HUMA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Human Resources Development and the Status of Persons with Disabilities

EVIDENCE

CONTENTS

Thursday, November 21, 2002

Á

1110

The Chair (Mrs. Judi Longfield (Whitby—Ajax, Lib.))

Mr. Serge Nadeau (Director, Personal Income Tax Division, Department of Finance)

Á

1115

The Chair

Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency)

Á

1120

Á

1125

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

Á

1130

Mr. Serge Nadeau

Á

1135

Ms. Carolyn Bennett

Mr. Serge Nadeau

Ms. Carolyn Bennett

Mr. Serge Nadeau

Ms. Carolyn Bennett

Mr. Serge Nadeau

The Chair

Mr. Serge Nadeau

The Chair

Mr. Larry Spencer (Regina—Lumsden—Lake Centre, Canadian Alliance)

Á

1140

Mr. David Miller

Mr. Larry Spencer

Á

1145

Mr. Serge Nadeau

The Chair

Ms. Raymonde Folco (Laval West, Lib.)

Á

1150

Mr. Serge Nadeau

Mr. David Miller

Ms. Raymonde Folco

Mr. Serge Nadeau

Ms. Raymonde Folco

Mr. Serge Nadeau

Á

1155

Ms. Raymonde Folco

The Chair

Ms. Raymonde Folco

Mr.. Serge Nadeau

The Chair

Ms. Madeleine Dalphond-Guiral (Laval Centre, BQ)

Â

1200

The Chair

Mr. Serge Nadeau

Ms. Madeleine Dalphond-Guiral

Mr. Serge Nadeau

Ms. Madeleine Dalphond-Guiral

Mr. David Miller

Â

1205

The Chair

Mr. Eugène Bellemare (Ottawa—Orléans, Lib.)

Â

1210

Mr. David Miller

Mr. Eugène Bellemare

Mr. David Miller

Mr. Eugène Bellemare

Mr. David Miller

Â

1215

Mr. Eugène Bellemare

Mr. David Miller

Mr. Eugène Bellemare

Mr. David Miller

Mr. Eugène Bellemare

Mr. David Miller

M. Eugène Bellemare

Â

1220

The Chair

Ms. Wendy Lill (Dartmouth, NDP)

Mr. Serge Nadeau

Â

1225

Mr. David Miller

Ms. Wendy Lill

Mr. David Miller

Â

1230

The Chair

Mr. Raymond Simard (Saint Boniface, Lib.)

Mr. David Miller

Â

1235

The Chair

Mr. Norman Doyle (St. John's East, PC)

Mr. Serge Nadeau

Mr. Norman Doyle

Mr. Serge Nadeau

Mr. David Miller

Â

1240

Mr. Norman Doyle

Mr. David Miller

Mr. Norman Doyle

The Chair

Ms. Carolyn Bennett

Mr. Serge Nadeau

Ms. Carolyn Bennett

Mr. Serge Nadeau

Ms. Carolyn Bennett

Â

1245

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

Ms. Carolyn Bennett

Mr. David Miller

The Chair

Mr. Serge Nadeau

Ms. Carolyn Bennett

Mr. Serge Nadeau

Ms. Carolyn Bennett

The Chair

Mr. Serge Nadeau

Â

1250

The Chair

Mr. Larry Spencer

The Chair

Mr. Larry Spencer

Mr. Serge Nadeau

Mr. Larry Spencer

Mr. Serge Nadeau

Mr. Larry Spencer

Mr. Serge Nadeau

Mr. Larry Spencer

Mr. Serge Nadeau

Mr. Larry Spencer

Mr. Serge Nadeau

Â

1255

Mr. Larry Spencer

Ms. Kei Moray (Chief, Charities, Department of Finance)

Mr. Larry Spencer

Ms. Kei Moray

The Chair

Mr. David Miller

The Chair

Mr. David Miller

The Chair

---

CANADA

Standing Committee on Human Resources Development and the Status of Persons with Disabilities

---

NUMBER 002

l

2nd SESSION

l

37th PARLIAMENT

---

EVIDENCE

Thursday, November 21, 2002

[Recorded by Electronic Apparatus]

Á  (1110)  

[English]

    The Chair (Mrs. Judi Longfield (Whitby—Ajax, Lib.)): Good morning, ladies and gentlemen. I apologize for the tardy start. We share our room with another committee, and I think those of you who were here just before 11 realize that the other committee still had to depart and we had to reorganize. I'm pleased to see all of you here this morning.

    When we initially added this to our agenda, we hadn't expected a vote in the House yesterday on this very issue. We originally intended that you make some comments on the government response to the subcommittee's report. We know, therefore, what you might have been saying to us before the vote has changed somewhat.

    We also appreciate that because you come from the department, you don't set policy. So matters directed to you concerning what the next step will be perhaps you're not going to be able to answer. I think all members of the committee would like to know a little more about the process. Perhaps you'll find questions directed to that.

    Without any further remarks on my part, I would like to welcome the witnesses. From Canada Customs and Revenue Agency, we have David W. Miller, who is the assistant commissioner, Assessment and Collections Branch, and Kathy Turner, the director general, benefit programs directorate, Assessment and Collections Branch. We also have with us, from the Department of Finance, Serge Nadeau, who is the director of the personal income tax division, Tax Policy Branch, and Kei Moray, chief, charities, personal income tax division, Tax Policy Branch.

    We'll hear from the Department of Finance first.

[Translation]

    Mr. Serge Nadeau (Director, Personal Income Tax Division, Department of Finance): Thank you, Madam Chair and committee members. On behalf of the Department of Finance, I would like to thank you for this opportunity to discuss recent developments relating to the Disability Tax Credit program.

[English]

    As you are all aware, there have been a number of distinct developments relating to the DTC in recent months. Unfortunately, public discussion and media coverage surrounding these developments have often mixed these developments together, which has led to a fair amount of confusion. These developments are the March 2002 report of this committee and the government response to the report tabled in August; proposals intended to clarify the eligibility criteria for the DTC in response to a recent court decision; recent work by the CCRA on the DTC application; and the review by the CCRA of pre-1997 DTC claims confirming continuing credit eligibility.

    I will focus my remarks on the government response and the proposals to clarify the eligibility criteria for the DTC. I understand that my colleagues from CCRA will speak to you about the other developments.

    The response to the committee report was tabled on August 21, 2002, in accordance with the requirement that government response to parliamentary committee reports be provided within 150 days of the tabling of such reports. The finance department had the lead in preparing the response, but there were extensive consultations with other departments, in particular the CCRA, HRDC, and central agencies. Like all other government responses to committee reports, the response was approved by cabinet.

    As you are aware, the government is taking action on some of the recommendations made in the report. In particular, in response to recommendation 15, the Department of Finance will initiate an evaluation of the DTC when kay data become available. In addition, in response to recommendation 7, the Canada Customs and Revenue Agency will establish a new permanent administrative advisory committee on visibility to ensure ongoing consultation on administrative issues. As for the committee's recommendations concerning the eligibility criteria for the DTC, the Department of Finance is investigating them in the context of the intent of the credit, which is to provide assistance to those individuals who suffer from a severe and prolonged mental or physical impairment. As in the past, all committee recommendations will be given serious consideration in developing policy options.

    Let me turn now to the draft amendments to the DTC eligibility criteria proposed by the Minister of Finance on August 30 of this year. These amendments were not part of the government's response to the committee report. They were proposed in response to a Federal Court decision that would have broadened the eligibility for the DTC far beyond its policy intent, which is to provide assistance for those individuals who suffer from a severe and prolonged mental or physical impairment. As you know, in March 2002 the Federal Court of Appeal rendered a decision that would expend eligibility for the DTC to individuals who, because of food allergies or similar medical conditions, must spend an inordinate amount of time to find, procure, or prepare suitable food. Such an expansion of eligibility to individuals with impairments of a less severe nature than the credit is intended for would result in fewer resources being available to individuals with a severe and prolonged mental or physical impairment.

    Inevitably, targeting eligibility for the DTC involved the difficult task of identifying those most in need. Indeed, the objective of the amendments proposed on August 30, 2002, was not to reduce government support for persons with disabilities, but rather to ensure that this support continues to be provided to those individuals with a severe and prolonged mental or physical impairment. In particular, the amendments were designed with a view to ensuring that no one who prior to the recent court decision qualified for DTC in accordance with this policy intent would be disqualified. The government is currently in the process of organizing consultations with various groups on the appropriate response to the Court of Appeal decision.

    In closing, I would like to reiterate our appreciation for the standing committee's, in particular the subcommittee's, contribution to our knowledge and understanding of issues facing persons with disabilities. I hope this discussion has helped clarify some of the recent important developments relating to the disability tax credit.

    Thank you.

Á  (1115)  

    The Chair: Thank you, Mr. Nadeau.

    Mr. Miller.

    Mr. David Miller (Assistant Commissioner, Assessment and Collections Branch, Canada Customs and Revenue Agency): Thank you very much.

    Madam Chair and members of the committee, on behalf of the Canada Customs and Revenue Agency, I want to thank you for the opportunity to discuss CCRA's administration of the disability tax credit program, especially in light of the events of the last two days. What I would like to do is focus on two key areas that are a result of the recommendations in that report, the CCRA's ongoing consultative process and our review of the disability tax claims that were accepted between 1985 and 1996.

    As you know, one of the recommendations in the report was for a new consultative process, which, in the words of your report, had to be meaningful. The process had to be transparent, and it had to encourage input from individuals with disabilities, and also from health professionals. In May 2002 the first consultative meeting was held with representatives of major associations with an interest in the federal government's disability agenda. At that meeting it was agreed that we should begin by focusing on how to make the disability tax credit application form easier to understand and use, especially with regard to mental impairments. At the same meeting the CCRA emphasized that areas of potential change had to be limited to how the CCRA administers the Income Tax Act. It is the Income Tax Act that defines how the DTC functions, and there have been no recent changes to the act related to that program.

    It was similarly important that all participants in the consultations, the CCRA included, respect the fact that two key viewpoints had to be considered within the legislated requirements of the Income Tax Act, the views of individuals who benefit from the DTC and the perspective of the medical practitioners who are required to complete the DTC application form. In respect of the current form, I should point out that except for those changes necessary to reflect new legislation, it is essentially the same form that has been used since 1996 by over half a million applicants.

    This summer the CCRA held two meetings with groups representing persons with disabilities and another two meetings with groups representing medical practitioners. At the end of August we presented a first draft of a revised DTC application form. Participants were asked to circulate it within their organizations and provide additional feedback within a month. In early September Minister Caplan also sent a copy of the draft form for comments to your Subcommittee on the Status of Persons with Disabilities.

    The volume and depth of comments made it clear that further review and consultation were needed. Rather than rushing to produce a new form for the 2003 tax filing season, Minister Caplan has instructed us to continue consultations and to produce a redesigned form following that process. This means the existing form will be used for the upcoming year. Furthermore, Minister Caplan had previously instructed CCRA officials that no new administrative reviews are to take place until these consultations and changes are completed. This, of course, is a direct response to recommendation 2 of the report.

    Minister Caplan also confirmed that the CCRA will establish a new, permanent administrative advisory committee on disability to ensure ongoing consultations on administrative issues. I think there are some very interesting ways we could go about that that I'd be happy to discuss with the committee.

Á  (1120)  

    The CCRA administers the DTC program according to very specific legislative criteria that, as you know, are contained in the Income Tax Act. Our responsibility is to ensure that all eligible individuals receive the amount they're entitled to under the legislation. The Income Tax Act states that to be eligible for the DTC, an individual must have a severe and prolonged mental or physical impairment. Furthermore, the impairment must have the effect of markedly restricting the individual's ability to perform a basic activity of daily living. The restriction must exist even with the use of medication or devices such as hearing aids or prosthesis, and the restriction must persist all or substantially all of the time over a continuous period of at least 12 months. As defined in the legislation, basic activities of daily living are limited to seeing, walking, hearing, speaking, feeding and dressing, eliminating, and perceiving, thinking, and remembering. Some people, though not all, may also be eligible if they need life-sustaining therapy to support a vital function.

    As you can see, the legislative criteria are very strict. Nonetheless, one common misconception is that everyone who has a disability qualifies for the DTC. In fact, as I've just described, the DTC is not about whether or not an individual has a disability, but about how the disability or condition affects an individual's ability to perform very specific activities. I cannot overemphasize this point. Under the legislation, the determining factor is the effect of the condition on a person's basic activities, not the condition itself.

    The misconception about eligibility was readily apparent during our recent review of DTC claims that had been accepted during tax years 1985 to 1996. Let me stress that this review is not about money or reducing numbers, but about fairness and equity for everyone. Claims before 1996, some of which resulted in lifelong benefits, are now undergoing the same level of review the CCRA performs on all claims made after 1996. Again, our review of older claims is intended to stop allowing the tax credit to people who currently do not meet the requirements, or in fact never met the requirements, while at the same time maintaining it for those who are legitimately entitled to it under the legislation.

    At the end of September 2002 of the 106,000 individuals who were asked to recertify their DTC eligibility for 2001 and subsequent years about 90,000 had responded. I know in the House a number of 60,000 was used, but that was earlier. So to date approximately 16,000 individuals have not replied, but the CCRA is still receiving new applications every day and, of course, those are retroactive. It's based on when you became eligible, not when you submitted the return to us.

    In conclusion, Madam Chair, the CCRA strives at all times to be fair and equitable to all Canadians. It would be interesting to see what specific changes result from yesterday's motion, but I'm sure this committee will agree that we can't allow DTC claims that do not meet the specific requirements of the legislative authority provided within the Income Tax Act.

    Thank you very much.

Á  (1125)  

    The Chair: Thank you, Mr. Miller.

    I have reversed the order just slightly. The Alliance, which normally would get the first round, has agreed to let Dr. Bennett proceed. We'll have seven-minute rounds.

    Carolyn.

    Ms. Carolyn Bennett (St. Paul's, Lib.): Thank you very much.

    Thank you very much for coming. On behalf of the subcommittee, we're thrilled that the HRDC committee has decided to have this special hearing today, mainly in view, I think, of what was a unanimous report of the subcommittee and of the HRDC committee. When we looked at the government response, I think we were pretty disappointed.

    I would draw to your attention the Library of Parliament analysis of the difference between our recommendations and the response from government. A large number of our recommendations were not actually dealt with in the government response, and therefore we felt that it hadn't been taken seriously. Some things, like recommendation 2, which asked for no further requests for recertification, the CCRA in fact was doing, but they aren't in the government response. It didn't look to us as if the government took this response very seriously, and we did want this issue back before cabinet, with an opportunity to perhaps get a bare response on the issues that had been really pressing the subcommittee and the HRDC committee.

    With the two things that happened in August, the government response and the court decision, we feel in recommendation 7 we were really clear that we wanted a joint advisory committee of CCRA and Finance that would have the disability community, the advocacy groups, and the physicians in the room at the same time, with maybe the potential to actually thrash out a court decision or various things. Because we too believe that the disability community does not want people to get the credit who don't deserve it, so there are more resources for the people who do deserve it. There are trade-offs, and there's an understanding, I think, in the community and among the physicians, but having sequential meetings with the community and the physicians isn't going to get us a better form, and certainly isn't going to get us an understandable response to court decisions.

    My main issue is that the finance department officials seem to think it's their job to interpret the act. I and the committee feel that it's Parliament's job to interpret the act. If we want to expand the details on the spirit and the intent of the act, that's our job, and I think that's what we thought we were doing in our report.

    With the response to the court decision, my concern is that there seems to be an attitude that we can exclude whole categories of people, asthmatics or celiacs or all of that, when actually I think, as a physician, we require a customized approach. There may be certain things that are the straw that breaks the camel's back for somebody who is without a doubt suffering from a severe and prolonged disability and meets what we had thought would be a better way of interpreting the act.

Á  (1130)  

    I want to know the rationale for the finance department's position regarding the determination of the eligibility. Could the department provide this committee with evidence that it knows what Parliament intended when it passed the original Income Tax Act? Also, based on yesterday's vote, do you think we can move beyond that now, so that there would no longer be the capacity to exclude whole classes of people? Not having breathing as an activity of daily living or some of the other afflictions is not, I think, what anybody intended with the specific activities. In everything I was trained for, activities of daily living very clearly include breathing. Yet I think people do think it's an economic resource thing: we couldn't dare have all asthmatics want to qualify, we couldn't have all this category, some sort of siege that would happen with persons with disabilities.

    So could you just help me with what you see the finance department's role as being in interpretation? Also, what is the big deal about not having an advisory committee that could protect us from this kind of knee-jerk response to court cases?

    Mr. Serge Nadeau: Thank you.

    Let me first say that the Department of Finance does not interpret the legislation. The Income Tax Act--I could cite Mr. Miller's presentation--spells out clearly that the objective is to provide assistance to people who have severe and prolonged mental and physical impairments. So it's not an interpretation, it's in the Income Tax Act and it was voted by Parliament.

    At the more general level, I'm not sure if I understand your question when you say we interpret the Income Tax Act. Do you have specific instances where the Department of Finance has interpreted the Income Tax Act? Amendments proposed by the finance minister were proposals not from the Department of Finance, but from the Minister of Finance. And they were, again, proposals. Draft legislation is proposed, then it's subject to feedback from the community, then it's amended. It happens all the time. In this particular instance, just to make it clear, the announcement, far from denying consultations or feedback, in fact invited feedback, because that's the purpose of having a press release in advance of when the measure comes into place.

    As to having an advisory committee, this is a decision that the finance minister has to take. In the response it was mentioned that there are several instances where there is consultation between the Minister of Finance and the community, for example, in pre-budget consultations, as well as through meetings with the practitioners and with organizations representing persons with disabilities. We made recommendations to the Minister of Finance on this, but the response is the result of these recommendations.

Á  (1135)  

    Ms. Carolyn Bennett: We heard in our hearings about a 90% rule and those kinds of things. That's where I think the finance department is interpreting the act, by having a 90% rule. We felt that if someone is confused only 50% of the time, that's still confused. We recognized that people with mental illness weren't being well served by the tax credit or by the form or by all of those things. We are having trouble figuring out where these rules come from. It doesn't seem to be CCRA that does that, it seems to be Finance, and we, I think, as parliamentarians, have been very confused. CCRA seems to be trying to do this, but there seems to be a blockage at Finance with the policy. We asked for a joint committee so that this wouldn't happen any more, and yet we get an answer back about pre-budget consultations, which just isn't satisfactory.

    Mr. Serge Nadeau: To be sure about consultations, any time groups want to meet us, we are more than happy to meet with them.

    Ms. Carolyn Bennett: Would you routinely meet with them after any court decision?

    Mr. Serge Nadeau: If they want to meet with us, we will.

    Ms. Carolyn Bennett: Wouldn't you think that would be a good thing for you to formulate responses?

    Mr. Serge Nadeau: There was a very important part in relation to “substantially all”, and I would like to address that. This is in the Income Tax Act that was voted by Parliament. It says“ an individual's ability to perform a basic activity of daily living is markedly restricted only where all or substantially all of the time...”. This is in the Income Tax Act voted by Parliament. The administrative interpretation across the Income Tax Act, because the “substantially all” terminology appears several places in it, is 90%.

    The Chair: That's more confusion.

    Mr. Serge Nadeau: But this is the policy decision.

    The Chair: I suspect we're going to get back to this issue, but we're now on Mr. Spencer's time.

    Mr. Larry Spencer (Regina—Lumsden—Lake Centre, Canadian Alliance): Thank you, Madam Chair.

    I think we could tell from the debate in the House yesterday that the feeling of Parliament is that there are two teams in operation here. There is CCRA, which is playing as if it's their responsibility to make decisions on how that money is spent, and there is a Parliament here that says it is utterly ridiculous to make some of the restrictions we are seeing made in this kind of legislation with disabled people. For instance, there's the insensitivity of a blanket request for these 106,000 people to reply. We understand your stewardship responsibilities for guarding against fraud or those who are certainly not qualified, and we give you credit for that. However, would you consider it fair or would it have been possible to have avoided asking blind people to reply, for instance, or even a quadriplegic or those classes of people who just will not change?

Á  (1140)  

    Mr. David Miller: On reviewing the 106,000, we had the opportunity to discuss this quite a bit at the subcommittee. Our problem was that another department, which no longer exists, was mandated to deal with the disability tax credit up until 1996. The files we have from that period are very incomplete, as is the information we have from tax filers from that time. We went through approximately 200,000 applications from that period, and we were left with about 130,000 that did not have sufficient information on them to tell whether or not the person was blind or whether they were entitled to the disability credit. We then did a further review and brought it down to the 106,000 by doing things like not sending a letter out to anyone over the age of 75 or trying to use other sources of information to understand the nature of the disability.

    Quite honestly, several hundred examples were brought to my attention--and this was by no means comprehensive--of people who, under any circumstances, could not be thought entitled to that particular credit. Some of my favourites are, I don't speak English or French, I only speak Greek; my husband drinks too much beer; totally blank forms without anything on them; or, I sprained my ankle in 1987. I don't think anyone expected those to continue. Those were the ones that were clear, and so we sent a letter back, not to say they were cut off, but that circumstances may have changed and we'd like them to reapply. Unfortunately, where we didn't have sufficient information, for example, to know if someone was blind, we had to send the same kind of letter out. In the income tax world, if you don't hear from CCRA in a period of 15 years, I consider that a plus as a personal situation. It literally had been 15 years since we contacted these people about taxation. It was an unfortunate thing we had to do.

    We were able to update our files. We do have another group where we are not going out to suggest that they recertify themselves until we've cleared up the form to the satisfaction of the subcommittee. We apologized that we didn't have the information available, and we asked them simply to recertify or to resubmit if they had their original return.

    I don't think anyone would want a tax administration that couldn't interpret the law. We do depend on looking at the law and understanding exactly how those words should be applied. As we heard, the idea of having all or substantially all is a very common thing within the Income Tax Act, and we've said it's about 90%. Going back to high school, if I told my parents I'd answered the questions on the exam all or substantially all correct and ended up with 50%, I don't think they'd be confused. But I do agree that with something like this, it's very difficult to say 90%, and we don't expect the medical practitioners who certify these forms to work it out. We do expect that 50% of the time would clearly be outside the scope of the legislation, but something around 80% or 90% would obviously not be. I can't think of any circumstance where we'd challenge something if it was slightly less than 90%.

    Mr. Larry Spencer: The DTC, as I understand it, came out after World War II. I guess if you got really narrow, you could maybe say, if it wasn't related to World War II, you didn't qualify, by the spirit of the act. Fortunately, you haven't gone that bonkers on us, you haven't gone that far back. However, I believe, in this day and age--and I think this is the spirit of what we were hearing in our debate yesterday--this entire act is written in an unfair manner. On the one hand you have the requirement of certain conditions that are basic to staying alive, on the other hand you are giving the disability credit to a person who is working every day at a productive job in an international company. This doesn't make sense to the person on the street, nor even to some of us commoners in here. That was the reason we were saying you need to look at the whole act, because the narrower you make it, the more unfair it becomes. It doesn't become fairer, it has become more unfair. That is important.

    I have just one more question. I believe it was you, Serge, who made the statement that if you broadened the gate, so to speak, to take in some of the disabilities you are restricting, individuals with a severe and prolonged mental impairment really would have fewer resources. How is that? How can this happen? I thought each person was qualifying on their own income, and if you had an extra 100,000, why would that change what I qualify for? Why would you say that?

Á  (1145)  

    Mr. Serge Nadeau: You are absolutely right, that needs clarification. There are limited financial resources, and for example, if, in light of the Court of Appeal decision, it was broadened to individuals with celiac disease or others who have difficulty with shopping for food or have food allergies, the fiscal cost could be very high. Given that we are in a world of limited resources, some other worthy causes would not be financed. This is the context, this is the meaning of what I said. You're right, people qualify on their own merit, but there was a discussion in the Speech from the Throne about providing more assistance to children with disabilities from low-income families. That is the context. If it is broadened very widely, there are fewer resources for other worthy causes.

    But to make it clear, of course, when people qualify, they get the amount.

    The Chair: Thank you.

    Madame Folco, then Madame Dalphond-Guiral.

[Translation]

    Ms. Raymonde Folco (Laval West, Lib.): Thank you, Madam Chair.

    I too would like to thank you for coming here today. I would like to go back to yesterday's vote. If there's one message that this vote should have given to the officials from these two departments, it's that this was a unanimous vote. The way I see it, it is clear that none of the parties agree with the way that you have reviewed benefit applications. My question will focus on the current benefit applications as well as on the review of benefit applications that were submitted before 1997.

    To what extent have you demonstrated some sympathy to the situation of people making such applications in your analysis? It seems to me that, somewhere along the line, it is not simply a question of telling such and such a person that they are entitled to the benefit whereas somebody isn't, and that the law is the law: that it's either black or white. There must be some grey areas that are very important in this issue. A lot of people in my riding have talked to me about it.

    My comment is addressed to both departments. In dealing with application review and current applications, how do you, in analyzing these grey zones, look at client applications in a sympathetic light? I would also like to hear an answer from the Department of Finance.

Á  (1150)  

    Mr. Serge Nadeau: I would be please to add something following Mr. Miller's intervention.

[English]

    Mr. David Miller: It is extremely difficult for us in tax administration to deal with grey zones, with things that aren't clearly one thing or another. That's true for the application of any of the tax laws, not just in the case of the disability tax credit. The major problem that arose and why the reaction was so strong to the review was that people--and I mentioned this in my opening remarks--somehow felt that having a disability entitled them to the disability tax credit. As I mentioned, it's the effect of that disability or that condition on those daily living functions that determines it, not the disability itself. But that's very hard to explain to someone, for example, who may feel that because they lost a hand or lost a foot, that's a disability. Yet the fact that they can still walk 50 metres after they've lost the foot, because they have an artificial foot, means they're not entitled under the legislation. Coming up to the Hill today, I passed the statue of Terry Fox, and it made me think he would not be entitled to the disability tax credit after he lost his leg. He ran across the country. The way the words are written and approved by Parliament, he would not be eligible.

    This doesn't put us in a very good light, but that's the law Parliament passed, and that's all we can deal with. Because this is so difficult, as you mentioned, because of the grey area, because of the implications of this, it makes our administration that much more difficult. It's easy with income to say, I've made the money or not, or with age, I'm eligible for certain deductions, but with something like the disability tax credit, where there are grey zones, I don't have an answer. I just say the only thing we can rely on is the specific provisions approved by Parliament, even though it may not make sense, unfortunately, to the average Canadian who looks at the results.

[Translation]

    Ms. Raymonde Folco: Mr. Nadeau, do you want to add anything? I would really like to hear your comments.

    Mr. Serge Nadeau: The easy answer is that this is an administrative issue.

    Ms. Raymonde Folco: No. Give us the difficult answer, Mr. Nadeau.

    Mr. Serge Nadeau: It is true that the legislation is very stringent. However, we have broadened it considerably over the years. In 1944, when the measure was introduced, only blind people were eligible for the credit. In 1946, we also included people who were bedridden or who were in a wheelchair, because we had concluded that these people were just as disabled as the others. It was a question of justice. Finally, in 1986, we broadened the scope of the credit a great deal by including the other disabilities.

    This is a political matter: to what extent should the tax system assist disabled individuals? I am not even sure whether Terry Fox considered himself as a disabled person, despite the fact that he was missing a leg, because he functioned very, very well. So, from the political point of view, what are the parameters that we need to take into account? At the end of the day, I think that the method that we are following, whereby we consider not the person's condition, but rather the effects of this condition, is still good. Moreover, this is what the World Health Organization has suggested in its eligibility system.

    We must also realize that the disability tax credit is not an income support measure. It is a measure to acknowledge that people with a disability are less able to pay tax. As was mentioned earlier, many disabled people have a disability that does not prevent them from earning very high salaries or does not entail higher costs. If there ever was a tax measure that was difficult to manage, it is indeed the disability tax credit. It is very difficult to manage because if it is too vague or not sufficiently stringent, the fiscal costs could be tremendous, because in looking at the statistical studies, we see that many Canadians have a disability.

    However, there are obviously some grey zones and this is a challenge to the administration; we are very aware of this aspect. If we were able to draft a legislative measure that would eliminate grey zones, we would do so, but in order for this to happen, there would have to be no tax credit or this tax credit would have to be available to everybody. Neither of these two solutions are acceptable.

Á  (1155)  

    Ms. Raymonde Folco: Madam Chair, may I have a moment to go back to this issue?

[English]

    The Chair: Very briefly.

[Translation]

    Ms. Raymonde Folco: As for the issue of grey zones, I simply want to say that this is what I was referring to earlier when I talked about a sympathetic analysis.

    Secondly, Mr. Nadeau, I find this hard to understand. You work in the finance department and I don't, but if a person is in a category where he or she does not pay taxes, it is because the individual is not earning enough money. So the tax credit is there specifically to help people who do not make enough money, because as a result of their disability, they are not able to do certain types of jobs.

    Mr.. Serge Nadeau: You have made a political observation. We are very clear about the disability tax credit. I will quote, in English, an excerpt from the 1997 budget on this matter:

[English]

The existing disability tax credit improves tax fairness by recognizing the effect of severe and prolonged disability on an individual's ability to pay tax.

So this is not an income support measure, but a tax measure. It doesn't mean additional support should not be provided to persons with disabilities, it just means, from a policy point of view, it should possibly not be through the disability tax credit. Ultimately, it's a matter of decision by the Minister of Finance and Parliament.

    The Chair: Therein lies the problem, obviously.

    Madame Dalphond-Guiral.

[Translation]

    Ms. Madeleine Dalphond-Guiral (Laval Centre, BQ): Thank you.

    Good afternoon, gentlemen. At the outset, I would like to follow up on two comments that I heard. Since I am a very fair person, I have a question for Mr. Miller and one for Mr. Nadeau.

    First of all, I would like to dispute what is written, namely, that everyone thinks that every disabled person is entitled to the tax credit. I'm against that. That is not really what we think and this is not really the message that we're sending out. However, we do want every disabled person who actually is entitled to a tax credit because he or she meets the legislative requirements to have access to such a credit. That is quite different.

    Secondly, I do not accept the argument that, in a federal State that has billions of dollars in financial assets, to the point where it can pay back incredible amounts of money, which is a good thing in itself, if we were to broaden the scope of this credit too much, we would unfortunately be compelled to reduce the amount of money for everybody. I will tell you one thing. Given that people are living longer and longer, and that new diseases are appearing—you are most certainly just as aware of this as I am—, we're going to have to look at things differently.

    That being said, I would like to ask some questions. Since I am not sure that there will be enough time to have a second round, I think that I will ask all of my questions at once. These questions can be noted and if you cannot answer me immediately, you can do so later on. If the witnesses do not respond, I will infer from that that there is no answer, because this is too good of a question.

    My first question is for Mr. Nadeau. You alluded to recommendation 15 in the report we are addressing today and you said that, before taking action on this recommendation, you were waiting for key data to become available. Could you please clarify exactly what data you were referring to.

    Wait a bit, because I am going to ask all of my questions now. If you provide me with a written answer you will have time to think about it.

    As regards recommendation 7, you stated that a permanent advisory committee would be established. I would like to know when this advisory committee will be established and who will be sitting on it. Should we be viewing this as something that will be part of an electoral platform in two years, for example? Those are my two questions for Mr. Nadeau.

    Mr. Miller, I have three questions for you, which isn't bad. You stated that 90,000 people responded to the request to recertify their DTC eligibility. I would like to know the results of these responses. How many individuals had the tax credit taken away and how many kept it? You must know the answer to that, unless you had not had time to deal with all of that.

    At one point, you talked about a consultative process that was required for certain recommendations in our report. I would like to know what recommendations you're referring to. You said that 106,000 requests for recertification had been sent out initially and that there was a second phase involving fewer people. Did you decide, which would have been very smart, to put the second phase of the reassessment on ice? I think that the members of the committee would applaud you if this is the case and we would like perhaps 5¢ for that. Or are you, instead, going to proceed with a formula that everybody is criticizing, that the committee has criticized unanimously and which clearly does not reflect the needs of disabled people or the responsibilities of health professionals?

    That's it, I am finished and I did not exceed my 10 minutes. That's good.

  (1200)  

[English]

    The Chair: So there you go. If it's one answer, it's not that it's too hard, it's just that it's not enough time. Off you go.

[Translation]

    Mr. Serge Nadeau: Thank you.

    Ms. Madeleine Dalphond-Guiral: I know that you just adore me.

    Mr. Serge Nadeau: Indeed, I must say that yes, I do adore you, because in reality Mr. Miller has four questions and I have one. So my answer will pertain to the data I was referring to and which we call the 2001 Participation and Activity Limitation Survey, or PALS. Such data, which will be available early next year, are in fact data which give us the best profile of the status of disabled people. Our most recent data on this subject go back to 1991. So we had the option of beginning by using the 1991 data, but I think they really are not recent enough, or waiting until the new data come out at the beginning of next year. We will wait until the new data are available to conduct our study.

    As regards recommendation 7, you are correct in saying that I raised this issue. This recommendation deals with an administrative committee that is being set up at CCRA.

    Ms. Madeleine Dalphond-Guiral: This is an overlap between jurisdictions, which is absolutely unacceptable. This is an issue which you will have to respond to,in addition.

[English]

    Mr. David Miller: One of the problems we've had with the disability tax credit and having meaningful consultations is that there are several hundred, if not over a thousand, groups that represent people who have disabilities or diseases or some particular condition they feel it necessary to bring forward. There are very few groups that represent a particular disability. There are lots of groups that represent the same kind of disability. It's difficult to get all these people in a room to discuss one particular condition. It is extremely difficult to get all people representing all disabilities in the same room. We knew this. We tried five years ago, we established a committee to deal with the disability tax credit for tax administration matters, and it did not work. There were very few things they had in common, so it was difficult to establish a very large agenda, and you could not advance the agenda very far during one meeting. You had to say, tell us the issue and we'll deal with it and come back to you.

    Fortunately, in the intervening five years technology has helped us out. I would recommend that we use an electronic method, through chat rooms, through e-mail, through surveys, that would allow not only quick responses that could be assessed from these different groups, but all groups--and there will probably be over 1,000 by the time we finish our list of groups representing those with disabilities and groups that will do the certification of the forms--in an electronic environment, to interact. Rather than a face-to-face meeting, which has a lot of difficulties associated with it, we would like to experiment using an electronic method and the Internet to communicate with these different groups, because, believe me, they all have access to it. For those who may have visual problems, there is assistance, and there are other ways to make them more comfortable in that environment. This is our recommendation. We hope to have it off and running within a few months. You can build on it; you can add to it as you go along.

    I hope I have addressed that issue of timing and perhaps how we'd be able to go about it.

    As to the review, with the 90,000 who have responded, our results are in line with what we get on new applications each year. We get about 150,000 or 160,000 new applications every year. With those new applications, about 30% do not meet the requirements and are denied. That is almost exactly the ratio for those 90,000 who came in for recertification after a 10- or 15-year period. About 30% have been turned down. When they're turned down, of course--and this goes back to some of the recommendations of the report--they receive a notice of assessment. Every Canadian gets that after we've processed their tax return. That notice of assessment very clearly identifies appeal mechanisms and what you, as an individual, can do to appeal that particular decision if you don't agree with it. That's right on the form where the person has been assessed and not allowed to continue, in this case, with the credit. They would have the appeal process identified for them, and if they so chose, they could follow that up.

    To deal with the third question on the consultation process for the design of the form, we learn from our mistakes. After our consultation session this summer, where we met with 38 different groups, we sent the result back to those groups to review. It gave them something to shoot at, something they could look at and say, no, that does not reflect what we want to have happen, and they did that. This would have been extremely difficult without a draft form, because they would not have known how their comments ended up on that revised form. Electronically, we could work with a draft form and not get to the same point of people thinking somehow that was the final product. It's just a method of getting people's views, getting their concerns and issues out on the table. Again, an electronic forum for this seems the ideal way to make progress towards a form that would be acceptable to all parties and provide sufficient clarity that they can understand their rights and obligations within that process.

  (1205)  

    The Chair: Mr. Miller, we're well in excess of the time limit on this. Hopefully, we can catch up on that very important question.

    Monsieur Bellemare.

[Translation]

    Mr. Eugène Bellemare (Ottawa—Orléans, Lib.): Thank you, Madam Chair.

    Most of the questions that I wanted to ask have already been put and dealt with adequately. However, I have a question which may seem a bit simple. On the application form for the disability tax credit certification, it says that these systems are based on other criteria aside from stuttering, for example. It comes down to the inability to work. If I understood correctly, a person who is unable to work because of excessive stuttering is not entitled to the benefits.

  (1210)  

[English]

    Mr. David Miller: To clarify that, it is not the disability, but the impact on daily living. I have within my organization several people who are totally blind; they can work, but they still get the disability tax credit, because they can't see. So it's not connected to the ability to work, it's connected to the impact of that disability on those seven activities of daily living. With stuttering or something, it would depend on the severity, how it allows you to communicate. It's really for the physician or the professional reviewing the form to determine the impact and result of that particular disability.

    Mr. Eugène Bellemare: On the form it does specify that this regime is based on a variety of criteria, one of which--and I'm translating literally--is the incapacity to work. You stated the case of Terry Fox. I would suspect he couldn't have driven a taxi, a bus, that there are a variety of things he couldn't have done if he had applied for a job somewhere downtown. A person like that, I suspect, would have to be self-supporting, to start up a business on his own, as opposed to working for another person. I get confused as to what you really mean by incapacity to work.

    Mr. David Miller: Perhaps you could give me a specific reference to the French on the form, because the qualification in English is that “not all people with disabilities can claim the disability amount. If you receive Canada or Quebec Pension Plan disability benefits...”, and it goes on to explain those. It says “these programs are based on other criteria, such as an individual's inability to work”. So it relates again to that confusion Canadians have, and rightly so, in that we have two major disability programs, the Canada Pension Plan, which depends on whether or not you can work, and the Income Tax Act, which depends on the effect of that disability on your daily living activities. I can understand why Canadians are confused, and we receive a lot of comments saying, I am eligible for the Canada Pension Plan disability or the Quebec Pension Plan disability, why won't you make me eligible for the disability tax credit? That's because one is related to your ability to work, the other is for those seven daily activities of living.

    Mr. Eugène Bellemare: Let's stick to the ability or inability to work. Some people may not be able to work for someone else, because they would not meet their criteria. They take a chance, they borrow money, they start a little business, and it works, because of their efforts, because of people having pity on them, or whatever--they're selling newspapers on the corner and someone will buy from them rather than the box, something like this. He or she would be very dependent on an activity he or she has fallen onto that permits that person to make a living of some kind, albeit a very poor living, in my estimation. So with your definition there, you could say to a person who has no legs, you're disabled, you'll get a cheque from the provincial government, but you can still work, in my estimation, so you don't have a tax credit. I don't understand that.

    Mr. David Miller: It's exactly the opposite. You may have a situation where someone doesn't have legs, does not have artificial legs or other means of compensating for the loss of their legs. They would clearly get the disability tax credit if they earned income. Again, it's related to the income they earn. It could be their chosen line of work they're no longer able to do, as a bus driver or something like that. They would clearly be eligible for something like the Canada Pension Plan disability or Quebec Pension Plan disability, since they could not work in their desired area. I don't pretend to be an expert in this particular aspect, but it's clear that you have to generate income to take advantage of this, because it is a non-refundable tax credit, but at the same time, getting the credit isn't related to your ability to work, but whether or not, in this case, you can walk fifty metres.

  (1215)  

    Mr. Eugène Bellemare: I have one example in my riding. A fellow has a grade 3 education, he stutters--you don't want to be near him when he starts talking, he stutters so much. He has a small coin-operated machine, so he doesn't speak to anyone, he just operates the machine. He stutters to the machine, period. Is he eligible for a tax credit? He makes money.

    Mr. David Miller: If I could quote from our own form, and this is to be completed by the physician: “Can your patient speak? Answer no only if all or almost the time, even with therapy, medication, or a device, your patient cannot speak so as to be understood in a quiet setting, or he or she takes an inordinate amount of time to do so”. So in the case of someone stuttering to the extent you're talking about, without understanding the details, I would say they qualify for the disability tax credit.

    Mr. Eugène Bellemare: Is there a means test?

    Mr. David Miller: Absolutely not, in that sense. It's available to anyone, but again, the tax credit has to be based on income, because you're getting a deduction from the income you've earned. That person has to either generate income or have someone claim on his or her behalf.

    Mr. Eugène Bellemare: Finally, the doctor fills this out, and it says at the very end:

[Translation]

Your patient is responsible for covering the costs of filling out this form. These costs are not covered by the provincial health insurance plans or by the Agency.

[English]

    With the means test, suppose this person was really making very little money. Isn't it an extra burden to have to pay a doctor to fill in the form, which is not covered by OHIP, for example, in Ontario?

    Mr. David Miller: Yes, it is a burden, and it's a concern we have had. Organizations such as the Canadian Medical Association have told us clearly they are not concerned about charging a patient to complete this particular form, which is a T-2201. Their concern is that if it's not clear enough and we have to go back to that physician in order to understand the decision they've reached, we have a series of additional forms we send to them to fill out, which can be complicated. Chances are they don't have their patient in front of them, so they can just fill in the form and sign it off. Their view is that they don't mind filling in the T-2201, but they feel they should be compensated for having to fill out that other return, and they don't think that cost should be transferred to their patients.

    In my discussions so far I've said I'd like to eliminate the necessity of going back to the physician. If we can have a form where they can clearly identify on behalf of their patient that the person is eligible or not, we won't have to do follow-ups. They don't mind, during the course of a regular physical or consultation process, spending the time it takes to do a fairly simple form, it's the more complicated activities. They agree, they do not want to pass the costs on to someone of very little means and have them pay for it.

    So again, we need a new form. One of our objectives is to make it simple enough that we do not have a number of follow-up actions necessary with those who are completing it on behalf of a Canadian.

    M. Eugène Bellemare: Thank you, Mr. Miller

  (1220)  

    The Chair: Ms. Lill, Mr. Simard, then Mr. Doyle.

    Ms. Wendy Lill (Dartmouth, NDP): Thank you.

    At the end of the day yesterday I walked home and thought to myself that possibly something very good happened in the House of Commons yesterday. We focused the minds of 301 parliamentarians who are all concerned about persons with disabilities and their ability to have a level playing field, or to come near to that, in advantage and opportunity.

    I think one thing we have not come to hear is a really clear sense from you of what you see the intent of the disability tax credit to be. My understanding of it is that it is a tax credit to reflect the additional cost involved in living with a disability. I want to give you a couple of examples. A 55-year-old man with Down's syndrome lives with his sister. He also has diabetes. His sister incurs an enormous number of additional costs so that Norman can live with her. He can think, he can remember, sometimes, he can perceive, he can eat, and he can dress. He can do all the things you have on your form, but he needs to have someone with him 24 hours a day. Believe me, that's an additional cost. There's a father who has three sons with schizophrenia. This is a tragedy, I have to say. He supports them however he can in the community. He takes them to their doctor's appointments, to clinics, he pays for drugs. He does everything he can to support them in their lives. These are additional costs. Terry Fox, you can bet, had a hell of a lot of additional costs because he only had one leg.

    I think it's clear that this is what this whole thing is supposed to be about. If that has got lost somewhere, I would like you to tell me how it has got lost. I don't think it has got lost.

    I also want to make another point, on this business about people having to be severely disabled all the time. We all have problems, we are all trying to deal with obstacles as we move through life. If we weren't, we would be in bad shape. Nobody wants to consider themselves disabled or a basket case all the time. We are all truly trying to live with the abilities we have. It is so abhorrent that we would even consider the fact that people have to be disabled all the time, when all of our goals in life are to make the best of it. The Income Tax Act is an ass. It is simply not working for any of the people we're talking about. It goes against the spirit of how Canadians try to move themselves and their families along.

    As far as I'm concerned, we have a big problem here. I'm very glad we had a huge consensus in the House of Commons yesterday that we are going to role up our sleeves and work on it.

    I would like you to answer that question, if you could, regarding the intent of the disability tax credit, if I'm right on that. And because of this really problematic term “all of the time”, you say you interpret it, administratively, as 90% of the time. Do you think, for us to really change our ways and how we approach persons with disabilities, we do need a change to the Income Tax Act?

    Mr. Serge Nadeau: On the policy intent of the disability tax credit--and here I'm referring to the budget of 1997--it is to improve tax fairness by recognizing the effect of a severe and prolonged disability on an individual's ability to pay tax. It is a tax fairness issue, in the sense that you want to treat all taxpayers in the same manner, all individuals who earn income and pay tax. There are different types of expenses individuals with disabilities face and are itemizable, and these are picked up by the disability tax credit. For example, a person who has trouble walking or is using a wheelchair probably will have to use cabs more often, and we don't want the individual to keep track of the receipts and so on. That is the objective of the disability tax credit. Expenses that are itemizable, extra expenses, can be claimed under the medical expense tax credit. This is the intent of the system. The intent of the DTC, again, is not to provide income support, but to take into account the fact that individuals with disabilities will incur extra expenses in order to earn income.

    On the “substantially all” part, I will let Mr. Miller answer.

  (1225)  

    Mr. David Miller: This is a difficult question for me as a Canadian, forgetting about my particular present position. Whenever we try to classify something within a grey zone, we're always going to have a dividing line. If we changed the rule to say the Income Tax Act meant 50% of the time you suffered from a particular condition or you were unable to do one of those seven activities, we would have a discussion about whether 50% is the right level or how we determine if it is 50%. Unless it is yes or no, it's always a matter of interpretation or the best level.

    I think it is clearer from the way the legislation is written for someone who is totally blind or someone who is confined to a wheelchair for the entire period, but there may be, with a lot of diseases, remission periods, and people may not have it for a 12-month period. What do you do with those situations? What do you do after extensive therapy, when people are able to walk on their own for brief periods of time? How do we take that into consideration? I do not have a simple answer. If I did, I would be more than willing to present it to the committee.

    It is always difficult when you have areas that are grey. As Monsieur Nadeau mentioned, the intent of it was to say those people who are obviously the most seriously affected Canadians because of their disabilities will clearly qualify. Now we're saying that's fine for that group, but there are those who also have an effect that is not quite as great. It's still an extremely debilitating situation, but it's not quite as great as it would be if they had that 100%. Where should that line be? I do not have an answer for that.

    Ms. Wendy Lill: Mr. Nadeau has said the intent of the disability tax credit is to reflect the additional costs of disabilities. That seems pretty straightforward. I'm not sure why this grey zone and 50% are hanging you up, because it seems to me those are clear. If there are additional costs, the tax system should be able to deal with them. It's money in, money out. There have been some Federal Court rulings, guidance really to the Department of Finance and to all of us, on this issue. Very recently, the Federal Court has said that it is time to have a more compassionate and humane interpretation of disabilities. Again, there is some guidance for some new language in our act and how we move ahead. I don't see the hang-up on the percentage. There are clearly costs associated with a disability, whether you have schizophrenia, MS, one leg, or a mental disability, all those things. You'd go crazy if you started trying to get into a 50%, 60% kind of definition. That's the wrong road to go down, I think.

    Mr. David Miller: I certainly agree. To clarify my point, with costs related to being disabled, our option under things like the Income Tax Act is to say, show us the receipts, show us the costs, substantiate those expenditures, and in lieu of doing that for people with disabilities, we said, if you get to a certain point, we will allow you to deduct $6,000--the amount has increased over the last number of years--from your income without keeping receipts, without looking at the extra expense perhaps of--well, we can name any number of situations where that would occur. So in lieu of keeping all those receipts, you can make a lump sum claim of $6,000 for those costs. That's really the effect of the current legislation. What I was alluding to was that it's not a graduated amount. It's not $6,000 if you're fully disabled in that activity of daily living, $4,000 if you're only two-thirds disabled. It ends up being a line you're either above or below. It's always extremely difficult to decide who should be included and who shouldn't.

  (1230)  

    The Chair: Mr. Simard.

    Mr. Raymond Simard (Saint Boniface, Lib.): Thank you, Madam Chair.

    Thank you very much for being here. As a new member of the committee, I'd like you to keep in mind that I haven't had the benefit of all the information my colleagues have received over the years, so you may have answered these questions many times over.

    One of my questions is in the same vein as that of Madame Folco. Although you indicated earlier that the definition of who qualifies is quite strict, there are grey areas, and the process is quite subjective when you think about it. One of my colleagues was telling me yesterday that a young girl in his riding was born without an arm, and she was told that because she was born with the handicap, she didn't qualify. I agree that it's probably more complicated than that, but that young girl could argue that her handicap is more severe than that of someone with an eating disorder. So again we come to that grey area.

    My first question is, who decides whether or not a person qualifies for the tax credit? Is it the medical practitioner? Is it CCRA at the regional level? Is it a special committee? I'd just like to know what the process is.

    My second question is with regard to celiacs. Again, it's a test of whether or not the process works. If one person with celiac disease has qualified for the tax credit, do you feel this opens the flood gates, or do you feel your process is strong enough to distinguish who deserves the tax credit and who doesn't?

    Mr. David Miller: Actually, the two questions are related in a way. First, in a perfect world 100% of the decision as to who qualifies would be left to the physician or medical expert who is completing the form on behalf of the patient. The Medical Association says, we get a form that's involved with tax, the next month we get one from the provincial government, and the following month we get one on the Canada Pension Plan. We don't understand what the differences are, so when we put down something to make them qualify for one particular activity, the criteria may not actually fit the form. It's very confusing, because there are a number of forms. I'm only saying that because occasionally, at a certain level of returns, we have people who look at them and say, very clearly, the practitioner said yes, you qualify, or no. There is a group where we're not sure exactly what they're telling us. In those situations they would be reviewed by people who are trained at the local office. For situations where there may be clarification required, we would go back to the practitioner to get it, and if we're still not clear, the case is sent to a group of experts here in Ottawa, who are employed just to deal with these reports. But as I mentioned at the beginning, in a perfect world, it would be the practitioner, as long as they understood exactly what the act meant and how things worked.

    Celiac disease is an interesting problem. If you read the judgment, it is clear that it wasn't just being a celiac, it was also the fact that this individual had diabetes as well, so it was a combination of things that made his life extremely difficult. The intent of the legislation wasn't related to time and food preparation. The intent of specifying eating was to do with upper body mobility, the fact that you could feed yourself. It wasn't restricting people who need excessive time to find the food or prepare it, it was literally saying, can you feed yourself? If you can't, basically, you would qualify. I think it was that decision that made it so much more difficult, and the amendment that was being put through was to say, let's go back to where we talk about the physical activity of being able to feed yourself.

    If we look at that and ask whether it is just this one case or it applies to all celiacs, one of the reasons we find it so difficult is that we don't know. If we took the view that it's only this person, only this case, what would happen to the next person who says, based on that decision, I look exactly the same or very similar to that, and while I may not have the combination of diseases that individual did, I have something else that makes me take a long time to find food for myself? We have allergies, we have diabetes, we have all kinds of things where people have dietary restrictions or problems that require them to spend additional time. The question is, in the words of the judgment, is it an inordinant amount of time that they have to do that, or is it just a process of daily living?

    Again, it opens up a completely new grey zone for us that we don't know how to deal with. We were hoping an amendment would clarify the kinds of rules we had and the way we administered them before that particular decision was made. It pushed the envelope in a direction that wasn't originally intended through the words that are in the legislation.

  (1235)  

    The Chair: Mr. Doyle.

    Mr. Norman Doyle (St. John's East, PC): You talked about the grey zone. Here's a black-and-white zone I want you to address. At least 50% of the people who are disabled cannot qualify for a disability tax credit, because they have no income. The child tax benefit, for instance, is a refundable benefit. People who have no taxable income receive that benefit by way of a government cheque in the mail or what have you. One of the real limitations of the disability tax credit is that it is non-refundable. It is only beneficial to the people who have a taxable income. Why not make the disability tax benefit refundable, so that disabled people with little or no taxable income might be able to avail themselves of that credit? Is it possible that we have 50% of the people out there who are legitimately disabled who cannot avail themselves of the tax credit because they don't show up as having a taxable income? These people could be legitimately living in poverty or what have you. Could you address that point?

    Mr. Serge Nadeau: This is a policy issue. Let me state that I'm not aware of the 50% figures. If you could forward the information to us, we would be interested in looking at it.

    Mr. Norman Doyle: That was a committee chaired by Andy Scott.

    Mr. Serge Nadeau: But does the definition of disability correspond to the definition of disability in the Income Tax Act and all these issues? But this is something we would like to inquire into.

    As I mentioned at the beginning, this is a policy decision, and ultimately, of course, it's the Minister of Finance and Parliament who decide what the policy should be. At this time the disability tax credit is a tax measure to recognize extra expenses for those who need to incur these extra expenses to earn a living. If you go to a refundable credit, it becomes an income support mechanism, and there are different measures of income support. The provinces provide income support for people with disabilities. Moving from tax measures to an income support measure is a major policy shift, so you need to look at what's happening in the provinces. You need to look also at fiscal costs, which could be quite high. I'm just listing some of the considerations the minister or Parliament would have to take into account in deciding whether or not to have the credit refundable.

    Mr. David Miller: If I could add a point to clarify, although this is a non-refundable tax credit, it is transferable. So if you have a family member or someone you're responsible for looking after unable to generate any income, you can use the disability tax credit yourself. It doesn't cover all the situations, but it certainly covers a majority where people require support, and that person providing the support can take advantage of the disability tax credit.

  (1240)  

    Mr. Norman Doyle: I'm just wondering about the process. What is the process used to determine what the amount of disability tax credit should be. Is there a process by which you arrived at a certain amount, $960?

    Mr. David Miller: That is a mathematical calculation, looking at our current income tax rate against $6,000 worth of income. So it's just 16% applied to that, and you end up with $960. So you actually, on your income tax form, deduct $6,000 worth of income. The odd thing is that as tax rates go down, the amount of the benefit goes down.

    Mr. Norman Doyle: Thank you.

    The Chair: Ms. Bennett, and I'm going to restrict you. You were way over the seven minutes last time, so you have a shorter round this time.

    Ms. Carolyn Bennett: I have a couple of quick questions. In view of yesterday's vote in Parliament, I want to know whether the finance department will move on recommendation 16, because we feel a comprehensive examination of all the federal tax systems and measures to support persons with disabilities would be a beginning. I would like to know you're moving forward on that.

    Who decided that feeding yourself was a matter of upper body mobility? Where did that come from if it wasn't the department?

    Further, as a family doctor, I felt there were lots of people who out of the seven activities were partially bad at five, which really rendered them unable to look after themselves. So what do you see would be the policy response to this linear approach? Having to be mostly incapacitated in any one of these seven doesn't account for the fact that you could be partially incapacitated in all of them, which would render you almost more disabled than somebody who was just afflicted in one activity.

    Mr. Serge Nadeau: In respect of recommendation 16, we will follow the direction of our minister. It's going to be up to him to tell us what to do. It is a ministerial decision, a policy decision, to have an advisory committee. I cannot decide for my minister.

    Ms. Carolyn Bennett: No, it was the review, the comprehensive examination of all federal tax system measures.

    Mr. Serge Nadeau: Doing a review like this would have policy implications, so we will follow the direction of our minister as to whether or not we should endeavour to do such a review. There is, as you know, a federal-provincial DTC working group that looks at the various forms of financial assistance, as well the tax report for persons with disabilities. That needs to be taken into account as well in the decision of whether there should be an extensive review.

    I think I missed the last part of your question on upper body mobility.

    Ms. Carolyn Bennett: Who decides that feeding is upper body mobility? If that isn't an interpretation of the act, who decided to put it into a proposed amendment?

  (1245)  

    Mr. David Miller: When you look at the questions we have on the form, it is clear that we have the same wording, basically, with any physical limitation. In other words, all we're saying here is, “Can your patient feed or dress himself or herself? Answer no only if all or almost all the time, even with therapy, medication, or a device, your patient cannot feed or dress himself or herself, or he or she takes an inordinate amount of time to do so”, as with walking. Our understanding was that the act had those words in it for the same reason it had the words in it for walking, which was an inability to walk over a distance in a reasonable length of time. So it was the inability to perform the acts of feeding yourself or dressing yourself in a reasonable length of time, not the activities associated with finding food or preparing food. We have always administered the act as if it definitely related to that physical ability to feed oneself or dress oneself, and the judge's decision opened a brand new area of that. So we said, was that intent of the act, and will that add more confusion as to who may or may not qualify? Let's try to find the proper words to get it back. That's a policy decision, but we felt the most important aspect was limitations on people being able to do everyday activities like feeding and dressing themselves.

    Ms. Carolyn Bennett: There are some people who actually eat with their feet.

    Mr. David Miller: I know.

    Ms. Carolyn Bennett: So where do you get upper body mobility from?

    Mr. David Miller: I only meant upper body as a general matter, and people who can feed themselves with their feet would not qualify.

    Ms. Carolyn Bennett: Exactly. So where did this come from?

    Mr. David Miller: I was only using that as a difference between the physical activity of being able to feed yourself, which normally is with the upper body, and the idea of looking for food or understanding the ingredients associated with preparing food as a completely unrelated type of thing, that's all. There was a very clear distinction for us in those two types of requirements.

    The Chair: Mr. Nadeau wants to respond.

    Mr. Serge Nadeau: As to who interpreted the definition of feeding that resulted in the proposed amendment, I just want to stress that this was a proposed amendment, a proposed clarification of the law, and ultimately, this would have been tabled and Parliament would have voted for or against this interpretation. There was no decision, it was a proposal.

    Ms. Carolyn Bennett: I don't think ending up on the front page of the Globe and Mail is good for us with proposals we could have said from the beginning weren't going to fly. I don't think that's a good process, and it's the reason I happen to believe consulting the community and having some input before it ends up on the front page of the Globe and Mail is a better approach, because we then end up with all the stories that make it seem this isn't a humane or compassionate approach to what I think all of us feel is about people who need a bit of help in getting to be taxpayers.

    Mr. Serge Nadeau: It's unfortunate that the media didn't read properly the news release, because it said, “John Manley, Deputy Prime Minister and Minister of Finance, announced today proposed amendments...”. That is the first line.

    Ms. Carolyn Bennett: I understand they are proposed, I understand they haven't even been tabled, I just think they are bad.

    The Chair: That doesn't come as a surprise to anybody who's been here.

    There is one portion of the question Dr. Bennett raised I am rather interested in hearing about, and that's the matter of multiple disabilities.

    Mr. Serge Nadeau: This is a very thorny question. Again, it is a policy decision, but it is something that needs to be looked at very carefully. That's as much as I can say. I'm talking off the top of my head here, but it seems to make sense that if some people have multiple handicaps, even if less than 90%, they may be more handicapped. That's something that may need to be looked at.

  (1250)  

    The Chair: I suspect you're going to get some sort of suggestion from the committee when it looks at a response.

    Mr. Spencer, and then there's the fourth question of Madame that you did not answer, so, Mr. Miller, you might want to go back and be thinking about her fourth question.

    Mr. Larry Spencer: It seems to me that we keep getting our wires crossed here as we're thinking about this. Part of the problem with the form is that it focuses on the physical aspect of the disability, and yet you're saying what we should be looking at is the impact of the disability. We've heard two lines of impact here. Mr. Miller talked about the extra cost Ms. Lill asked about, and we understand that. Mr. Nadeau talked about the impact the disability has on that person's ability to pay taxes. How in the world is a person going to pay taxes if he has no ability to work?

    Let me just quickly tell you about two of my constituents. One is on the CPP disability because of a recurring mental condition that makes him unemployable. He's just would not be dependable. Yet to sit down and talk to him, he's very normal, a very bright gentleman. He used to be a personal assistant to the old Prime Minister from Prince Albert.

    The Chair: Mr. Diefenbaker.

    Mr. Larry Spencer: We all know Diefenbaker's name. What's my name?

    He cannot work, but he doesn't qualify, because he can walk, talk, think, remember, and do all these things.

    I have an ex-RCMP member who, in the course of his service, broke three vertebrae in his neck. Over the course of years the degeneration of that has rendered him unemployable, because there are hours of the day, sometimes days of the week, he has to spend lying on his back, which is the way to recover. It is the only treatment. There is no therapy, that is the therapy, yet that's not allowed as the prescribed therapy, because it doesn't keep him alive, it simply lets him relax and get up and go back to the breakfast table again.

    Neither of those gentlemen can work, neither has the ability to pay taxes. Is there a way to uncross these two things? Is it really related to expenses, or is it really related to the ability to pay taxes? Wouldn't it help us design a better form if we could decide which one it is?

    Mr. Serge Nadeau: The policy intent is to recognize unitemizable costs on a person's reduced ability to pay tax. That's the purpose of the disability tax credit.

    Mr. Larry Spencer: Why would not the inability to hold a job be the primary disability?

    Mr. Serge Nadeau: There are income support measures that should take care of that. Provinces provide income support for people who cannot get a job, for whatever reasons, including disabilities.

    Mr. Larry Spencer: But you put the word support there.

    Mr. Serge Nadeau: Income support or income assistance.

    Mr. Larry Spencer: But they're still severely disabled when it comes to paying taxes, because if they're going to pay taxes off of that piddly bit of income support, they're not very good taxpayers.

    Mr. Serge Nadeau: But they will benefit from income assistance, and they may benefit as well from the income tax credit. Again, the objective of the DTC as a tax measure is to try to reach some form of horizontal equity, which means taxpayers with equivalent ability to pay pay the same amount of tax, more or less.

    Mr. Larry Spencer: I think you would find quite a number of people with recurring problems, especially mental disabilities of different kinds, who do not have the ability to hold a job and are not on disability or not qualifying for DTC.

    Mr. Serge Nadeau: But they would probably qualify for welfare assistance.

  (1255)  

    Mr. Larry Spencer: Does welfare assistance make you a taxpayer?

    Ms. Kei Moray (Chief, Charities, Department of Finance): Maybe I could just clarify it a bit. In our system we want people to pay taxes according to their ability, and we normally measure that by income levels. So if you have two people with the same income level, we think it's fair that they pay the same amount of tax. But what we're doing with this credit is recognizing that a person with a disability incurs some expenses the person without a disability doesn't. So if they both have the same level of income, we recognize that the person with disability should pay less tax because of these extra costs.

    So this is really just going to cost recognition on the ability to pay tax, and we recognize it in two ways. We've got the medical expense tax credits, so if you have expenses for prescription drugs or wheelchairs or that sort of thing, you can get tax assistance through the medical expense tax credit. We also have this special provision where we say, if you are very severely disabled, we recognize that you're going to have extra costs for everyday living expenses that you can't easily itemize; you might need to have your heat up higher, for example, or you might have to take taxis more often. We just have this blanket recognition of $6,000 worth of costs for these people, and it has to be associated with a very severe disability, or you're not likely to incur that level of cost.

    I don't know if that clarifies things at all.

    Mr. Larry Spencer: It clarifies your position.

    Ms. Kei Moray: It clarifies what's in the Income Tax Act.

    The Chair: They don't set policy.

    Mr. Miller, do you have the fourth question?

    Mr. David Miller: Yes, I do. I believe the fourth question dealt with the second phase of the review. As I mentioned in my opening remarks, Minister Caplan made it very clear to us that we would not proceed on any further aspects of the review until we had basically got a green light from the committee that they were comfortable with the form, the implications, the wording of the letters, and all other aspects. So we will not proceed with phase two until the committee is comfortable.

    The Chair: Had you started with phase two at all?

    Mr. David Miller: Phase two is simply a group of people who did not have sufficient income on their own to use the credit, but the credit was actually used by a family member or someone else. Again, it's not a question of our not having talked to them in fifteen years, so we'd better do it, it's a question of not having sufficient information on file to understand whether or not their disability is present at the current time and whether or not they should be entitled to continue to receive the credit into the future. Obviously, the wording of any letter that would go out or anything like that is extremely important. We do not want to get ourselves into the situation that occurred, which I think is a misunderstanding of the first phase of that review.

    The Chair: I want to thank our witnesses for coming today and for responding as fully as they have. This has been something that has seized this committee for quite some time, and I think you can understand that there are members on this committee who feel very passionately about the constituents they are serving. We know you have a difficult job as well, so I thank you for your cooperation and your participation.

    Before the members of the committee leave, next Tuesday we have budgets that need to be passed, so that we can submit them to the liaison committee, so that the work of this committee and the subcommittees can proceed. Also, I got notice from Minister Stewart that she is available to come to this committee next Tuesday, and she will be here at 12 o'clock to talk to us about the skills and learning agenda. I would suggest that the first part of the meeting be an in camera meeting to give some direction to the researchers on the disability tax credit.

    Meeting adjourned.