On or before April 30, 2001 you’ll be following that yearly ritual and filing your income tax return. If you received pay equity payments as a result of the agreement between the PSAC and Treasury Board, read on.

Any payments you received which covered back pay or recalculations of overtime, etc. are considered income and therefore subject to tax. But what about the interest the government paid on the money you were owed?

PSAC has consulted with its legal counsel and is taking the position that the interest you received should not be taxed. However, the Canada Customs and Revenue Agency (CCRA) may not agree with our position.

If you want to argue that your interest payment shouldn’t be taxed you may wish to consider the option outlined below.

The union intends to pursue a test case in the Tax Court. We will be approaching the Minister of Revenue to coordinate the case so that each member does not need to file a separate appeal. Our aim is to make the test case binding and applicable to all other members in the same situation.

When you fill in your tax return, include the amount your received in interest in your calculation of taxable income. Clearly indicate on the tax form that you are paying this tax "without prejudice" and attach a statement outlining the reason for your position as follows:

I have received the amount of $___________ for interest on the monies due to me under the federal government’s pay equity settlement. I take the position that such monies are not subject to tax. However, on a without prejudice basis, I have included this amount in my calculation of taxable income and do not hereby waive my right to appeal against any assessment based upon this income being taxable.

Your income tax return is a calculation, on your part, of the taxes you owe the government in any given year. Your return will be assessed to determine whether or not it is accurate. Normally, this assessment is made within 90 days of you filing your return.

You will then receive your Notice of Assessment. This is the same notice that you receive every year, outlining any discrepancies found in your return and letting you know if you owe any more tax.

The Notice of Assessment will accept that the interest portion of your award is taxable income. As a result, the Notice of Assessment will include tax owing on the interest portion.

Filing an objection to the Assessment

Within ninety days of receiving the Notice of Assessment, you must file an objection with the CCRA if you intend to challenge the assessment of the tax owing on your interest payment. This is a simple procedure, and merely involves writing to the Minister stating your reasons for disagreeing with the assessment. You can use Form T400A "Notice of Objection", available on the CCRA website (http://www.ccra-adrc.gc.ca/E/pbg/tf/t400abq/README.html), but this is not mandatory.

In your Notice of Objection, you should include a statement that reads as follows:

I object to the Minister's assessment of $_____________, which represents presettlement interest on the monies due to me under the federal government's pay equity settlement, as taxable income. I take the position that such monies are not subject to tax and therefore ought not to be included in the calculation of my taxable income. The interest on this back pay is compensation for the discrimination suffered by myself and as such is not taxable. In addition, given the treatment of other similar types of presettlement interest, such as interest on wrongful dismissal awards, it is inappropriate to tax this type of settlement interest which is of the same nature.

PSAC maintains that, as the interest is compensation for discrimination, it should not be taxable. The union intends to pursue this matter though the tax appeal process in order to ensure that members affected may have the benefit of a ruling which deems the interest to not be taxable.

While each individual member is entitled to object and pursue an appeal on her or his own, PSAC would like to identify a test case with which to proceed. Accordingly, when you file your objection, please advise PSAC so that we may identify a test case and coordinate its impact upon other persons. A copy of your objections should be sent to: PSAC Representation Section, Suite 201, 233 Gilmour Street, Ottawa, Ontario K2P 0P1.

Needless to say, a number of members could potentially file objections and it will be in everyone's best interest to proceed with one appeal in an orderly and focussed fashion.

Once the CCRA receives your objection, one of three things can happen. The government can void the Notice of Assessment (in other words, agree that you don’t have to pay the tax on your interest payment), make changes to the Notice of Assessment or confirm that you have given no valid reason for the government to change its position that you owe the tax.

If you receive a Notice of Confirmation, or if the CCRA fails to respond to your objection within 90 days, the next step is an appeal to the Tax Court. At this point, you are asked to again contact the PSAC and advise us of the decision you’ve received. Send a copy of the decision to: PSAC Representation Section, Suite 201, 233 Gilmour Street, Ottawa, Ontario K2P 0P1.

As mentioned earlier, PSAC intends to approach the Minister of Revenue and coordinate an appeal which will allow this matter to be dealt with in the Tax Court on a test case and binding basis so that each person does not need to pursue a separate appeal.