Towards Replacing the Goods & Services Tax: 3
 - Table of Contents - Previous - Next -

The health care sector

A number of changes are proposed to make the federal sales tax system fairer in its application to the health care sector.

Health care practitioners

Changes will be made in the tax treatment of health care services provided by health care practitioners who are not medical doctors or dentists. Certain health care practitioners who are specifically listed in the legislation are not required to charge tax on their health care services. Also, services provided by other health care practitioners not listed are exempt in a province where they are fully or partially covered by that province's health care plan.

Many health care professionals who are not on the list of exempt health care practitioners have expressed dissatisfaction with the lack of clear criteria for determining which professions should qualify to be listed as exempt health care practitioners. In order to ensure fairness in the exemption of services provided by health care practitioners, the list of health care practitioners qualifying to provide their services exempt of tax will be based on the following criteria:

• the service must be covered by a provincial health care plan in two or more provinces; or

• if the service is not covered by a provincial health care plan, the service must be provided in the practice of a profession that is regulated as a health care profession in five or more provinces.

Accordingly, the list of exempt health care practitioners will be extended to include dieticians, who are regulated as health care professionals in five provinces. As a result, dieticians will be able to provide their services exempt of federal sales tax to individuals, health care facilities and public sector bodies as of January 1, 1997. In addition, services provided by other health care professionals who do not meet these criteria (psychoanalysts, osteopaths and speech therapists) will become taxable after the end of 1997 unless, at that time, they satisfy the new criteria.

Linking the federal sales tax exemptions to provincial policies recognizes the provinces' major role in the health care field.

Medical devices

A number of changes are proposed to extend or clarify the zero-rating provisions as they apply to certain medical devices and associated services. These are:

• the zero-rating of hospital beds will be extended to purchases by all health care facilities, including long-term care facilities. Currently, sales of hospital beds are zero-rated only when purchased by a hospital, or by an individual on the written order of a medical practitioner. This measure will be effective for supplies for which payment becomes due after ANNOUNCEMENT DATE;

• the zero-rating of a service (as well as goods supplied in conjunction with the service) of modifying a vehicle to meet the needs of an individual using a wheelchair will be expanded. Currently, such adaptations are zero-rated only when the vehicle is owned by an individual. This restriction will be eliminated and the zero-rating will be extended to other owners, such as corporations, associations, or municipal or governmental organizations. This measure will be effective for supplies for which payment becomes due after ANNOUNCEMENT DATE;

• orthotic or orthopaedic devices will be zero-rated when they are made to order for an individual, or when they are supplied under a prescription issued by a medical practitioner to a consumer. Currently, the provisions for orthotic devices and orthopaedic braces have different zero-rating conditions and are contained in two different sections of the legislation. This measure will be effective for supplies for which payment becomes due on or after the day that is 21 days after ANNOUNCEMENT DATE;

• a supply of footwear will be zero-rated if it is specially designed to be used by an individual with a crippled or deformed foot and it is supplied on the written order of a medical practitioner. The requirement for a written order from a medical practitioner has been added for greater certainty. This measure applies to supplies for which all of the payment becomes due on or after January 1, 1997.

The municipal sector

A number of changes will be introduced to simplify the federal sales tax treatment of the municipal sector. These include:

• broadening the scope of exempt municipal services;

• ensuring consistency in the treatment of supplies by public utilities;

• clarifying the tax status of the collection of recyclable materials; and

• clarifying the tax status of municipal non-optional services.

Exempt municipal services

Most municipal services are provided on an exempt basis. That is, no tax is charged on the services provided by the municipality, and the municipality is not entitled to claim input tax credits for tax paid on the inputs purchased in relation to these services.

Under the existing legislation, basic municipal services, which are generally provided on an exempt basis, may also be taxable in certain circumstances. This has led to administrative difficulties. For example, optional services supplied to individual households on a fee-for-service basis are generally taxable. Thus, garbage collection services provided by a municipality as part of a weekly service are exempt, but the special pick-up of a refrigerator for a homeowner, for example, is taxable.

To streamline and simplify the application of the tax in the municipal sector, the collection of garbage and the supply of information or documents regarding titles or assessments in respect of property or the zoning of real property will always be exempt when provided by a municipality or government, or by a board or commission established by a government or municipality. Also, the following services will always be exempt when provided by a municipality or a board, commission or other body established by a municipality:

• removal of snow, ice, or water;

• installation, repair, maintenance or interruption of the operation of a water distribution, sewerage or drainage system;

• installation, replacement, removal or maintenance of street or road signs, barriers, lights and similar property;

• repair or maintenance of roads, streets, sidewalks or similar or adjacent property; and

• removal, cutting, pruning, treating or planting of vegetation.

These changes will simplify the rules in many cases by eliminating the need for municipalities to distinguish between taxable and exempt supplies and to apportion their inputs accordingly. It is proposed that the measures apply to services performed on or after January 1, 1997 or for which any payment becomes due on or after that day except in the case of supplies of information or documents regarding titles or assessments where the amendment applies to supplies for which all of the payment becomes due or is paid without becoming due on or after January 1, 1997.

In addition, an amendment is proposed to clarify that municipal transit services are exempt only when supplied directly to the public. For example, if an organization contracts with a municipality to provide transit services on behalf of the municipality, the charges for the transit service to the public are exempt. However, any charges from the organization to the transit authority for these services are taxable. The amendment will apply to supplies for which all of the payment becomes due or is paid without becoming due after ANNOUNCEMENT DATE.

Finally, certain supplies of unbottled water are currently exempt when made by a person other than a government or by a government designated as a municipality. The rules will be clarified by providing that the service of delivering unbottled water is also exempt only where the delivery is made by the supplier of the water, and that supply of water is exempt. The amendment will apply to supplies for which all of the payment becomes due or is paid without becoming due after ANNOUNCEMENT DATE.

Supplies by public utilities

Under the current rules, special provisions exempt many transactions between municipalities and their para-municipal organizations. As a result, municipalities that own or control public utilities are able to purchase electricity, gas, steam or telecommunication services on an exempt basis, while municipalities that do not own or control public utilities must pay tax on these supplies.

In order to ensure consistent tax treatment of supplies by public utilities, it is proposed that a supply of electricity, gas, steam or telecommunication services made by a public utility be excluded from the special exempting rules and, therefore, be taxable. However, supplies by a municipality to a public utility that it owns or controls will continue to qualify for the exemption. For example, a municipality will continue to be able to provide services, such as legal or accounting services, on an exempt basis to the public utilities that it owns or controls.

The proposed measure will apply to supplies of electricity, gas, steam or telecommunication services for which payment becomes due after ANNOUNCEMENT DATE.

Municipal recycling programs

There has been some uncertainty about whether the curbside pick-up of recyclables is included in the exempting provision for garbage collection. To remove this uncertainty, the government proposes that the collection of recyclable materials be included in the exempting provision for the collection of garbage. This exemption will include the collection of recyclables as part of a curbside or neighbourhood collection program as well as the delivery of such recyclables to a recycling facility.

The measure will be effective as of January 1, 1991.

Tax status of non-optional municipal services

The tax status of services performed by a municipality or government as a result of an owner's or occupant's failure to comply with an obligation imposed under a law will be clarified. Such services are non-optional services and are therefore exempt. For example, if an individual fails to control the growth of weeds on his or her property, thereby violating a municipal by-law, and the municipality cuts the weeds and charges for the service, the service is exempt. The amendment will apply to supplies for which payment becomes due after ANNOUNCEMENT DATE.

The education sector

A number of clarifications will be made to the federal sales tax treatment of the education sector.

Public college

It is proposed that the definition of public college be amended to clarify the basis on which such an organization is eligible for the exempting provisions. Under the current legislation, a public college is defined as an organization that operates a post-secondary college or technical institute:

• that is funded by a government or a municipality; and

• the primary purpose of which is to provide instruction in vocational fields or general education.

It is proposed that, in order to qualify as a public college, an organization be required to receive funding from a government or municipality to support the ongoing delivery of educational services by the organization to the general public. This contrasts with funding paid under a special agreement between an organization and a government or municipality for the provision of training to a particular group of students. The amendment will apply for the purpose of determining any rebate for which an application is received at a Revenue Canada office on or after ANNOUNCEMENT DATE. For all other purposes the amendment applies after 1996.

In addition, it is proposed that an amendment be made to clarify that, in order to claim a partial rebate of the federal sales tax paid on its inputs used in providing exempt services, a public college must operate on a non-profit basis. This is consistent with the existing eligibility criterion applicable to school authorities and universities. This amendment will apply for the purpose of determining rebates for claim periods beginning after ANNOUNCEMENT DATE.

Vocational school

It is proposed that the existing definition of vocational school be amended to remove the reference to organizations certified for purposes of the tuition tax credit under the Income Tax Act. Currently, an organization must meet one of two conditions to be a vocational school and eligible for the related exemptions. The organization must be:

• established and operated primarily to provide courses that develop or enhance students' occupational skills; or

• certified by the Minister of Employment and Immigration (now Human Resources Development) for the purposes of the tuition tax credit.

Removing the certification criterion from the definition will mean that an institution will have to be established and operated primarily to provide courses that develop or enhance students' occupational skills. A number of organizations that are currently certified, while providing one or more occupational courses, are not established primarily to provide students with courses that develop occupational skills and, in some cases, are not primarily educational institutions. These organizations will no longer qualify as vocational schools for federal sales tax purposes. The amendment will apply in relation to supplies made on or after January 1, 1997.

Meal plans offered by universities and public colleges

The circumstances in which meal plans offered by universities and public colleges are exempt will be clarified. A meal plan that is sold to students will be exempt if the amount paid for the plan is sufficient to provide a student with at least ten meals per week for the period of the plan, which must not be less than one month.

The amendment will ensure that meal plans sold to students in the form of a decreasing balance debit card or meal vouchers are eligible for the exemption. The amendment applies to supplies for which all of the payment becomes due or is paid without becoming due on or after July 1, 1996.

 - Table of Contents - Previous - Next -