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- Title
2005-6 Award-Winning Student Paper: The Canadian Tax Foundation-Fasken Martineau DuMoulin Award for Ontario.
- Abstract
The ongoing debate about private health care in Canada was further fuelled by the Supreme Court's ruling in Chaoulli v. Quebec (Attorney General) (2005), which held that prohibitions on private health care violated the Quebec Charter of Human Rights and Freedoms. Currently, the role that private health care will play in Canada's future remains uncertain; however, the expansion of a private second tier of health care is a very real possibility. The author looks at Canada's current tax treatment of permitted private health-care expenditures and at other countries' experiences with the taxation of private health care. It is likely that the subsidization of private health-care costs would occur via an employee benefit exclusion for health-care benefits and a medical expense credit, the two measures already used in Canada. A third measure, the health savings account, which permits tax deductible contributions and tax-free distributions, is becoming popular internationally. The author critiques these measures in terms of traditional tax policy criteria to determine whether they should be retained in their present form or modified if an expanded private tier of health care emerges. In the author's view, equity is undermined by all three measures. The employee benefit exclusion and the health savings account result in an upside-down subsidy whereby the wealthiest segment of the population receives a disproportionate benefit. The medical expense credit, in its current non-refundable form, is similarly limited because those with insufficient income to absorb the credit are unable to take advantage of it. Neutrality is compromised because the existence of the tax measures distorts individual choices about medical expenditures, insurance coverage, and even place of employment. While the measures vary in their degree of simplicity, subsidies designed to achieve equality are typically more complex. However, it seems that, for Canadians, equality at the expense of simplicity is the more palatable choice. Finally, because the subsidization of private health care is costly for the government in terms of forgone revenue, the author examines the three measures from a tax-expenditure perspective. The narrower objective of reducing the financial burden on users of private health care and ultimately facilitating access to the private system is at least partly achieved, albeit more successfully for those with higher incomes. However, the broader objective is to reduce wait times and costs in the public sector, and international experience with private and two-tier health care demonstrates that these tax expenditures do not successfully achieve this objective.
- Subjects
CANADA; MEDICAL care; LEGAL judgments; CANADA. Supreme Court; CHAOULLI v. Quebec (Supreme Court case); MEDICAL care costs; MEDICAL savings accounts; TAX expenditures; TAXATION
- Publication
Canadian Tax Journal / Revue Fiscale Canadienne, 2006, Vol 54, Issue 3, p695
- ISSN
0008-5111
- Publication type
Article