Why is the Canada Revenue Agency denying the Disability Tax Credit to those who need it most?
A version of this commentary appeared in Policy Options, the Hill Times and the Vancouver Province
“Providing benefits not burdens” is how former Health Minister, Judy LaMarsh once described the vision for disability policy in Canada.
Unfortunately, this vision is not a reality when it comes to one of the main benefits open to Canadians with disability: the federal Disability Tax Credit (DTC). Administered by the Canada Revenue Agency (CRA), the DTC is designed to recognize some of the higher costs faced by people with severe disabilities and their caregivers.
Yet reports from Autism Canada and disability groups across the country suggest recent CRA decisions have resulted in people diagnosed with autism and intellectual disability having their eligibility to the DTC suddenly revoked or denied – against the CRA’s own rules.
This is unsettling news for families caring for children with disability, given three in four children with disability identify as having a cognitive or mental health-related disability. This issue goes beyond the credit itself, given that DTC eligibility is frequently used for access to additional federal and provincial disability benefits.
Revoking DTC eligibility means a family with a child with a severe disability can no longer receive up to $2730 through the Child Disability Benefit and $4000 or more in federal and provincial disability-related tax credits (depending on income and where they live).
They also must close their child’s Registered Disability Savings Plans (RDSP), forfeiting contributions from the government of up to $70,000 over the lifetime of the plan.
We commend the recent announcement by Minister Lebouthillier that a Disability Advisory Committee will be reinstated next year. The committee’s mandate of advising on the CRA’s administration and interpretation of laws and programs relating to disability tax measures is sorely needed, as are efforts to improve awareness of the DTC and related benefits.
However, the committee has its work cut out for it. Recent concerns about people having their DTC eligibility revoked are only the tip of the iceberg.
Research tells us the DTC is already underutilized, meaning most Canadians with qualifying disabilities are not accessing the described benefits and credits. Of those who do claim the credit on their tax returns in any given year, only half of all claimants (including caregivers) actually receive value from the DTC.
In addition to awareness, three major barriers to accessing the DTC need to be addressed.
Firstly, the DTC is a non-refundable tax credit, which means that the credit itself is only valuable to those earning enough taxable income. This means it would be of little or no direct benefit to the one in five families in Canada with a child with a severe disability living in low income.
Secondly, eligibility criteria are poorly operationalized. Criteria have been criticized for lacking clarity, being open to interpretation, failing to accurately reflect the practicalities of living with a disability and requiring people with impairments in mental functions to meet a higher bar than for those with physical impairments. The CRA have even departed from wording in the Income Tax Act in tests of impairment in the DTC application form, which can impact whether a person receives DTC eligibility or not.
Finally, the application process is burdensome. The CRA’s public consultations in 2014 demonstrated that the application process was not user-friendly, resulting in a shorter form. However, access to help and information from the CRA has been reduced in recent years, with the Auditor General findings this month showing that two in three calls to the CRA’s call centers go unanswered.
The absence of a clear and transparent appeals process is also a problem.
Consequently, some seek paid professional support to access the tax credit, including people with limited resources to spare. Third-party companies to help people apply for the DTC, many with hefty fees, are commonly used, necessitating laws to limit the amount they could charge applicants (something else that’s been on the government “to do” list for years).
The good news is that these are problems an empowered and transparent DAC can advise on. But this is a lot to take on for a committee of 12 voluntary unpaid members meeting three times a year.
The CRA is the gatekeeper to several key federal disability benefits underutilized by eligible Canadians. There are issues that the CRA can – and should – address immediately, such as amending eligibility criteria to better align with the Income Tax Act.
It is time the federal government started taking this seriously.
If you’d like to read the full policy brief by Jennifer Zwicker and Stephanie Dunn, please click here.
Dr. Jennifer Zwicker is an expert advisor with EvidenceNetwork.ca, a Director of Health Policy at The School of Public Policy and Assistant Professor in the Department of Kinesiology at the University of Calgary.
Stephanie Dunn is a Research Associate in the Health Policy division at The School of Public Policy at the University of Calgary.
This work is licensed under a Creative Commons Attribution 4.0 International License.