Advisory committee says disability tax credit should be refundable

The federal government should make the disability tax credit (DTC) refundable as a “first step” in addressing poverty among persons with disabilities, suggests Canada’s disability advisory committee (DAC) in a report.

The government should also consider providing a basic income for persons with disabilities, said the report released Friday.

“Converting the DTC to a refundable credit would be an important first step, a foundation, in creating a basic income for Canadians with severe disabilities who face disproportionately high rates of poverty,” wrote the DAC in the first annual report since the committee was reinstated in late 2017.

The DTC is currently non-refundable.

The DAC’s mandate is to advise the Canada Revenue Agency (CRA) on how it can improve the way it administers and interprets tax measures for Canadians with disabilities, and how it can better respond to the needs and expectations of this community. It was first created in 2005 and disbanded the following year.

In its 2019 report, which it presented to the minister of National Revenue and the CRA commissioner, the DAC made 42 recommendations grouped into four general categories in a document released with the report. Those categories were:

• Making it a priority to help Canadians with disabilities
• Making it easier for more Canadians to qualify for the DTC
• Making the DTC application process fairer
• Making it easier to keep Registered Disability Savings Plans (RDSPs) and get other disability benefits

The report argued that, as a non-refundable tax credit, the DTC currently offers “little or no value to Canadians who are too poor to pay income tax, except for any benefits resulting from the DTC being a gateway to other programs.” On the other hand, converting the DTC into a refundable tax credit “would provide some financial assistance to lower- and modest-income individuals with severe disabilities to help offset their disability-related costs.”

While a basic income for persons with disabilities was not specifically among the 42 recommendations, the report argued that introducing such a program could help the government address the issue of poverty among persons with disabilities.

“Tax credits can go only so far in tackling poverty alleviation. Income security programs are required to address this objective,” the report said, noting that Ottawa already provides financial assistance to low-income seniors and low-income families via the guaranteed income supplement and Canada child benefit, respectively. “There is significant policy precedent for this action in Canada.”

The report also recommended that the government consider making poverty alleviation of persons with disabilities a focus of all relevant federal-provincial meetings, and that there be no clawbacks at the provincial level for any new federal measures to alleviate poverty among the disability community.

The federal government responded to the DAC report Friday by acknowledging the committee’s recommendations and saying that it remained committed to meeting the needs of persons with disabilities.

The government also highlighted the fact that it had already met some of the committee’s recommendations, including one to allow Canadians to keep their disability savings grants and bonds for all periods in which they qualify for the DTC. In the 2019 federal budget, the government proposed eliminating the requirement to close an RDSP when a beneficiary no longer qualifies for the DTC.

Finally, the government said that it expects to implement many of the report’s recommendations related to administrative improvements by spring 2020, and that it would work with the committee in the coming year to develop an approach to address more complex recommendations that were beyond the CRA’s immediate purview.

“I look forward to talking with members [of the committee] about the report findings, which can serve as the basis for lasting improvements in the living conditions of people with disabilities,” said National Revenue Minister Diane Lebouthillier in the release.

Some of the report’s other recommendations included:

• raising awareness about tax measures for persons with disabilities;
• collecting a wider range of DTC data;
• making the DTC form easier to fill out;
• providing denied DTC applicants more information about why they were denied, and what options they have;
• reconsidering whether the DTC should be a gateway for other benefits;
• making eligibility criteria for both mental and physical functions clearer and more clinically accurate; and
• automatically qualifying individuals for the DTC if they have certain health conditions or need life-sustaining therapy.

Read the full report here.