HUMA Committee Report

Recommendation 2

The Committee recommends that the Government immediately amend the Income Tax Act by:

(a)   Adding “breathing” to the list of basic activities of daily living in paragraph 118.4(c);

(b)   Amending the wording in subparagraphs 118.4(1)(c)(i) and (ii) to replace “thinking, perceiving and remembering” and “feeding and dressing oneself” by “thinking, perceiving or remembering” and “feeding or dressing oneself.”

(c)    Rewording subparagraphs 118.4(1)(c)(iii) and (iv) in order to better reflect the everyday situations of individuals with severe speaking and hearing impairments.

Recommendation 3

The Committee recommends that, following consultations with organizations representing persons with disabilities and medical practitioners, the Government amend the Income Tax Act to:

(a)Define “markedly restricted” in the context of each of the basic activities of daily living or some combination thereof. The Committee believes that these changes must clarify the meaning of “all or substantially all of the time” to reflect the reality of living with a disability; and

(b)Redefine “prolonged” in order to capture individuals who have an impairment that is substantial and recurrent, although not necessarily lasting for a period of 12 continuous months.

THE DISABILITY TAX CREDIT CERTIFICATE: FORM T2201

During our hearings on the DTC, we were constantly reminded of the need to develop a better application form - one that corresponds to the legislation, one that is less prescriptive, one that provides a better opportunity for describing an applicant’s disability, one that minimizes the need for supplementary information, and one that is more comprehensible and oriented toward the needs of applicants and not bureaucrats. Furthermore, in developing a new DTC certificate, the Committee recommended that the Department of Finance and the CCRA consult widely and that the revised form be referred to the Committee for consideration, prior to its use.

Except for a terse reference to initial discussions on 28 May and 20 June, 2002 between the CCRA (apparently the Department of Finance was absent) and groups representing persons with disabilities, these issues were not addressed in the government’s response to the Committee’s report. During our meeting on 21 November 2002, we learned that the CCRA held two more meetings with groups representing medical practitioners. Following these meetings, the CCRA circulated a first draft of a revised DTC application form. We were told “the volume and depth of comments made it clear that further review and consultation were needed.”[15] While we congratulate the CCRA’s efforts to establish an advisory group, the Committee continues to believe that the Department of Finance’s involvement in this process is essential. In addition, we commend the Minister of National Revenue for instructing her Agency to continue consultations on this matter and produce a redesigned application form. Nevertheless, the Committee remains steadfast in its view that the revised application form should reflect the content of our recommendation on this matter.

Recommendation 4

The Committee recommends that all forms used to assess eligibility for the Disability Tax Credit be redesigned. The new Form T2201 should conform to the Income Tax Act; be less prescriptive; afford greater prominence to, and space for, a qualified person’s diagnosis; and be designed primarily to meet the needs of applicants instead of those who process the applications. If necessary, the form should be either expanded or separated into different forms so that it (or they) contain questions related to an individual’s specific disability. A revised form should be referred to the Standing Committee on Human Resources Development and the Status of Persons with Disabilities for consideration and study well in advance of its printing date.

 EXPLANATION FOR NEGATIVE DECISIONS

In our original report on the DTC, the Committee felt strongly about the need to inform applicants and “qualified persons” associated with the applications of the reason or reasons why their applications were rejected. Both time and money are spent applying for the DTC and in our view there should be an obligation on the part of the CCRA to advise rejected applicants as to why they are not eligible. In addition, advising “qualified persons” about rejected applications could prove instructive in relation to completing subsequent applications.

While the government’s response to our report defended the existing appeal process, it did not respond to our recommendation to provide an applicant with a written explanation of why DTC eligibility was not granted. The Committee is fully aware that all tax filers receive a Notice of Assessment and that this document identifies appeal mechanisms that a tax filer may pursue if the tax filer disagrees with a CCRA decision. Nevertheless, this correspondence fails to provide the explanation that the Committee has requested and members continue to believe that all rejected DTC applicants deserve this explanation. Moreover, the Committee deserves an adequate response to its recommendation regarding this matter.

Recommendation 5

The Committee recommends that when the CCRA rejects an application for the DTC, the Agency provide the claimant with a written explanation setting out the reasons that the application has been refused and setting out the applicant’s rights and procedures for an appeal.

THE NEED FOR REVIEW AND REFORM

In its original report, the Standing Committee recommended both an evaluation and a comprehensive examination of the tax system’s treatment of disability. We were pleased that the government response agreed to conduct an evaluation of the DTC once new data from the 2001 Participation and Activity Limitation Survey becomes available in the spring of 2003.

Recent experiences, however, have confirmed to us, more than ever, the need for a comprehensive review of the federal tax measures to support persons with disabilities. The debate and vote in the House of Commons on 19 November 2002 provided specific direction to the Department of Finance to develop a comprehensive program to level the playing field for persons with disabilities. During its study and report on the DTC, the Committee wrote that it had “received testimony, too voluminous to cite here, that the Disability Tax Credit must be considered in the light of social policy objectives for persons with disabilities and not just in the light of its place as a tax measure.”[16] The Committee also stated its belief that these questions needed to be the subject of public debate. We have not changed our mind. Until this public debate takes place, the Department of Finance will continue, we suspect, to insist on its view of the DTC as a tax measure, and that Canadians and parliamentarians will still see it as a social measure. And there will probably be more Committee reports to Parliament produced by our successors repeating the same recommendations that have been going forward for the past 10 years. This is an unsatisfactory future to look forward to. We believe that a long-term solution needs to be found.

Recommendation 6

The Committee recommends that the government:

(a) undertake a comprehensive examination of all the federal tax system’s measures to support persons with disabilities;

(b) as part of this examination, prepare and release a public discussion paper by 31 December 2003 outlining possible options for reform. This paper should specifically include a discussion of combining tax measures (e.g. the Disability Tax Credit and the Medical Expenses Tax Credit), refundability and a registered savings plan (with a grant component like the RESP) for children with disabilities who may not be able to benefit from higher education but who require financial support to live;

(c) use the consultation paper as the basis for public consultations to be conducted in a transparent manner with the participation of all stakeholders and;

(d) Report the outcome of these discussions and present an action plan for legislative and administrative changes to this Committee by 1 September 2003.

AN URGENT NEED

As the federal government prepares the next federal budget and its measures to implement the promises in the recent Speech from the Throne, the Committee believes that one important issue remains to be considered. This pertains to the way that the budget will deal with the government’s promise to “put in place targeted measures for low-income families caring for severely disabled children, to help meet the needs of the child and of the family.”[17]

We believe that using the Disability Tax Credit is a good place to start. Recent evidence makes clear that the tax system can indeed be an effective tool for social policy. The Canada Child Tax Benefit has begun to make a significant dent in child poverty in this country. The DTC could also become a tool for addressing the poverty that results for children with disabilities and family members who support them, in part because of their out-of-pocket expenses for disability-related needs. The DTC could be used to deliver the Throne Speech commitment to introduce targeted measures. Along with the current supplement for families with children with severe disabilities, the value of the credit is approximately $1500 for those who can take full advantage of it. By turning this into a refundable tax credit for this group, the government could easily deliver its Throne Speech commitment and provide assistance for those families that cannot now take advantage of the DTC because of low or non-existent taxable income.

Such a step would move forward and begin the job of addressing another aspect of fairness. It would also create a platform to move to the longer-term objective of better addressing the out-of-pocket cost of disability-related supports for all low-income Canadians with disabilities.

Recommendation 7

The Committee recommends that the Government:

(a)   consider making the Disability Tax Credit refundable for families who have children with severe disabilities and;

(b)   acknowledge that refundability for families with severely disabled children is the first step in addressing the needs of the poorest Canadians with severe disabilities.

[15] Ibid., (11:15).

[16] Getting it Right for Canadians: The Disability Tax Credit, March 2002, p. 27.

[17] The Canada We Want: Speech from the Throne to Open the Second Session of the Thirty-Seventh Parliament of Canada, 30 September 2002.