Policy Brief – Why is Uptake of the Disability Tax Credit Low in Canada? Exploring Possible Barriers to Access

Disability supports should be designed to provide benefit and not burdens to eligible recipients. Unfortunately, this is not a reality when it comes to one of the main benefits open to Canadians with disability: the federal Disability Tax Credit (DTC). Designed to recognize some of the higher costs faced by people with severe disabilities and their caregivers, the DTC appears to be more of a burden for many, with estimated utilisation unacceptably low at around 40 per cent of working-aged adults with qualifying disabilities. Low uptake is a concern not only because people are missing out on the credit itself but also because eligibility to the DTC – which is not automatic – is a gateway to other important and more valuable benefits such as the Child Disability Benefit and Registered Disability Savings Plans (RDSP). Why is take up low? Awareness and a burdensome application process are likely key contributing factors. There is also a lack of clarity around eligibility rules, which have been criticized for being open to interpretation, failing to accurately reflect the practicalities of living with a disability and requiring people with impairments in mental functions to meet a higher bar than for those with physical impairments. The design of the DTC may also be limiting utilization of disability benefits such as RDSPs that require DTC eligibility as a prerequisite. As a non-refundable tax credit, the DTC is a tax-fairness measure that benefits those who pay taxes (provides no monetary value to those without taxable income). It is poor design to use eligibility to a benefit, that does not provide value to all individuals with qualifying disabilities, as a gateway to benefits with different policy objectives. A policy overhaul of the DTC, and broader disability policy in Canada, is long overdue. This will require effort and the will to make the necessary changes to improve existing policies. Boosting awareness of the DTC, gaining a better understanding of the target population (particularly children with disabilities) and monitoring data on the DTC’s usage and reach, would go a long way towards improving uptake. Creation of a clear and transparent review and appeals process to replace the current and often inconsistent one would further knock down barriers to access. Improving the disability assessment process for the DTC and for other key disability benefits is also essential. More broadly, it is time for Canada to consider new coordinated policy measures that guarantee improved access, independence, portability and support for individuals with disability – particularly those living in low income.