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Report of the Standing Senate Committee on Social Affairs, Science and Technology, entitled Breaking Down Barriers: A critical analysis of the Disability Tax Credit and Registered Disability Savings Plan

Report of the Standing Senate Committee on Social Affairs, Science and Technology, entitled Breaking Down Barriers: A critical analysis of the Disability Tax Credit and Registered Disability Savings Plan

Report of the Standing Senate Committee on Social Affairs, Science and Technology, entitled Breaking Down Barriers: A critical analysis of the Disability Tax Credit and Registered Disability Savings Plan

Hon. Art Eggleton moved:

That the twenty-sixth report of the Standing Senate Committee on Social Affairs, Science and Technology, entitled Breaking Down Barriers: A critical analysis of the Disability Tax Credit and Registered Disability Savings Plan, tabled with the Clerk of the Senate on June 27, 2018, be adopted and that, pursuant to rule 12-24(1), the Senate request a complete and detailed response from the government, with the Minister of National Revenue being identified as minister responsible for responding to the report, in consultation with the Ministers of Finance and Families, Children and Social Development.

He said: Colleagues, people with disabilities face many challenges in day-to-day living in our country, whether those are barriers to employment or housing, and transportation issues. The biggest one of them all is financial issues because if people have disabilities, they are twice as likely to be in poverty as people who are not having to deal with disabilities.

There are 3.8 million people in this country with disabilities. This specific report deals with 1.8 million of those. These are 1.8 million people who have severe and prolonged disabilities.

We try to help them from different orders of government — federal, provincial, municipal — in terms of social support programs and also tax breaks. This report is specifically about a tax break called the Disability Tax Credit. It’s there to help people with severe and prolonged disabilities. Unfortunately, it doesn’t help an awful lot of them. Two thirds of people in that category can’t get this Disability Tax Credit. Why would that be? It’s simply because they don’t make enough money against which to apply the tax credit; they don’t have enough income to take advantage of it.

The one third who remain to take advantage of it, who were really the initial subject of this report, were running into problems. The Disability Tax Credit is administered by the Canada Revenue Agency, the tax people. And they do this in accordance with an amendment to the Income Tax Act that allows for people with severe and prolonged disabilities to qualify for the Disability Tax Credit as long as they have certification by health care professionals.

It also connects into another program that we looked at in this report, and that is the Registered Disability Savings Plan, or RDSP. You can’t get the RDSP, which has various components to it, unless you qualify for the Disability Tax Credit. If you do qualify for it, what turns out to be the reality is that only 25 per cent of them actually have it. A lot of people don’t seem to know much about it or how it works. That’s 25 per cent of the third I talked about in the first statistic. It really has a small takeup.

If for some reason the Disability Tax Credit gets cancelled, that cancels the RDSP. In fact, since the government provides either grants or bonds — please read the report; I don’t want to get terribly complicated on this whole matter — the government expects the grants and bonds to be paid back, adding to the financial burden of some of the most vulnerable people in our country.

What triggered this study particularly was the fact that in the last fiscal year, 2016-17, the CRA decided to make changes in how they interpret the application of the law. What was the result? The number of applications they rejected rose by 50 per cent. Some of the people they disqualified suddenly were people who had been on the system for years and the medical personnel were still saying they qualified. But the CRA said they didn’t qualify, or so they thought in the first instance.

The Minister of National Revenue then had lots of representation about that and she, the Honourable Diane Lebouthillier, got involved, reviewed the matter and said she felt there were some unintended consequences as a result of this change in interpretation. She asked that all the ones that were rejected be reviewed. That’s apparently a process that is still ongoing.

She also re-established the Disability Advisory Committee. There had been one in 2004. It was eliminated in 2006, so she brought it back into existence. Still we have the case where the CRA, the people responsible for enforcing the tax codes, which is a different mindset from operating a social program — in fact, I would like to quote from André Picard, who wrote a column in The Globe and Mail supporting our endeavour in this report and at the committee:

The last people who should be shaping social policies for the most disadvantaged are anonymous accountants in the Canada Revenue Agency.

He wrote:

. . . pencil-pushers in the CRA have no business second-guessing a medical decision unless there is evidence of fraud.

None of us would disagree with this.

Our committee also got into the action at the time, because many of these organizations — Diabetes Canada, MS Society of Canada, Autism Canada and various other organizations — approached us. Senator Munson recommended to our committee that we have a look at this matter and make representations to the minister.

Let me leap to our recommendations, and I can add further comments as we go. We made 15 recommendations in all. I will not talk about all of them, but I will just mention a few.

First, we recommended that the Minister of National Revenue take steps to ensure the Disability Advisory Committee “better reflects the diversity of the larger disability community including intersectionality.”

With regard to the larger disability community, one of things we found with this advisory committee was that organizations such as Autism Canada that deal with neurodevelopmental issues were not represented. You don’t have to have every organization, but you need to have every category. One of the problems the CRA seems to have when they’re processing these applications is that they have a hard time coming to grips with people with mental issues or neurodevelopmental issues. The program was originally intended more for physical disabilities. The rejection rate for ones that involve mental issues is much higher than the ones for physical issues. Yet the applications coming in over the last few years have had more to do with the former, or a combination of mental and physical issues.

Another category that is not represented here is the MS Society of Canada — episodic disabilities. To qualify for the Disability Tax Credit, you have to have “a severe and prolonged impairment,” and “prolonged” means a year. However, some people with episodic ailments, such as multiple sclerosis, for which there is no cure — it’s a very serious matter — sometimes they are up and down. Sometimes they are not in a severe condition, but it still impacts their life; you can’t just go and get a job for a few months and then you are back on disability. It doesn’t work that way as far as the CRA is concerned. There needs to be a broader representation of the community and we said that in recommendation 1.

In recommendation 2, we said that we need to bring into force limiting the fees disability service providers can charge to complete the disability tax credit application.

Now, this is an interesting one because these forms must be certified. They must be filled out by health care professionals, doctors and nurses who get no compensation for that in the health care system. They either do it out of their good graces or they have to pass it on to the client or patient who in fact is applying for the tax credit. These people are very low-income people, as we have talked about already.

Beyond the professional health care people, there are some consultants or companies who will do the forms for you if you give them up to a third of what you are going to get back in taxes. They gouge you for that.

However, legislation was passed by the previous government in 2014. Here we are in 2018, and they still haven’t finished the regulations. The regulations are still not in effect. We suggest they’d better get the regulations into effect, but we also suggest they increase funding to non-profit disability community organizations to help those organizations to be able to volunteer to help people in need with filling out the forms.

Another minister comes into this because it is an Income Tax Act provision that revises the disability tax credit eligibility criteria to be more even-handed in terms of people with mental illness. They are much easier on people with a physical illness in terms of what they have to prove, so we have a recommendation on that.

Recommendation 4 says that the Minister of Finance should revise the credit rules to better recognize the lifelong nature of certain physical and mental disabilities in order to eliminate the need to re-apply for the credit. Every now and then you have to re-apply even though you have a lifelong disability. The medical profession has told them what you have, but they want you to fill out the forms again. We are asking them to be a little more reasonable than that.

Recommendation 5, the applicant should have access to all relevant information. The applicants have been denied and their documents have been denied, too. One the problems is if you get rejected and you want to know why, they don’t tell you. They sometimes say they have additional information from somebody, the medical care person perhaps, but they won’t give it to you. How do you appeal when you can’t get the documentation that would tell you what the basis is to make your appeal?

Another recommendation is that people who do get disqualified, perhaps for a valid reason, that they will not have to give up their Registered Disability Savings Plan because a lot of these people still have difficulties in coping with day-to-day living and need those kinds of savings to help them in future.

I’m not going to go on beyond that too much. Those are more short-term fixes that we think are needed to the system. There are a few others in here. We are almost up to four o’clock which is adjournment time. I do want to mention some longer-term solutions. We have three of them in fact that we suggested.

The first is that the disability tax credit be made a refundable tax credit when it’s non-refundable. But as I said, as a result of that, two thirds of people who should be able to qualify can’t because they don’t have any money to run the tax credit against. Refundable would mean they would start to get money.

We also suggested that since there is such a low take-up in the Registered Disability Savings Plan, we say that the Minister of Families, Children and Social Development should get more involved in all of this and take over some of the responsibilities from the Canada Revenue Agency accountants in terms of the administration of a social service program.

We’re saying that the Minister of Families, Children and Social Development should take steps to implement a system of automated enrolment. I think we did that on something else not too long ago in the Registered Disability Savings Plan. Once someone is eligible for the disability tax credit or the equivalent disability welfare benefits of provinces and territories — which we said there should be more harmonization between the provinces and between the programs and federal government — automatic enrolment in the Registered Disability Savings Plan with the monies the federal government adds in either the bond or grant forms should happen automatically.

Finally — this is always a favourite phrase of mine — basic annual income.

The Hon. the Speaker: Senator Eggleton, your time has expired. Are you asking for five more minutes? Is leave granted, honourable senators?

Senator Eggleton: Yes, please.

Hon. Senators: Agreed.

Senator Eggleton: Finally, we said in recommendation 16 that the Minister of Finance should work with the Minister of Families, Children and Social Development to develop a guaranteed basic annual income for Canadians with disabilities. This is something our committee recommended a number of years ago. We think that there are people who are particularly vulnerable in our society who need that kind of assistance, just like our seniors have. Seniors have a basic income program, and I think we should be doing that for people with disabilities.

Colleagues, in summary, what we heard was absolutely deplorable. We need to give better treatment and support to some of our most vulnerable people, those with disabilities. Thank you.

Some Hon. Senators: Hear, hear!