by the Phoenix Pay System rally on Laurier Avenue, during a protest on the three year anniversary of the launch of the pay system, in Ottawa on Thursday, Feb. 28, 2019. THE CANADIAN PRESS/Justin Tang

OTTAWA - The country's biggest civil service union says it will contest a decision that would see government workers pay tax on money they receive as part of a settlement reached over long-standing problems with their paycheques.

The federal government and the Public Service Alliance of Canada (PSAC) reached a deal last summer to compensate the union's 140,000 members affected by failures in the Phoenix pay system.

The agreement would see workers paid up to $2,500 in general damages for four years of pay problems including delays, overpayments, underpayments or lack of pay.

A letter provided to PSAC by the Treasury Board Secretariat says the Canada Revenue Agency has concluded those payments are taxable.

The union says the letter is not a formal tax ruling and will dispute it on the basis that the CRA has determined that other specific damages in the settlement are non-taxable.

Treasury Board also announced Thursday that it has launched a new claims process to compensate current and former employees who experienced severe personal or financial impacts as a result of issues with the Phoenix pay system.

The new process was called for as part of a separate agreement reached in June 2019 with other unions to compensate approximately 121,000 current and 25,000 former employees.

This report by The Canadian Press was first published January 14, 2021.

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