Decade long attack against people with disabilities takes new turn

Recent stories about alleged Disability Tax Credit (DTC) fraud are another chapter in the decade old battle of Canada’s tax man against people with disabilities.

Canada Revenue Agency had a project to deny the DTC  prior to 2001. That year it tried to disqualify hundreds of thousands blind, mentally ill and wheelchair bound Canadians with a single letter.

Ten years later the battle continues with an attack on firms who help people with disabilities get passed the complex bureaucracy that enshrouds the DTC.

While National Benefit Authority is the prime target, Canada Revenue has targeted all the firms that prepare the DTC forms.  The Toronto Star and CBC are making headlines with stories that distort the real situation.

The Disability Tax Credit is a non-refundable tax credit worth $1,100 annually. It is allowed by law for people who have a severe and prolonged mental or physical impairment. Generally it only applies to people who are working and earning an income, since it is non-refundable. 

See DTC in-depth – Dispelling the myths about controversial Disability Tax Credit

It baffles me why Canada Revenue has kept this battle going except they hate to lose at the tax office and they also like to pick on the weak and defenseless.

When Canada Revenue targets one group for audit it’s called a project audit. You don’t see them auditing lawyers and accountants since they can protect themselves. Canada Revenue like to pick on groups who are the least likely to defend themselves and bully them into submission.

Fisherman, farmers, small business people and people with disabilities are favorite targets for the taxman in their role as government bully.

The Canada Revenue project audit against the Canadians with disabilities and the DTC started in 2001. That summer letters went out to one third of the people who claimed the deduction in the prior year. The letter gave the disabled person a short time to re-qualify or lose the small credit.

Canada Revenue loses in court

While the DTC allowance in the Income Tax Act has always included most people with severe disabilities, Canada Revenue has historically tried to limit the tax credit.

In 2001, Lembi Buchanan won a case at Tax Court that proved one more time the DTC was meant for all people with a severe disability. DTC – Case Study of the Disability Tax Credit and Wife of Canadian with disability wins historic tax case against CRA

September 2001

The Council of Canadians with Disabilities (CCD) raised the issue of mass audits of the DTC in September 2001.  CCD raises cry about tax changes

“The Council of Canadians with Disabilities (CCD) office has received a number of calls from individuals who have received a letter from Canada Customs and Revenue Agency (formerly Revenue Canada) regarding their eligibility for the Disability Tax Credit.”

November 2001

“The Canada Customs and Revenue Agency (“CCRA”) is conducted a sweeping audit of Disability Tax Credit (“DTC”) eligibility,” reported ARCH an Ontario legal advocacy group.

“They are sending out form letters to taxpayers who have disabilities, or who have dependants with disabilities, and who have been allowed the DTC claim for previous taxation years. While no official figures are available, government officials have provided an estimate of 70,000 to 90,000 as the number of letters which have been sent out.”

Later that month, the Canadian Parliamentary Sub-committee on the Status of  Persons with Disabilities heard submissions from Buchanan and disability groups complaining about Canada Revenue’s attempt to “project audit” the DTC.

“We cannot condone a government department that has abandoned its responsibility to the most vulnerable members of our society by creating a form,” said Buchanan. “We expect our government to be fiscally responsible. But it is unconscionable when cost-saving measures are carried out by targeting our most vulnerable members of society.”

The Sub-Committee heard evidence that despite court cases against Canada Revenue, the tax agency was trying to change the application form to disallow more Canadians with disabilities.

March 2002

The Sub-Committee recommended in March 2002 that Canada Revenue write Canadians with disabilities who they tried to disallow and apologize.

The Sub-Committee also recommended that Canada Revenue design the form to agree with the law and court rulings. Getting it Right for Canadians: The Disability Tax Credit

August 2002

Then-Minister of Finance John Manley tried to introduce amendments to the Income Tax Act in August 2002 that would have denied the DTC to even more Canadians. Disability Tax Credit Clarification Proposed by Finance

This set off howls of protest from Canadians with disabilities, their advocates and Members of Parliament.

November 2002

The House of Commons passed a unanimous resolution on November 21, 2002 censuring Canada Revenue and Manley,

“That this House call upon the government to develop a comprehensive program to level the playing field for Canadians with disabilities, by acting on the unanimous recommendations of the committee report “Getting It Right for Canadians: the Disability Tax Credit”; in particular the recommendations calling for changes to the eligibility requirements of the Disability Tax Credit so that they will incorporate in a more humane and compassionate manner the real life circumstances of persons with disabilities, and withdraw the proposed changes to the Disability Tax Credit, released on August 30th, 2002.”  Canada Revenue Agency censured in House of Commons

The matter was sent to another sub-committee and the changes to the DTC form were finalized on 2005.

Attack on firms who help in 2008

It is the 2005 changes that Canada Revenue dislikes and wants to roll back. The battle to retain this small tax credit continues.

In 2008, Canada Revenue began another of its program audits against the disabled, this time targeting firms who help people fill out the forms and navigate the bureaucratic process.