REFERENTIAL TAX LEGISLATION: THE ROLE OF PROVINCIAL LAW IN THE MEDICAL EXPENSE TAX CREDIT

Abstract

Since 2001 there has been an explosion of Tax Court of Canada decisions interpreting “medical practitioner” for purposes of determining a taxpayer’s eligibility for the medical expense tax credit. In each decision, the definition of medical practitioner was indirectly provided by provincial (or other non-federal) law. This article considers the role of non-federal law in the current interpretation of “medical practitioner” under subsection 118.4(2) of the Act. Based on the history of the provision and the policy implications of deferring to non-federal law in this context, it is argued that the role of non-federal law under the medical expense tax credit is atypical and its consequences are difficult to justify from a federal tax policy perspective. Further, it is argued that the current reliance on non-federal law represents an unexplained and dramatic policy shift following the 1988 amendments that converted the prior deduction for certain medical expenses into tax credits. This policy shift results from the definition of “medical practitioner” as “a person authorized to practice as such … pursuant to the laws of the jurisdiction in which the service is rendered” (the words “as such” were added making it a reflective definition). Case law following the 1988 amendments interpreted the definition of “medical practitioner” to require a substantive determination under provincial (or other nonfederal) law. Implications of, and alternatives to, defining this term under provincial law are explored. The constitutional basis for incorporating provincial law in this fashion is discussed, concluding that the decided constitutional authorities cast significant doubt on the federal government’s competence to adopt provincial law in this fashion on a division of powers basis. Although the scope of this paper is limited to the role of non-federal law in the context of the medical expense tax credit, the implications of the reliance of non-federal law pervade the interpretation of federal taxation law in Canada.