I'm from Canada and tips are never put on pay stubs. They must be kept track of manually and included on your income taxes. No one normally does this, and no one normally gets audited.

What OP is saying is that the policy is that if they make below a certain threshold, they do not have to report their tips with work or pay the 7.5%

On average when they do make enough to have to report it, the 7.5% takes it below the threshold to an amount that would not have to be reported and would not need to have 7.5% removed from it.

I don't think it's illegal, we can't really say for sure if this is on purpose from the employer, as well it depends on the server comma the day and the time of day, and the customer. There will be a range between the threshold where it needs to be reported, and another amount where it will be under that first threshold when the 7.5% is removed. Above This range a server can make enough so that even with the 7.5% removed the tip amount would be high enough to have to be reported.