Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 19 - Evidence for September 21, 2000
OTTAWA, Thursday, September 21, 2000
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-24, to amend the Excise Tax Act, a related Act, the Bankruptcy and Insolvency Act, the Budget Implementation Act, 1997, the Budget Implementation Act, 1998, the Budget Implementation Act, 1999, the Canada Pension Plan, the Companies' Creditors Arrangement Act, the Cultural Property Export and Import Act, the Customs Act, the Customs Tariff, the Employment Insurance Act, the Excise Act, the Income Tax Act, the Tax Court of Canada Act and the Unemployment Insurance Act, met this day at 11:05 a.m. to give consideration to the bill.
Senator E. Leo Kolber (Chairman) in the Chair.
[English]
The Chairman: The first item on our agenda is pursuant to the order of reference adopted by the Senate on Wednesday, June 28, 2000. The committee has before it Bill C-24, the Sales Tax and Excise Tax Amendments Act, 1999.
Can we proceed to consideration of Bill C-24 and can I dispense with clause-by clause consideration?
Senator Tkachuk: Yes, you can, but I would like to raise several topics that you and I discussed, Mr. Chairman. I do not know how the rest of the committee members feel, but I thought there was some concern yesterday about our report and that it should strengthen the undertakings of department officials given the lateness with which some of these amendments were made to the act. Some of them are from eight years ago, five years ago and four years ago. I do not know exactly how the language would read, but that is something I believe we would all be concerned about. Perhaps we should mention in the report, as a recommendation, that these amendments to the tax act be included in legislation much more quickly than they are now.
The Chairman: There was a general voicing of displeasure regarding the fact that we are dealing with material that is so archaic that it is almost irrelevant..
Senator Tkachuk: It is law without law. Tax is being collected without tax law in place. If there is ever a court case, I do not know how it will be handled. It seems to me to be a bit of a problem.
The Chairman: Is that agreed, senators?
Hon. Senators: Agreed.
The Chairman: We are in full agreement, then. Do you want us to check with your office as to the wording?
Senator Tkachuk: No, I think it will be all right.
The Chairman: Just voice general displeasure.
Are there any other matters?
Senator Tkachuk: What did we do with the psychoanalytic services? I notice you obviously got on to the department as you promised yesterday. I am not prepared to make an amendment for sure because I do not know anything about it.
The Chairman: Could you give us a two-minute resumé of what this says?
Ms Marlene Legare, Senior Chief, Sales Tax Division, Tax Policy Branch, Department of Finance: Mr. Chairman, as has been requested, we summarized the situation with respect to the original exemption for psychoanalysts and the removal of that exemption, which was proposed in 1996 and effected in 1997.
The original exemption for psychoanalytic services was added to the bill that introduced the GST by the House of Commons Finance Committee in response to representations by the Canadian Psychoanalytic Society. At that time, the exemption provided that practitioners who could be exempt had to receive the same training in psychoanalysis as that of medical doctors who perform psychoanalytic services. As well, the exempt practitioners had to be members of the Canadian Psychoanalytic Society. It was not named, but the description of the society basically encompassed the Canadian Psychoanalytic Society.
Subsequent to that, two major problems were encountered. First, with respect to that particular exemption and the criteria that had applied to it, the department and the Minister of Finance received representations from other psychoanalysts practising in Canada at the time who did not meet the exemption criteria. Of course, because this exemption had been added to the bill at a relatively late stage, it had not been put out in draft legislation for consultation; hence, this was the first opportunity for these other psychoanalysts to comment on it. What they brought to light was the fact that not all psychoanalysts practising in Canada belong to the Canadian Psychoanalytic Society, which essentially is comprised of members who follow the Freudian theory of psychoanalysis.
These other psychoanalysts argued that the exemption was discriminatory because they likewise had high qualifications and standards of practice. They were not a large enough group to meet the criteria provided by the legislation of having a minimum of 300 members, nor were they large enough to have their own national society, but they belonged to a North American society.
They saw that the exemption criteria appeared to be based on the theory to which the practitioners subscribed and/or the number of their members, neither of which, obviously, is an appropriate criteria for differentiating between taxable and tax exempt treatment under the GST. Therefore, it was necessary to revisit that exemption and implement a more rational way of determining who should be exempt among psychoanalysts.
In the broader context, and particularly as a result of the enactment of that special provision for psychoanalysts, the minister received many representations from practitioners in the health field who were not on the list of exempt practitioners, and it was not clear to them why they were not. When we began to look at the list, it was clear that there was a lack of consistent criteria for differentiating between exempt and taxable services.
Sometimes the practitioner would not clearly fall into what we think of as the traditional health care field, such as practitioners of naturopathy and homeopathy. Guidance counsellors are another example. They are not only employed by schools but are sometimes self-employed. Life skills counsellors help inmates reintegrate into the community and provide a range of services. These kinds of practitioners asked why they were not exempt.
In 1996, as part of the government's overall review of the GST system, the government decided to include the treatment of health care in its broader review. As a result, the government concluded that the criteria should be clear, consistently applied, objective, and based on provincial practices because provinces were better placed than Finance Department officials to determine whether a health care service merited coverage under the health care plan.
To put it in simple terms, if a person visited a practitioner, the fee for the visit would be exempt in all cases if the practitioner was a medical doctor. Obviously, it would be completely impractical for a medical doctor to have to show that the service involved no taxable aspect. If medical doctors were supplying psychoanalytic services as well as giving physical examinations, it would be impractical for them to separate their fee. Therefore, if the service is provided by a medical doctor, it is always GST exempt. In addition, if the service, even if not provided by a medical doctor, is covered by a provincial health insurance plan, that visit is exempt as well.
There are two final criteria. The first is that if a visit to that practitioner would be covered by a provincial health insurance plan if the practitioner were carrying on that practice in two or more other provinces, it would be GST exempt. The second is if that practitioner's service would be provincially regulated in at least five provinces if that practitioner was carrying on his practice in those provinces, it would be GST exempt.
This criterion was applied to all the services that were then on the list of exempt services. Some, such as psychoanalytic and speech therapy services, did not meet the criteria, and it was proposed that they be taken off the list. Others did, such as dieticians. They were not on the exempt list. They met this criteria, so they were added.
As a footnote, the exclusion from the exemption for speech therapy service has been delayed because they are in the process of becoming regulated in a fifth province.
The criterion was applied consistently to all the services. The main advantage of taking this approach was that the Finance Department got out of making the determination of whether something should be exempt as a health care service. We are really not positioned to make that decision. The criteria is more objective and it simply relies on provincial practices.
In fact, the members of the Canadian Psychoanalytic Society do not satisfy these criteria in the case of a practitioner who is not a medical doctor and whose services are not covered by a health care insurance plan.
Senator Furey: As we heard yesterday, all psychoanalysts are not medical doctors. Are you saying that members of the same group who provide the same service and happen to be medical doctors are exempt, but those who are not medical doctors are not covered?
Ms Legare: Yes.
Senator Furey: Even though they are providing the same service?
Ms Legare: The services of a medical doctor are exempt and we do not inquire into what those services are. It would be impractical to tax psychoanalytic services provided by a medical doctor because the argument could always be made that the doctor also provided, and perhaps mostly provided, medical services.
Senator Furey: Are you saying that it is discriminatory to go the other way and include only the members of the Canadian association because there are other psychoanalysts who are not members of the association?
Ms Legare: That is right. The criterion that was relied upon pre-1996 is unsustainable because it does discriminate among psychoanalysts.
Senator Tkachuk: Between the Jungians and the Freudians.
Ms Legare: Yes.
Senator Hervieux-Payette: What is the view of the Department of Health on this issue? This service prevents some further health care expenditures. It is a very expensive service. People who follow this procedure deserve much admiration because it takes years and costs thousands of dollars. Yet, we tax these people who are willing to cure themselves at their own expense.
Why would we not be happy with this and encourage those who are recognized as professionals, although not necessarily recognized by a profession? What is the view of the Department of Health?
Ms Legare: I know that the Department of Health was consulted on the review of the treatment of health care services under the GST and in particular on qualifications and whether services that were then on the list of exempt services met the criteria. We worked with the Department of Health in establishing that.
Members of the Canadian Psychoanalytic Society have themselves made the point that you must bear in mind that the vast majority of psychoanalytic services are not subject to GST, either because they are provided by a medical doctor or because they are covered by the provincial health care plan.
There are a relatively small number who have to charge tax on their service, and those who must do so because they are providing, as non-medical doctors, an uninsured service.
As I mentioned, a long list of highly qualified practitioners provide services that they argue are in the health field. The question became whether it was appropriate for us to determine if these services should be exempt health care services.
I go back to the example of life skills counsellors, naturopaths, homeopaths, and so forth. In the absence of a set of consistently applied, clear criteria, there was basically an arbitrary schedule of exempt services and the squeaky wheel would get on the list.
Once you depart from those criteria, there is no sustainable basis to say no to qualified professionals in their field who have some bearing on a person's overall health.
Senator Hervieux-Payette: Did you say that naturopaths and homeopaths are covered or are not covered?
Ms Legare: They are not on the list of exempt practitioners.
Senator Hervieux-Payette: Their services are taxable, then.
Ms Legare: The services are taxable if the service is not provided by a medical doctor.
Senator Hervieux-Payette: The government reimburses homeopathic services with its own health care plan.
Ms Legare: I should clarify. If a particular visit is covered by a provincial health care plan, there will be no GST on the fee for that visit.
Senator Hervieux-Payette: I am talking about senators. We are reimbursed by Sun Life for homeopathic services. My employer is the Senate of Canada.We recognize these services as being insurable and we pay a premium for that, yet you tell me that they are not covered.
I just want to know the rationale. I come from the department of social affairs in Quebec. We know that everything dealing with health has been taken over by one profession, that being the profession of medical doctors, but there are others who provide health care services, such as homeopaths and naturopaths. In the last international study on the quality of health care, France was rated first.There are 10,000 homeopaths in that country and their services are insured.
I wish that there could be a more in-depth consultation so that we could have a more holistic approach to health issues, because the whole issue is being revised by all governments.
Ms Legare: The government decided to adopt criteria based on provincial practices for exactly that reason, so that there would be some consensus on what is a health care service.
The Chairman: Trends in medicine are quite interesting. Doctors who graduated 30 or 40 years ago used to laugh about vitamins and natural medicine. Now our research institutes are studying these issues and are being taken very seriously. Our traditional medicine may not be the entire answer any more. There has been a change, and I think that Senator Hervieux-Payette is exactly right.
I think the consensus of the committee is that what is being done here is really not fair.
Senator Hervieux-Payette: It is unfair to the doctors, but more so to the patients. These people are going through a very painful exercise that costs many thousands of dollars. In addition to that, we impose a tax.
The Chairman: On behalf of the committee, I suggest that you further study this matter and report back to us in a few months.
Ms Legare: Certainly.
The Chairman: Thank you very much.
Is it agreed, honourable senators, that I report Bill C-24 to the Senate with observations, as suggested by Senator Tkachuk?
Hon. Senators: Agreed.
The committee adjourned.