The ability to deduct fees paid to a social worker as a medical expense was
dealt a blow last month in a Tax Court of Canada case involving an Ontario
resident.
On the advice of a doctor, the taxpayer's wife received counseling from a
registered Ontario social worker. In 2002, he paid $9,750 for her counselling
services and he claimed this amount as a medical expense for purposes of the
associated tax credit on his return.
The question the court had to answer was whether or not a provincially
registered social worker who provides counselling is considered a "medical
practitioner" under the Income Tax Act.
The Tax Act sets out the rules governing which expenses qualify for the tax
credit, specifically stating that "a medical expense ... is an amount paid to a
medical practitioner ... in respect of medical ... services." The Act further
goes on to define a "medical practitioner" as "a person authorized to practise
as such ... pursuant to the laws of the jurisdiction in which the service is
rendered."
The CRA's position was that in Ontario, a "medical practitioner" means
someone who is a member of the College of Physicians and Surgeons of Ontario.
Justice Judith Woods examined the Ontario rules governing the practise of
medicine, as set out in Ontario's Medicine Act, and agreed that "members of the
College are medical practitioners" for purposes of the Tax Act, and since social
workers are not members of the College, they are not medical practitioners in
Ontario.
Countering Justice Woods' findings, the taxpayer argued the term "medical
practitioner" should include a social worker who is registered under the Ontario
Social Work and Social Service Work Act, claiming "the counselling services
provided to his wife are the same as those provided by other health
professionals."
The judge disagreed, explaining that "a medical practitioner is someone who
is authorized to practise as a medical practitioner. From my review of the
legislation ... it does not authorize [social workers] to practise as a 'medical
practitioner' within the ordinary meaning of that term."
In a final attempt to legitimize his claim, the taxpayer pointed to a
February, 1998, CRA letter outlining CRA's administrative position on fees paid
to social workers. In that letter, the CRA states it will allow fees paid to
social workers to be claimed as valid, eligible medical expenses if the social
workers meet three conditions: they work in a recognized mental health clinic,
community agency or hospital; they are members of the association governing
their particular profession; and they provide treatment at the request of a
medical practitioner.
The taxpayer argued his claim ought to have qualified under CRA's published
administrative position. However, since the social worker who treated his wife
did not work in a recognized mental health clinic, the first condition for
administrative relief was not met.
Nonetheless, the Court does not have authority to provide any administrative
relief, but only to apply the law and, therefore, Justice Woods disallowed the
taxpayer's medical expenses, stating, "although the result may seem harsh,
Parliament has seen fit to limit the medical expense credit to payments to
certain types of health professionals."
Richard Sugarman, a social worker and family therapist with the
Neuropsychiatry Team at The Hospital for Sick Children in Toronto, is
disappointed in the ruling.
"It's not fair," he says. "This is a lost opportunity and will impose an
unfair burden on some people. Perhaps the Minister of Health should speak to the
Minister of Finance. Medical care is being protected; health care is not."
This case also highlights the difference between the law (the Tax Act) and
administrative practice (CRA's published positions), and emphasizes the caution
that must be taken when relying for tax guidance on an administrative position
of the CRA, especially one which seems to be contrary to the law.
The Tax Act, in sum, must be taken exactly as prescribed.