Government moves to deny Phoenix victims full compensation: Public Service Alliance of Canada

THE Public Service Alliance of Canada said on Thursday that the federal government is recklessly moving ahead with its plan to tax Phoenix general damages, clawing back the compensation owed to more than 140,000 federal public service workers impacted by the pay debacle.  

It accused the government of refusing to work with CRA and the PSAC to clarify errors in information that CRA needs to revise its initial opinion on the taxability of Phoenix damages; all while moving ahead with reduced compensation to its employees. 

“This is blatant interference by the Liberal Government and rubs salt in the wounds of workers who’ve already endured five years of Phoenix pay problems,” said Chris Aylward, PSAC President. “It is completely unacceptable for this government to deny CRA the information they need before issuing the Phoenix damages payments.” 

The Treasury Board provided incorrect information to CRA when it issued an initial opinion about the tax implications of the Phoenix settlement. When these errors were pointed out by the PSAC, particularly with regards to general damages for pain and suffering, CRA agreed to re-issue an opinion if the Treasury Board joined the PSAC in clarifying the facts.  

The Treasury Board is refusing, however, to sign a joint statement of facts that sets the record straight and is therefore blocking CRA’s ability to review its opinion on taxability, according to the PSAC.   

“On the very week of Phoenix’s 5th anniversary, the government has found yet another way to hurt PSAC members who have already lost so much because of years’ worth of pay problems,” said Aylward. 

The PSAC said it carefully negotiated an agreement that emphasizes the ‘stress, aggravation, pain and suffering’ PSAC members have experienced because of the Phoenix Pay System. The tax treatment of the general damages should reflect the purpose of that compensation – and pain and suffering of this type has historically been tax exempt.  

The Treasury Board’s interference in the tax process could ultimately lead to thousands of unnecessary individual tax challenges and lengthy retroactive payments for PSAC members. 

Already, more than 31,000 PSAC members have sent letters to the government, urging them to stop the taxation of Phoenix damages without a revised opinion on taxability from CRA. 

Background: The PSAC reached a settlement on Phoenix damages in July 2020 with Treasury Board to compensate more than 140,000 members impacted by the Phoenix pay system. The Phoenix damages agreement replaced the five days of leave provided to other bargaining agents with a $2,500 lump sum payment to be distributed to all of the eligible PSAC members who have been directly or indirectly impacted by the Phoenix pay system.