Law blocks disabled from people’s tax court
TheStar.com – Business/Personal Finance
Published On Fri Nov 05 2010. By James Daw, Personal Finance Columnist
A gap in recent legislation appears to have turned the people’s court for unhappy taxpayers into a court without access to the poor and disabled.
“It’s not right,” says lawyer David Sherman, editor of the Practitioner’s Income Tax Act, echoing the sentiments Tax Court of Canada judge Gerald Rip expresses in a new ruling.
“Nobody intended this to happen,” Sherman suspects.
As soon as the court released Rip’s ruling this week, he dashed off a note to a senior tax policy official. Then we conveyed his concerns to an aide to Finance Minister Jim Flaherty.
We suspect the issue would be near and dear to Flaherty’s heart, but he and his aide were unavailable Friday afternoon. They were on the other side of the world for meetings.
It relates to the Registered Disability Savings Plan, the new tax-deferred savings plan he introduced so that family and friends may contribute to protect a disabled person in retirement.
“Annette (Robertson) and the minister are at Asia-Pacific Economic Co-operation in Japan, and likely both asleep,” said Chisholm Pothier, Flaherty’s director of communications. “So getting input from the minister on this (before your deadline) is likely impossible.”
For a person to be eligible to make or receive contributions to an RDSP, that person must be sufficiently disabled to qualify in the tax year for a disability tax credit. That requires the support of a doctor, and the agreement of the Canada Revenue Agency.
Doctors and the CRA have turned away folks who qualify for Canada Pension Plan disability pensions. But courts have overruled the CRA’s tough stance in several published case.
Giovanni Tozzi of Montreal tried to bring his appeal before the Tax Court of Canada. But Judge Rip ruled with regret he is powerless to interfere in a situation where the taxpayer is assessed as owing no taxes.
Tozzi owed no tax in 2008 when RDSPs became available. He applied in early 2009 for the disability tax credit, before the tax filing deadline. But his application was denied by CRA.
Rip does not provide details of Tozzi’s situation in his ruling. But, as Sherman notes, it would be common for someone with a low income, someone receiving tax-free welfare benefits and someone receiving a tax-free disability income to have no tax payable, or what’s called a nil assessment.
Tozzi was represented by an agent named Vincent Biello, not a lawyer. The Tax Court of Canada is quite informal. You may write a letter to ask to be heard, and have a friend or accountant represent you.
“Mr. Tozzi’s agent, Mr. Biello, who very well represented Mr. Tozzi, also argued that the inability to appeal from a nil assessment ought not to apply to appeals from assessments. . . where the issue relates to eligibility for RDSPs,” Rip wrote.
It would seems that no one thought of that ahead of Flaherty introducing RDSPs, effectively erecting a barrier or removing elevators to block the poor from the Tax Court of Canada.
“This Court unfortunately has no lawful jurisdiction to order the Minister (of Revenue) to recognize Mr. Tozzi’s disability, if the Court should find he is disabled, for purposes of the disability savings plan,” Rip wrote.
Tozzi, and any other low-income person denied the disability tax credit, could only get around this gap in the law by hiring a lawyer and appealing to the much more formal, and complicated, Federal Court of Canada.
“It is simply not right for the Crown (the government) to act behind a nil assessment to prevent Mr. Tozzi from applying for a disability savings plan,” Rip writes.
Sherman agrees, and so do we.
Perhaps a lawyer will step forward to take Tozzi’s case at no charge. Perhaps Flaherty, a lawyer, will commit to correct things when he returns.
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