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the Disability Tax Fairness
report posted Dec. 15, 2004

Disability Tax Fairness —
Technical Advisory Committee’s Mandate Completed

By Garry Angus


Individuals with disabilities may experience more equity and greater tax fairness, thanks to the work of a special technical committee that submitted its final recommendations to the federal ministers of finance and national revenue in December.

The report, Disability Tax Fairness, was the end product of 18 months of deliberations by the government appointed technical committee composed of members of organizations representing people with disabilities, health practitioners, human rights groups and tax experts from across Canada.

The committee's mandate was to make recommendations on improving tax fairness for people with disabilities within the existing tax system, and advise the ministers on how to spend $85 million, first allocated in the 2003 budget, to meet that objective.

The report's set of 24 recommendations focus on three key areas: the disability tax credit (DTC); employment and education-related tax measures; and special provisions for caregivers and children with disabilities.

The estimated total annual cost of the tax changes, according to the report, is $110 million plus $2 million in administrative costs. The committee recognized that the package exceeded the $85 million ceiling, but believes that all of the recommendations represent important steps for people with disabilities.

In an interview for the Disability News, committee member Dr. Gary Birch (executive director of the Neil Squire Foundation) stated that the DTC was a major piece of the groups work. The DTC certificate – and accompanying form T2201 (the application form) – essentially define all-around eligibility for these tax credit measures.

The group's DTC proposals responded to recommendations in the March 2002 report of the House of Commons Standing Committee on Human resource Development and the Status of People with Disabilities, Getting it Right for Canadians: The Disability Tax Credit, and called for legislative, interpretive and administrative changes to achieve better tax fairness.

Significantly, they recommended that individuals with multiple restrictions in activity that have a substantial overall impact on their everyday lives be eligible for the credit, and made proposals seeking to remove systemic barriers to financially and psychologically vulnerable individuals.

Key DTC proposals include: recommendation 2.3 -The Canada Revenue Agency state in its explanatory materials and on the application form for the disability tax credit that some impairments in function can result in a marked restriction in a basic activity of daily living, even though these impairments may have signs and symptoms that may be intermittent; recommendation 2.4- the Income Tax Act be amended to provide that persons with a severe and prolonged impairment who are restricted in two or more basic activities of daily living qualify for the disability tax credit if the cumulative effects of the restriction are equivalent to a marked restriction in a single basic activity of daily living all or substantially all of the time.

"The DTC is a real hard issue to deal with," said Birch, "because the types of disability range and the impacts of those disabilities. It's very hard to quantify and do it in a way that meets everyone's needs. It's a very challenging task. I think that we saw a lot of improvement there. I wouldn't by any means say it's perfect, but I would like to think that we definitely made it more equitable than it was."

Within the second key provision, employment and education-related tax measures, the technical committee had early federal approval and adoption of one item. That item, recommendation 3.1, called for 100 per-cent deductibility of the cost of disability supports purchased for the purposes of employment or education. The proposal, with an estimated cost of $15 million annually, was implemented in the March 2004 budget as the new disability supports deduction.

Committee member Laurie Beachell (National Coordinator, Council of Canadians with Disabilities) affirmed it creates greater opportunity for those who have expenses related to education or employment to write those expenses off without a threshold, "such as what previously existed in the medical expenses tax credit-expenses over three per-cent of income, etc."

The committee's third key provision and proposals - those for caregivers and children with disabilities - focus on tax measures that provide some recognition of the costs that caregivers incur in providing support for adults with disabilities and that families sustain in raising children with disabilities.

"Tax fairness", according to the technical committee, requires equitable treatment among persons with disabilities and between persons with disabilities with and without taxable income. According to Beachell, the
other major component of the report is an acknowledgement that the tax system only has benefit for a certain segment of the disability population — those with a taxable income or someone a tax credit can be transferred to.

"The report probably does not address those who may have even greater disadvantage," he said. "When you recognize that many people with disabilities are unemployed, or poor, or live on social assistance, you realize that tax remedies for people with disabilities are extremely limited in their impact. Secondly, there are other sectors like aboriginal Canadians, First Nations people, who are excluded from the tax system; who, even when efforts are made to take up a benefit through tax measures, are not substantive."

The committee's closing proposal was created with the intent of recognizing the need for non-tax measures to create such equity for all members of the disability community. The proposal states that priority should be given to expenditure programs rather than tax measures to target new funding where the need is greatest, and recognized that the development of such programs would involve consultations with provincial and territorial governments and the disability community.

As Birch points out, "there is a lot that just cannot be done through the tax system, which can be better done through other mechanisms."

"At the end of the day, I think what the recommendations do," says Beachell, "is recognize that people with a variety of cognitive impairments, developmental disabilities, learning disabilities, mental health concerns have not had equal benefits on the disability tax credit. The report, I think, creates greater fairness, identifies the limitations of the tax system in addressing broad social policy needs of people with disabilities, and says ultimately what we need are greater services and supports at a community level for people to engage in employment, education and community life."

"I think what the community needs are two things. We need an investment and an engagement process that helps us develop a long-term strategy, the collaboration of federal and provincial governments and the disability community to define a ten-year action plan.

"We need at the same time, as other communities have seen, an earmarking of some initial resources.

Our community is saying, 'it's now time to commit some dollars to invest in disability supports.' CCD calls for an investment in disability supports that help people get education, get jobs, and participate in community life. And frankly, we believe there has been an erosion of those supports right across this country, as governments have done deficit reduction. We understood the need for governments to get their house in order. We have been patient. We say to governments, " now you have surpluses. Now you have monies to invest. It is time to invest in supports for people with disabilities to be equal and full citizens."

"For those persons with disabilities" says Birch, "the Disability Tax Fairness recommendations will help. It is not a windfall by any means, but it will help those who are working or who have taxable income. I do not think that we need to return to the tax table per-say in the foreseeable future, but focus on other mechanisms to create equity outside the tax system. I believe, as a technical committee on tax measures, our work is done."

 

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