A fresh controversy linked to the Liberal government’s approach to taxation erupted on Sunday when a group of health professionals, accompanied by the Conservative finance critic, held a news conference in Ottawa to denounce “thousands of dollars in tax increases” for people with Type 1 diabetes.
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This complaint is not really new, as interest groups have been trying to flag the problem to the federal government for several months. But with the backing of the official Opposition, it’s now making headlines, becoming the latest in a growing list of tax-related headaches for the Liberals.
There has already been some stinging backlash on social media:
Here’s a look at what’s at stake, who is losing out and what the government is saying in response.
What’s the problem?
The complaint coming from groups like Diabetes Canada is simple: Canadians diagnosed with Type 1 diabetes (of which there are an estimated 250,000) used to be approved relatively easily for a tax credit to help with their out-of-pocket medical expenses. That has changed.
Managing the autoimmune disease can cost between $5,000 and $15,000 a year. There is no way to prevent or cure Type 1 diabetes.
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In order to qualify for the disability tax credit, a medical professional (doctor or nurse) must certify that a patient has a severe and prolonged impairment in physical or mental functions, as defined in the Income Tax Act.
The Canada Revenue Agency evaluates each case individually, verifying that the patient requires “life-sustaining therapy” administered at least three times a week, for a total of at least 14 hours a week.
For a Type 1 diabetic patient or their parent, that could include the time preparing or receiving insulin therapy, but it does not include the time spent planning meals or going to pick up medication.
The credit is worth up to $1,500 a year.
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The number of Canadians with Type 1 diabetes who have been rejected for this credit has recently skyrocketed, according to Diabetes Canada. Up to 80 per cent of patients used to have their claim approved, the organization claims, and now most are turned down.
Late Monday, the CRA said it had “no reason to believe that DTC rejections for diabetes-related cases are anywhere near as high as was suggested. As we speak, CRA officials are reviewing a selection of eligibility decisions related specifically to diabetes.”
Those same patients may still qualify for other disability-related tax breaks, like the Canada Pension Plan Disability Benefit or provincial disability benefits.
So while the government may not be “targeting vulnerable people suffering with diabetes with thousands of dollars in tax increases,” as the Conservatives suggested on Sunday, it’s certainly true that fewer people are being approved for this specific federal tax credit.
Why are T1 diabetics being rejected?
Even the government seems unsure of what, exactly, is behind this shift.
According to CRA spokesman John Power, the concerns raised on Sunday are “worrisome,” especially since the government has not changed the eligibility criteria for the credit, nor has the CRA changed how it decides who qualifies for the credit and who does not.
Similarly, Power said, the CRA’s interpretation of “life-sustaining therapy” and the 14-hour time requirement have also remained constant.
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So what’s happening? One possible explanation, hinted at by the CRA, is a change in who actually reviews and approves each individual claim.
In the past, registered nurses were hired by the CRA to work in its processing centres. At some point (it’s unclear when), they were removed from the approval process, meaning that a medical professional isn’t necessarily involved in reviewing the applications anymore once they reach the CRA.
Another possibility is that there has been an overall increase in the number of claims. In this year’s budget, the Liberals made it easier for Canadians to apply for the disability tax credit (regardless of their condition) by allowing nurse practitioners to sign off on the applications. Before last spring, only a doctor’s signature would do.
But Diabetes Canada says many patients are suddenly being rejected for the credit because “the type of therapy indicated does not meet the 14 hours per week criteria.”
On Sunday, Power told The Globe and Mail that it’s possible there is confusion among doctors and nurses as to which activities qualify. That could theoretically lead them to include things like meal planning in the 14-hour time estimate.
The Conservatives, meanwhile, have labelled this a simple “tax grab,” used to pad out government coffers.
“This government is trying to raise additional tax revenue at the expense of diabetics,” said Conservative national revenue critic Pat Kelly in a written statement.
“This is part of an alarming trend from a government increasingly desperate to raise revenue to fund its out-of-control spending.”
The government had been taking its time responding to the concerns, according to the interest groups that sent a letter to Minister of National Revenue Diane Lebouthillier in early October.
But under increased pressure this week, Ottawa has now released a multi-point plan.
The plan includes hiring back registered nurses to work in the CRA processing centres, further simplifying the tax credit application process, promoting the credit and explaining the application process and eligibility more clearly, and seeking feedback from “stakeholders and partners, including medical associations.”
In the House of Commons on Monday, Lebouthillier said she understands the concerns raised by the diabetes groups.
“The father of my children passed away from diabetes complications,” she said.
“I have asked the agency to improve its data collection for the (disability tax credit) in order to better understand the portrait of claims and the decision-making process.”