Child Care — A Taxing Issue?

Child Care – A Taxing Issue?

Claire F.L. Young*

While child care policy has been the subject of many
governmental inquiries and much lobbying activity dur-
ing the past twenty years. little substantive progress has
been made towards implementing comprehensive state
funding for child care. State funding of child care in Can-
ada is currently primarily limited to the federal income
tax system. It is provided through section 63 of the
Income Tax Act, which allows a limited deduction to be
made from earned income.

The author reviews the current deduction for child
care and examines its limitations. She also demonstrates
how the income tax system as a whole discriminates
against women, particularly against women with lower
incomes. This discrimination within the taxation context
reinforces the overall invisibility and devaluation of child
care. The system fails to ameliorate the continuing dis-
proportionate impact that the child care provision has
on Canadian women. The author discusses the recent
Supreme Court of Canada decision in Symes, which drew
further attention to this issue. The appellant taxpayer did
not succeed in her attempt to claim child care expenses as
a business expense deduction beyond the restricted child
care deduction. A five-judge majority of the Supreme
Court held that section 63 of the hicome TaxAct is a com-
prehensive provision that precludes the additional deduc-
tion of child care costs. The author uses Symes to illus-
trate some of the negative consequences of using the tax
system to subsidize child care, but concludes that despite
these limitations, there is a role for the tax system to play.
The author believes that, in the face of judicial and
political reality, the tax system will remain the primary
source of government funding. It is argued that the tax
system could, and should, use a fairer and more efficient
subsidy than that which is now provided. A framework is
proposed for a new child care tax subsidy intended to
replace the current deduction: a refundable tax credit, an
accelerated capital cost allowance for expenditures on
child care facilities, and zero-rating of child care for the
purposes of the Goods and Services Tax. Given the recent
political withdrawal from a more.comprehensive federal
child care policy, a tax provision that is as equitable as
possible may be the most effective mechanism for
improving the affordability and accessibility of child care
services in Canada.

Alors que, durant leas vingt demitres anrdes, les ques-
tions concemant les frais de garde d’enfants ont fait l’ob-
jet de plusieurs enquttes gouvemementales et de revendi-
cations par de nombreux groupes de pression, peu a
riellement 6t6 fait dans le but de mettre sur pied une aide
financitre 6tatique pour les frais de garde d’enfants. Pr-
sentement, a Canada, l’aide financitre 6tatique pour les
frais de garde d’enfants est tirie principalement du sys-
ttme f~dral d’imprt sur le revenu. On la retrouve sous
le couvert de l’article 63 de ]a Loi sur l’impdt sur le
revenu, qui prdvoit une d&luction limitde sur les revenus
salariaux.

Lauteure 6tudie la prdsente ddduction pour les frais
de garde d’enfants et examine ses limites. Elle ddmontre
6galement comment le systme de l’imprt sur le revenu,
dans son ensemble, est discriminatoire vis-t-vis des
femmes, et plus particulierement vis-A-vis des femmes a
faibles revenus. Dans le domaine fiscal, cette discrimina-
tion renforce l’invisibilit6 et rdduit l’importance de la
garde des enfants. Le systame ne fait rien devant l’impact
disproportionn6 et continuel que cause aux femmes la
disposition lgislative relative aux frais de garde d’en-
fants. L’auteure traite de la rdcente decision de la Cour
supreme du Canada dans
‘affaire Symes, qui a accord6
davantage d’attention 4 cette question. L’appelante, une
contribuable, n’a pas rdussi t obtenir que ses ddpensaes
pour leas frais de garde de sot-enfant soient incluses dans
la d&luction A laquelle elle a droit pour ses ddpenses d’af-
faires. La Cour supreme, par une majorit6 de cinq juges,
ajug6 que I’article 63 de la Loi sur ‘impdt sur le revenu
east une disposition compltte qui empeche toute d6duction
additionnelle pour leas frais de garde d’enfants. L’auteure
fait appel t I’affare Symes pour illustrer certaines des
cons6quences ndgatives que peut entrainer le recours au
systame fiscal afin de subventionner les frais de garde
d’enfants, mais elle conclut que malgr6 ses limites, le
systme fiscal a un r6le a jouer sur cette question.

Face t la rdalitd juridique et politique actuelle, l’au-
teure croit que le systtme fiscal demeurera la source pre-
mitre d’aide financitre gouverementale. Elle soutient
que le systme fiscal pourrait, et mime devrait, offrir un
soutien financier plus juste et plus efficace que celui qui
existe prdsentement. Elle propose une structure compre-
nant une nouvelle approche fiscale aux frais de garde
d’enfants afin de remplacer la ddduction actuelle : un cr-
dit d’imprt remboursable, une allocation accdlrde du
colt en capital pour les services de garde d’enfants et le
,zero-rating,. des frais de garde d’enfants pour la taxe sur
les produits et services. Etant donn6 les demitres rti-
cences gouvemementales en matitre de frais de garde
d’enfants, une disposition fiscale aussi 6quitable que pos-
sible constitue peut-6tre le mdcanisme le plus efficace
pour amdliorer I’accessibilit6 des services de garde d’en-
fants an Canada et en riduire les colts.

* Faculty of Law, University of British Columbia. Many thanks to Susan Boyd, Nitya Iyer, Fiona
Kay, Marlee Kline and Judy Mosoff (all co-investigators on a Social Sciences and Humanities
Research Council grant project) for their helpful comments on earlier drafts. Thanks also to Ty
Russell for research assistance and Laurel Welman for research and editorial assistance. The finan-
cial assistance of the Social Sciences and Humanities Research Council, provided by way of a stra-
tegic grant under the Women and Chanee orogramme. is also gratefully acknowledged.
McGill Law Journal 1994
Revue de droit de McGill
To be cited as: (1994) 39 McGill L.J. 539
Mode de rdfdrence: (1994) 39 R.D. McGill 539

McGILL LAW JOURNAL

[Vol. 39

Synopsis

Limitations of the Law

Introduction
I.
H. Section 63 of the Income Tax Act
III. Child Care Policy in Canada
IV. Symes and the Tax Debate
V. Recommendations for Change

A. Tax Credit
B. Eligibility for the Tax Credit
C. Refundability of the Tax Credit
D. Receipts
E. Advertisement of Entitlement
F. Primary Caregiver
G. Accelerated Capital Cost Allowance
H. Zero-Rating for the Purposes of the Goods and Services Tax

VI. Consequences of Using the Tax System to Deliver the Subsidy for

Child Care

Conclusion

Introduction

It is incontrovertible that lack of affordable and accessible child care is a
significant impediment for women with children who need or wish to work out-
side the home. Indeed, over .twenty years ago the Bird Commission, when
reviewing the lack of child care facilities and funding in Canada, said, “We are
faced with a situation that demands immediate action.”‘ This is even more true
today when 64 percent of women with children under six work outside the
home.2 Lack of access to child care is, however, more than a barrier to women’s
participation in the paid labour force. It is also, as I shall discuss, an equality
issue in the workplace and beyond. The role that the State should play in pro-
viding child care, and how child care should be funded, have been the subjects

‘Canada, Report of the Royal Commission on the Status of Women in Canada (Ottawa: Informa-

tion Canada, 1970) at 263.

2National Action Committee on the Status of Women, Review of the Situation of Women in Can-
ada 1992 (Toronto: National Action Committee on the Status of Women, May 1992) at 6 [here-
inafter Women in Canada 1992].

1994]

CHILD CARE – A TAXING ISSUE?

of much debate in Canada.’ The Supreme Court of Canada held in Symes v.
Canada4 that child care expenses may not be deducted as a business expense
under the Income Tax Act Symes has drawn attention to the child care issue,6
and while the case was limited to the issue of the deductibility of these expenses
under the Act, it raised more general questions about the funding of child care
in Canada, and particularly, the role of the Act as a tool to deliver some of that
funding.7 Federal funding is currently provided primarily through the income
tax system, in the form of a deduction for child care expenses.8 A smaller
amount of funding is also distributed through the Canada Assistance Plan Act,9
under which the federal government cost-shares with the provincial govern-
ments the provision of limited assistance for persons “in need”.’

This paper focuses on funding child care through the tax system. I shall
review how the tax system currently subsidizes child care, examine the limita-
tions of this system and consider policy issues underlying the debate about the
efficacy of its use for this purpose. Can the tax system accomplish more than
it does at present, by delivering a child care programme that is equitable for all
women and that increases access to affordable, high quality child care? This
question became even more pressing with the federal government’s 1992
announcement that it would not proceed with the proposed National Strategy on

3See Canadian Advisory Council on the Status of Women, Caring for Our Children (Brief pre-
sented to the Special Committee on Child Care) (Ottawa: Canadian Advisory Council on the Status
of Women, 10 June 1986); National Association of Women and the Law (Brief presented to the
Special Committee on Child Care) (Ottawa: National Association of Women and the Law, 10 June
1986); Status of Women Canada, Report of the Task Force on Child Care (Ottawa: Supply & Ser-
vices Canada, 1986) [hereinafter Cooke Report]; Canada, Special Committee on Child Care, Shar-
ing the Responsibility (Ottawa: Queen’s Printer, 1987) [hereinafter Martin Report]; National Coun-
cil of Welfare, Child Care: A Better Alternative (Ottawa: Supply & Services Canada, December
1988); Jane Beach, “A Comprehensive System of Child Care” (Paper presented to the National
Child Care Conference and Lobby, October 1992) [unpublished].

4[1993] 4 S.C.R. 659, 110 D.L.R. (4th) 470 [hereinafter Symes (S.C.C.) cited to S.C.R.],
aff’g [1991] 3 F.C. 507, 91 D.T.C. 5397 (C.A.) [hereinafter Symes (F.C.A.) cited to F.C.], rev’g
[1989] 3 F.C. 59, (sub nom. Symes v. R.) 8 D.T.C. 5243 (T.D.) [hereinafter Symes (F.C.T.D.) cited
to F.C.].

5R.S.C. 1985, c. 1-5 [hereinafter Act].
6See e.g. George Corn, “Child Care Expenses: Deductibility as Business Expenses or Personal
Living Expenses” (1991) 3 Can. Curr. Tax 91; David A. Steele, “The Deductibility of Childcare
Expenses Re-Examined: Symes v. R.” (1991) 7 Can. Fain. L.Q. 315; Faye Woodman, “The Charter
and the Taxation of Women” (1990) 22 Ottawa L. Rev. 625; Claire Young, “Symes v. The Queen”
(1991) British Tax Rev. 105; Audrey Macklin, “Symes v. MNR: Where Sex Meets Class” (1992)
5 C.J.W.L. 498; Donna M. Eansor & Christopher Wydrzynski, “Troubled Waters: Deductibility of
Business Expenses under the Income Tax Act, Child Care Expenses and Symes” (1993) 11 Can. J.
Fam. L. 249.

7See Symes (S.C.C.), where L’Heureux-Dub6 J., in her dissenting judgment, said:

Further, I am not unaware that income tax deductions are undoubtedly not the best way
for the government to provide assistance with regard to the high cost of child care and
that the allowed deductions under s. 63 are not representative of the real cost of child
care. Perhaps child care should not even be subsidized through the tax system but,
rather, provided for in another manner (supra note 4 at 823).

8Section 63 of the Act provides a deduction for child care expenses. See the discussion of the

operation of section 63 at Part 11, below.

9R.S.C. 1985, c. C-I. This article will not discuss this method of funding in any detail.
‘0lbid., s. 6(2)(a).

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Child Care.” The abandonment of that programme, which had included
increases in the amount allowable as a child care deduction under the Act, and
the replacement of the Canada Assistance Plan with a new federal-provincial
cost-sharing programme, left the future of the state funding of child care uncer-
tain.” This uncertainty remains following the election of the new Liberal gov-
ernment in the fall of 1993. That government has committed itself to “a realistic
and fiscally responsible program to increase the number of child care spaces in
Canada,”‘3 but details of how this will be accomplished have not yet been
announced.

My thesis is that, while funding child care through the tax system raises
some social policy and tax policy issues that must be resolved, there is a clear
role for the -tax system to play in subsidizing child care. This is especially true
given the evident reluctance of the government to proceed with increased fund-
ing through other measures like direct grants or federal-provincial cost-sharing
programmes. I shall propose a taxation model that takes into account some
problems of the current tax provisions and attempts to redress them in order to
provide a fairer and more efficient subsidy. 4

I. Limitations of the Law

At the outset, it is important to note the instrumentality of an approach that
advocates using the tax system to address –
an issue of such
significant social and economic dimensions. While the tax system is a powerful
economic and social tool, and while it is important to reflect on that power and
its effects, we must not be blind to the limitations of legislative changes to that
system. At a general level, as much feminist work in legal areas other than tax
has shown, while legislative changes have been beneficial for many women,
they have failed to materially trarisform women’s lives.’ Such changes operate

even partially –

“Health and Welfare Canada, National Strategy on Child Care (Ottawa: Supply & Services

Canada, 1987).

1

12The abandonment of the National Strategy on Child Care was announced in the February 1992
budget. At that time, the only part of the programme that had been fully implemented was the
changes to the section 63 child care deduction, including increases in the deductible amount.

13The Liberal Party of Canada, in “Creating Opportunity: The Liberal Plan for Canada” (15 Sep-
tember 1993), presented the party’s campaign platform. The government also announced that no
child care programme would be put in place until the economy grew by 3 percent in a given year
(Susan Delacourt, “Throne Speech Sets Modest Goals” The [Toronto] Globe and Mail (19 January
1994) A2).
41n this article, I refer to the section 63 deduction for child care expenses as a subsidy. This is
consistent with the classification of the deduction as a tax expenditure. See Department of Finance,
Government of Canada Personal Income Tax Expenditures (Ottawa: Department of Finance,
December 1992). The significance of classifying a deduction as a tax expenditure is that it is con-
sidered to be a departure from the normative tax system and as such to be evaluated not only by
reference to traditional tax criteria but also by reference to budgetary criteria. In short, it is viewed
as a spending measure. It should be noted, however, that in Symes (S.C.C.) (supra note 4 at 759),
lacobucci J. was of the view that to classify “the child care expense deduction as a tax expenditure
in this case can be problematic.”

IsMuch has been written on this issue. In Feminism and the Power of Law ((London: Routledge,
1989) at 5), Carol Smart argues that we need to de-centre law and “think of non-legal strategies
and … discourage a resort to law as if it holds the key to unlock women’s oppression.” In the Cana-

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CHILD CARE – A TAXING ISSUE?

within and are constrained by the strict boundaries of the patriarchal and cap-
italist society and institutions of which they become a part. The income tax sys-
tem operates within those same boundaries and constraints, and we must be
aware of this when we consider strategies for funding child care. Furthermore,
the inherent biases of the Act and its discriminatory application to women mean
that any use of the Act to deliver a subsidy for child care is potentially fatally
flawed unless these limitations are recognized and redressed.16 We must ensure
that the inequities of the tax system are minimized to the greatest extent possible
in any child care programme funded by that system.

Many lobby groups and others resist the idea of using the Act to subsidize
child care because they are aware of its discriminatory application to women. 7

dian context, some feminist work on equality rights has focused on the limits of law. See e.g. Judy
Fudge, “The Public/Private Distinction: The Possibilities of and the Limits to the Use of Charter
Litigation to Further Feminist Struggles” (1987) 25 Osgoode Hall L.J. 485; Canadian Advisory
Council on the Status of Women, Canadian Charter Equality Rights for Women by Gwen Brodsky
& Shelagh Day (Ottawa: Canadian Advisory Council on the Status of Women, 1989); Amy Bar-
tholemew, “Achieving a Place for Women in a Man’s World: Or Feminism with No Class” (1993)
6 C.J.W.L. 465. See also Susan B. Boyd “(Re)Placing the State: Family, Law and Oppression”
(1994) 9 Can. J.L. & Soc. 39.

16As previously mentioned, the Act is an instrument for directing social and economic behaviour.
One consequence of this is that it has inherent biases. Current Canadian tax policy favours certain
activities over others and treats different groups of taxpayers differently. For example, investment
in certain forms of equity is favoured over investment in debt by taxing only three quarters of a
capital gain, or in some cases exempting the entire capital gain from tax, while interest income is
fully taxable. Residents are taxed differently than non-residents be.cause a withholding tax is often
applied to non-residents’ income in situations when it is not applicable to a resident. These biases
are not, however, necessarily discriminatory treatment as defined by the Supreme Court of Canada.
In R. v. Swain ([1991] 1 S.C.R. 933 at 992, 5 C.R. (4th) 253), Lamer C.J., for the majority, syn-
thesized the jurisprudence on discrimination, including the precedential judgment of McIntyre J.
in Andrews v. Law Society of British Columbia ([1989] 1 S.C.R. 143, [1989] 2 W.W.R. 289), this
way:

The court must first determine whether the claimant has shown that one of the four
basic equality rights has been denied (i.e., equality before the law, equality under the
law, equal protection of the law and equal benefit of the law). This inquiry will focus
largely on whether the law has drawn a distinction (intentionally or otherwise) between
the claimant and others, based on personal characteristics. Next, the court must deter-
mine whether the denial can be said to result in “discrimination’. This second inquiry
will focus largely on whether the differential treatment has the effect of imposing a bur-
den, obligation or disadvantage not imposed upon others or of withholding or limiting
access to opportunities, benefits and advantages available to others. Furthermore, in
determining whether the claimant’s s. 15(1) rights have been infringed, the court must
consider whether the personal characteristic in question falls within the grounds enu-
merated in the section or within an analogous ground, so as to ensure that the claim
fits within the overall purpose of s. 15 – namely, to remedy or prevent discrimination
against groups subject to stereotyping, historical disadvantage and political and social
prejudice in Canadian society.

17The Cooke Committee, for example, was opposed to the provision of new funding for child
care through the Act. The National Council of Welfare, responding to the National Strategy on
Child Care, in its report, Child Care: A Better Alternative (supra note 3), was critical of using the
Act to tund child care. t he report said, -Unlike the tederal strategy, which perpetuates the old sys-
tem of a mix of subsidies for child care and tax benefits for parents, our alternative puts all avail-
able resources into child care services and none into tax breaks” (ibid. at 31). The Canadian Advi-
sory Council on the Status of Women also advocates less reliance on the tax system. Its brief to

McGILL LAW JOURNAL

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The tax system as a whole,” and particularly the Act, discriminates against
women in many ways;19 the discrimination I shall focus on in this article is the
oppressive impact on the disproportionate number of women who are poor.

In 1991 the average female-headed family had an income that was less
than half that of the average male-headed family.2″ The National Council of
Welfare has observed that there is “guaranteed poverty for large numbers of
Canadian women at some point in their lives.”‘ For these women, some of the
1987 tax reform measures have had a particularly adverse effect. For example,
the number of tax brackets was reduced from ten to three, and the top federal

the Cooke Committee, Caring for Our Children (supra note 3), stated:

The CACSW believes that, in the long term, there should be a major restructuring of
federal funding on child care to ensure its provision as a universal program comparable
to education and health.
The CACSW has recommended that, in order to improve the availability of day care
services in the short term, the federal government extend the range of child care costs
eligible for cost sharing under the Canada Assistance Plan to include capital construc-
tion costs and start-up grants for all child care spaces in provincially approved agen-
cies.

Finally, the Ontario Fair Tax Commission, in its report, Women and Taxation (Toronto: Fair Tax

Commission, November 1992), was divided on the issue. The report said:

A universally available, publicly-funded child care system is one of the requirements
for economic independence for women. Some working group members believe this
form of child care will not be a reality for women in the near future. Consequently, tax-
delivered assistance should be redesigned to make it more equitable. … Other working
group members believe public support for child care should not be delivered through
the tax system (ibid. at 49).

181 use the term “tax system” when my comments do not apply only to income taxes. Other taxes
relevant to this issue are consumption taxes, with the most important example being the Goods and
Services Tax.

19There is a small body of Canadian feminist literature on the impact of the tax system on
women. See e.g. Louise Dulude, “Joint Taxation of Spouses – A Feminist View” (1979) 1:4 Can.
Taxation 8; Maureen Maloney, “Women and the Income Tax Act: Marriage, Motherhood and
Divorce” (1989) 3 C.J.W.L. 182; Kathleen Lahey, “The Tax Unit in Income Tax Theory” in Diane
Pask, Kathleen Mahoney & Catherine Brown, eds., Women, the Law and the Economy (Toronto:
Butterworths, 1985) 277; Louise Dulude, “Tax and Family Laws: A Search for Consistency in
Family Law in Canada” in Elizabeth Sloss, ed., Family Law in Canada: New Directions (Ottawa:
Canadian Advisory Council on the Status of Women, 1985) 63; Louise Dulude, “Taxation of the
Spouses: A Comparison of Canadian, American, British, French and Swedish Law” (1985) 23
Osgoode Hall L.J. 67; Canadian Advisory Council on the Status of Women, Women and Income
Tax Reform by Maureen Maloney (Ottawa: Canadian Advisory Council on the Status of Women,
1987); National Association of Women and the Law, Women and Tax Policy (Ottawa: National
Association of Women and the Law, 1991); Faye Woodman, “The Charter and the Taxation of
Women” (1990) 22 Ottawa L. Rev. 625; Jack London, “The Impact of Changing Perceptions of
Social Equity on Tax Policy: The Marital Tax Unit” (1988) 26 Osgoode Hall L.J. 287; Brigitte
Kitchen, “The Patriarchal Bias of the Income Tax in Canada” (1986) 11 Atlantis 35. More recently,
the Ontario Fair Tax Commission (supra note 17 at 47) concluded, “[Changes should be made to
the tax system to enhance progress towards the elimination of inequities faced by women and to
address provisions that systemically discriminate against women.”
2tThe figures were $49,812 for male-headed families and $23,812 for female-headed families
(Statistics Canada, Income Distribution by Size in Canada 1991 (Ottawa: Minister of Industry, Sci-
ence ana iecnnotogy, December i992)). it should be noted that, in families consisiing ofua maied
couple, the male spouse is considered the head, regardless of income.

2 National Council of Welfare, Women and Poverty Revisited (Ottawa: Supply & Services Can-

ada, Summer 1990) at 3.

19941

CHILD CARE – A TAXING ISSUE?

rate was lowered from 34 percent to 29 percent. This reduction in the progres-
.sivity of the tax rate structure placed a proportionately higher burden on those
with lower rather than higher incomes. In addition, the introduction of the
Goods and Services Tax (“GST”), a flat rate consumption tax, has meant a fur-
ther decrease in the progressivity of the tax system.’

To the extent that the Act provides tax deductions, not tax credits, for cer-
tain expenses, it discriminates against low income taxpayers. This is because the
value of a deduction is tied to the rate at which the taxpayer is taxed. In other
words, a deduction is worth more in terms of tax dollars saved to the taxpayer
who pays tax at a high rate than it is to the one who has less income and pays
tax at a lower rate. A tax credit, by contrast, is worth the same amount of money
to all taxpayers with taxable income. The deduction for child care expenses is
an obvious example of this inequity in action.’ While women form the majority
of the poor in Canada, it is single mothers who are the poorest of the poor: 35.6
percent of all single women live below the poverty line, and on average, their
income is $3,756 below the poverty line; 60.6 percent of all single mothers live
below the poverty line, and on average, they live $8,232 below that line, farther
below than any other group.24 For these women, any deduction for child care
expenses is worthless.

Why then would one advocate using a tool that discriminates against many
women to deliver a subsidy that is directed primarily to women? The answer is
that, even though the tool is flawed, there is scope within the system to design
a provision that is fair and that does not discriminate, either against women or
between different groups of women. Furthermore, while tax measures alone
cannot perform the task of social reconstruction, there is a role for them as one
tool in conjunction with others in the quest for more accessible and affordable
child care. Indeed, I contend that making the current tax rules more equitable
and target-efficient may well be a catalyst for other substantive changes that will
increase access to child care for those who need it. Improvements to the tax sys-
tem can be a precursor to systemic change.

II. Section 63 of the Income Tax Act

Section 63 of the Act provides the only direct tax relief for child care
expenses. This provision, introduced in 1972,1 was apparently intended to assist

2An income tax credit with respect to the Goods and Services Tax was implemented when the
tax was introduced in an attempt to reduce some of the regressive effects of the flat rate tax (Act,
supra note 5, s. 122.5). The amount of that credit is, however, insufficient to mitigate entirely the
regressive effect of the Goods and Services Tax.

2For an analysis of the discriminatory effect of the tax treatment of retirement income and sav-

ings for retirement, see the Ontario Fair Tax Commission, supra note 17 at 18-22.

24In 1990, 14.6 perdent of all Canadians lived below the poverty line. See National Council of

Welfare, Poverty Profile, 1980-1990 (Ottawa: Supply & Services Canada, Autumn 1992).

25Section 63 was added to the Act by S.C. 1970-71-72, c. 63, s. 1, in force 1 January 1972. It
originally only permitted the deduction to be taken by women and a very limited group of men
that included unmarried or separated men who incurred eligible child care expenses. Section 63
was made gender-neutral by S.C. 1984, c. 1, s. 25, applicable to the 1983 and subsequent taxation
years.

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women with children to enter the paid labour force.26 It has become clear that,
if this is its intention, it is, for many reasons, completely inadequate. This is pri-
marily a consequence of its limited application. Briefly, section 63 permits a
deduction in the computation of income for child care expenses paid with
respect to an eligible child. Allowable child care expenses include amounts paid
for babysitting services, day nursery services and boarding school 6r camp fees,
although there are weekly maximums prescribed in the latter two categories.”
The child care expense must have been incurred to enable the taxpayer or sup-
porting person who resided with the child to perform the duties of employment,
carry on a business, undertake certain occupational training or carry on grant-
funded research.28

The section further defines an eligible child as a dependent child, under
fourteen, of the taxpayer or the taxpayer’s spouse, provided that the child’s
income does not exceed the basic personal amount.29 As of January 1st, 1993,
the amount of the child care expense deduction is $5000 for each child under
seven (or who has a prolonged mental or physical impairment) and $3000 for
each child aged seven to thirteen. The deductible amount is limited to the lesser
of the amounts described or two-thirds of the taxpayer’s earned income for the
year. In two-parent families, the deduction must be claimed by the person earn-
ing the lower income, except where she or he is a full-time student, in prison,
incapable of caring for the children, or living apart from the other person for at
least ninety days by reason of the breakdown of their relationship.

The limitations of section 63 as an effective subsidy for child care expenses
are readily apparent. Notably, the amount that may be deducted does not reflect
the actual cost of child care. 0 This limitation is exacerbated by the fact that sec-

2 61rhe proposal to include a deduction for child care expenses in the Act was explained in the
following manner: “Costs of looking after young children when both parents are working, or when
there is only one parent and that parent is working, would be allowed as a deduction subject to
certain conditions. This new plan is intended primarily to benefit mothers who need to work to sup-
port their families …” (Canada, Proposals for Tax Reform by Edgar J. Benson, Minister of Finance
(Ottawa: Queen’s Printer, 1969) at 10).
271t is interesting to note that the deduction for child care expenses subsidizes the cost of sending
a child to a sports camp or private boarding school, institutions not usually considered to be child
care facilities.

28See text accompanying note 34, regarding a challenge to the scope of this section, pending
before the Federal Court (Trial Division). Joy Stevens is arguing, in part, that to deny her a deduc-
tion for child care expenses incurred to attend university on a full-time basis is to discriminate
against her contrary to section 15 of the Canadian Charter of Rights and Freedoms (Part I of the
Constitution Act, 1982, being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11 [hereinafter
Charter). Section 15 reads in part:

15.(1) Every individual is equal before and under the law and has the right to equal
protection and equal benefit of the law without discrimination and, in particular,
without discrimination based on race, national or ethnic origin, colour, religion,
sex, age or mental or physical disability.

29The basic personal amount is the amount of the single status deduction in paragraph 118(1)(c)

of the Act.

-“Recent tigures put the cost ot regulatea chltd care in Canada at an average of $6882 per year
for infants, $5436 for preschoolers, and $2640 for school-aged children. See National Action Com-
mittee on the Status of Women, Review of the Situation of Women in Canada 1993 by Punam Kho-
sla (Toronto: National Action Committee on the Status of Women, July 1993) at 19. Costs vary

19941

CHILD CARE – A TAXING ISSUE?

tion 63 provides a deduction from income and not a tax credit, which ties the
value of the deduction to the taxpayer’s tax rate. For example, the taxes saved
in respect of a child care expense of $10,000 are $5000 for a person paying tax
at a combined federal-provincial rate of 50 percent, but only $2500 for a person
paying tax at a rate of 25 percent. This establishes a hierarchy of taxpayers
which is in inverse relation to their ability to pay for child care. At the top are
those with the highest incomes. Below them, in declining order, are taxpayers
with lower incomes. At the bottom are taxpayers to whom the deduction is
worthless because they have little or no income to which to apply the deduction.
The requirement that couples allocate the deduction to the lower income person
also limits the value of the deduction.3

As mentioned, the deductible amount is the lesser of the allowable portion
of the expense and two-thirds of the taxpayer’s earned income. “Earned
income” includes employment income, business income, disability payments
made under the Canada Pension Plan, training allowances and scholarship mon-
ies.32 It does not, however, include all taxable income. Unemployment Insurance
benefits are not earned income, nor are alimony or child support payments.33
Therefore, a mother whose income is a combination of alimony and/or child
support payments and employment income, for example, may only apply the
child care expenses to reduce her employment income. This means that, when
her employment income is reduced to zero by her child care expenses, she may
not apply the unused portion of the expenses to reduce the tax on her alimony
and/or child support payments.

The definition of “earned income” is being challenged in a case to be heard
in early 1994 by the Federal Court (Trial Division). Joy Stevens, a full-time the-
ology student, is arguing that to deny her a deduction under section 63 for oth-
erwise eligible child care expenses, because child support is not considered to
be- earned income, is to discriminate against her in contravention of section 15
of the Charter.M Stevens illustrates the inconsistent effect of a provision that is
intended to assist women with children who work outside the home. Although
the taxpayer is furthering her education in order to return to the workforce, she

widely across the country. In 1990, for example, the average price tag for all types of paid day care
was $4385. Day care in Toronto, however, cost $6612 per year –
over $2200 more than the
national average. See Bruce Cohen, “Federal Deduction Is Falling Way Behind the Cost of Day
Care” Financial Post (23 November 1990) 21.
311t should be noted that the deduction under section 63 may be of more value to those in lesbian
or gay relationships. Because the Act does not recognize such relationships, these couples are not
required to allocate the deduction to the individual with the lower income and, in cases where each
individual in the couple is the parent of a child, each one may claim the deduction, a benefit not
available to heterosexual couples. Lesbian and gay taxpayers do, however, suffer a disadvantage
under section 63. They may not take the deduction in respect of a child who they are co-parenting,
unless they are the biological or adoptive parents of the child, which will rarely be the case.

32Act, supra note 5, s. 63(3)(b).
33However, subsection 56(1) of the Act requires, among other things, the inclusion of alimony

(spousal) and child support payments as part of income.

34The taxpayer is also arguing that to deny the deduction of these expenses because they were
incurred to attend university on a full-time basis and not for one of the reasons listed in paragraph
63(3)(a) is also a contravention of section 15 of the Charter.

McGILL LAW JOURNAL

[Vol. 39

is denied the deduction because only paid labour outside the home is recognized
as a legitimate endeavour for which one may receive a child care subsidy.

In order to deduct child care expenses, a taxpayer must file receipts with
the Minister which include the social insurance number of the individual provid-
ing the child care services.35 The problem with this requirement is that in many
instances receipts are not provided by the caregiver, reflecting the often
informal nature of many child care arrangements.36 For example, unlicensed day
care is the most frequently used type of child care in Canada.37 The requirement
for receipts for an expense incurred so frequently in the informal market puis
a far more onerous burden on a taxpayer than, for instance, the requirement for
receipts for business expenses, which are generally incurred in the formal mar-
ket where the issuance of receipts is the norm.

Child care is only considered an eligible expense if it is not provided by
a parent of the child or a person under eighteen who is related to the taxpayer.3″
This restriction demonstrates the reluctance of the State to subsidize child care
provided within the private family, and consequently reinforces the invisibility
and undervaluation of child care. It also has a harsher effect on some women
than on others. First Nations children, for example, are often cared for within
an extended family unit, and care may be given by siblings or other relatives
under eighteen.39 Poor women who cannot afford to purchase child care services
often rely on relatives, including siblings of the child, to provide child care at
a cost less than that incurred in either the formal or extra-familial informal mar-
ket. In both of these examples, because the Act recognizes only those child care
arrangements that fit within a traditional white middle class norm, the subsidy
for child care is denied to those who may need it most.’

H. Child Care Policy in Canada

Child care policy has been a subject of ongoing study. The last twenty
years have seen the release of numerous reports on the issue by different bodies,
but despite various recommendations made in them, there has been remarkably
little change in government policy. The decision to fund child care partially
through the tax system was implemented in 1972 as part of an overall tax reform
process. While technical changes to the provision have been made over the

35Act, supra note 5, s. 63(1). It should be noted that the administrative practice spelled out in
the General Income Tax Guide (Ottawa: Revenue Canada, 1993) is that the receipts need not be
submitted when the tax return is flied. Nevertheless, it is a statutory requirement that could be
enforced at any time. For most other deductions under the Act, receipts need only be provided on
request by the Minister.

36See Part V.D., below, for other implications of this requirement.
37Less than 11 percent of children in Canada receiving child care are in any form of licensed
child care, according to statistics compiled from Statistics Canada & Health and Welfare Canada,
National Child Care Study by Donna S. Lero et al. (Ottawa: Statistics Canada, 1992).

38ACt, supra note 5, s. 63(3)(a)(ii).
39For an analysis of these issues, see Marlee Kline, “Complicating the Ideology of Motherhood:

Child Welfare Law and First Nations Women” (1993) 18 Queen’s L.J. 306.

4Whether the deduction should be available for care by a parent or sibling under eighteen is a
complex one, raising the issue of the public/private distinction. It is, therefore, beyond the scope
of this article.

19941

CHILD CARE – A TAXING ISSUE?

years, its general policy has remained unchanged despite widespread support for
either abandoning or reducing reliance on the tax system as the primary method
of delivering funding for child care.4

In 1984, the Commission on Equality in Employment, chaired by Rosalie
Abella, argued that child care is a necessity and not a luxury,42 and this theme
underlies many of the reports which followed. In 1986, the Task Force on Child
Care (“Cooke Committee”) conducted the most comprehensive examination of
child care to date.43 It undertook twenty-five research projects, invited twelve
-hundred groups to make submissions, received more than two hundred briefs
and made fifty-three recommendations. Perhaps its most important recommen-
dations were that “the federal, provincial and territorial governments jointly
develop complementary systems of child care and parental leave that are as
comprehensive, accessible and competent as our systems of health care and edu-
cation,” and that “all new financing initiated by the federal government be
directed only to services that are licensed and monitored by provincial or terri-
torial governments.” The government responded to the Cooke Committee’s
report by establishing a parliamentary Special Committee (“Martin Commit-
tee”), which proposed a $700 million child care package.45 The Martin Report
parted company with the Cooke Report on many issues, most significantly in its
recommendation that the child care expense deduction be replaced by a refund-
able child care tax credit at a cost of $414 million, thereby continuing partial
reliance on the tax system to fund child care.

The Conservative government’s response to both these .reports was its
announcement in December 1987 of the National Strategy on Child Care
(“National Strategy”).4 This programme proposed to increase the amount of the
tax deduction for child care expenses and to replace the day care provisions of
the Canada Assistance Plan with a new scheme which would commit the federal
government to spending $4 billion over seven years on capital and operating
grants and increasing the number of day care spaces by 200,000.47 In its 1988
report,4 the National Council of Welfare criticized the National Strategy and its
reliance on the tax system as a continuing method of subsidizing child care. It
recommended that more money be spent on public sector rather than private
sector child care places. The discussion proved moot, however, as later that year
the Canada Child Care Bill, which had included many of the new government
proposals, died on the order paper when a general election was called. The Con-
servatives followed their return to power with the announcement of the with-
drawal of the previously announced $4 billion investment to create new child

4 1Supra note 17.
42Canada, Report of the Commission on Equality in Employment (Ottawa: Supply & Services

Canada, 1984).

43Cooke Report, supra note 3.
4Ibid. at 373.
4 5Martin Report, supra note 3.
‘National Strategy on Child Care, supra note 11.
47This plan was included in Bill C-144, Canada Child Care Act, 2d Sess., 33d Parl., 1986 [here-

inafter Canada Child Care Bill].

4Child Care: A Better Alternative, supra note 3.

REVUE DE DROIT DE McGILL

[Vol. 39

care spaces,4 9 and in February 1990, a cap was placed on transfers to the prov-
inces under the Canada Assistance Plan.” Two years later, the government
announced that it was abandoning its National Strategy.”‘ The most recent report
on child care is the ambitious National Child Care Study, 2 which paints a dis-
mal picture of child care in Canada today.

Child care has been and continues to be perceived as a women’s issue,53 but
we must be careful about identifying it solely as such, as this only perpetuates
the notion that women should be responsible for the care of children. While
research shows that child care in heterosexual relationships is still performed
primarily by women,’ many feminists argue that the sharing of child care
responsibilities by women and their male partners is an essential step in
women’s struggle for equality.”

Although men are spending more time with their children and thus may be
playing a more significant role in their lives, women still devote considerably
more time than men to primary child care. “Primary child care” is not merely
interacting with children, but is defined as including activities like physically
caring for children (dressing, feeding and washing); reading; talking or playing
with children; helping, teaching or reprimanding children; and caring for chil-
dren during illness and overseeing their medical care.56 Statistics show that
while 67 percent of mothers spend some time on these activities on a daily basis,
only 33 percent of fathers do so. Furthermore, the highest participation rate for
fathers is on Sunday at 41 percent, while for mothers it is on weekdays at 70
percent, an indication that women continue to take primary responsibility for
children during periods that are traditionally the time most paid labour is per-
formed. 7 Another example of the responsibility taken by women for children
during the regular work week is that the number of days women take off work
for family reasons increased from’an average of 1.9 days per year in 1977 to 5.2
days in 1990.58 Men’s time off work for family responsibilities has remained rel-

(26 February 1992) at 7609, and those of the Hon. Benoit Bouchard, ibid. at 7613.

49See e.g. the comments of Mary Clancy, Member of Parliament, House of Commons Debates
50The Government Expenditures Restraint Act, S.C. 1991, c. 9, s. 2 [hereinafter Expenditures
51The only part of this plan that was implemented was the increases to the amount of the section

Restraint Act].

63 deduction for child care expenses,

52Supra note 37.
53For a discussion of this issue, see Norene Pupo, “Preserving Patriarchy: Women, the Family
and the State” in Nancy Mandell &’Ann Duffy, eds., Reconstructing the Canadian Family: Fem-
inist Perspectives (Toronto: Butterworths, 1988) 207-37.

54Margrit Eichler, Families in Canada Today: Recent Changes and Their Policy Consequences,
2d ed. (Toronto: Gage, 1988); Arlie Hochschild & Anne Machung, The Second Shift: Working Par-
ents and the Revolution at Home (New York: Viking, 1989); Statistics Canada, Where Does Time
Go? by Andrew S. Harvey, Katherine Marshall & Judith A. Frederick (Ottawa: Minister of Indus-
try, Science and Technology, 1991).

55See e.g. Nancy Chodorow, The Reproduction of Mothering: Psychoanalysis and the Sociology

of Gender (Berkeley: University of California Press, 1978).

:’This definition is from Where Does Time Go?, supra note 54 at 59.
571bid.
58For further discussion of this issue, see Nancy Zukewich Ghalam, Women in the Workplace,
2d ed. (Ottawa: Minister of Industry, Science and Technology, 1993) at 11: “In 1991, 11 percent

1994]

CHILD CARE – A TAXING ISSUE?

551

atively static during the same time period, increasing slightly from .7 days in
1977 to .9 days in 1990.”9

The fact that child care is performed primarily by women’ and is viewed
as a “women’s issue” has resulted in an invisibility and undervaluation of
women’s child care work,6′ which is exacerbated by the belief that women are
the “natural” carers for children.62 The invisibility of child care work is the
result of several factors. The child care work of those women who participate
in the labour force on a full-time basis, while occupying a significant proportion
of their time, is seen as secondary to their paid labour. For those women who
do not work outside the home, child care activities also become invisible as they
disappear into that activity described as housework.63 This invisibility of child
care work contributes to its undervaluation, which becomes dramatically appar-
ent in an examination of workers’ salaries. In 1991, the average salary of female
child care workers was $13,252,6 placing them at the very bottom of Statistics
Canada’s list of the ten lowest paid professions. Significantly, when men per-
formed this work, they were much better paid. The average salary for male child
care workers for the same period of time was $20,987, over 50 percent more
than that of women.’

The inordinately low salaries paid to child care workers are somewhat puz-
zling given the high demand for child care and the shortage of spaces in child
care facilities. One would expect market forces to prevail and push salaries
upwards. That this has not happened is further evidence of the role that the
invisibility of child care labour and its stereotyping as “women’s work” play in
contributing to its undervaluation. Another factor may well be that child care
services are often provided by immigrant women, a group which has consist-
ently been treated as cheap labour.’

There is an important relationship between the invisibility and undervalu-
ation of child care and its chronic underfunding.67 As mentioned earlier, federal

of women in two-parent families with at least one child under age 6 and 6 percent of comparable
lone mothers missed time from work each week because of personal or family responsibilities.”
59Ernest Akyeampong, “Absences from Work Revisited” (1992) 4:1 Perspectives on Labour and

Income 44.

60This is true both in terms of child care duties performed by parents and with respect to child
care provided by paid child care workers, of whom 96.6 percent are women. See Statistics Canada,
The Daily (13 April 1993).
61Evelyn Ferguson, “The Child-Care Crisis: Realities of Women’s Caring” in Carol Baines,
Patricia Evans & Sheila Neysmith, eds., Women’s Caring: Feminist Perspectives on Social Welfare
(Toronto: McClelland & Stewart, 1991) 73 at 74, 81-85.

62Ibid. at 85-86.
63See Eichler, supra note 54 at 164, where she defines housework as comprising three major

functions: housekeeping, child care and the provision of personal services.

64Statistics Canada, supra note 60.
651bid.
66For an analysis of the history of foreign domestic workers in Canada and their exploitation,
see Audrey Macklin, “Foreign Domestic Worker: Surrogate Housewife or Mail Order Servant?”
(1992) 37 McGill L.J. 682.

67 0n the more general issue of the privatization of the costs of reproduction, see Jane Ursel, Pri-
vate Lives, Public Policy: 100 Years of State Intervention in the Family (Toronto: Women’s Press,

McGILL LAW JOURNAL

[Vol. 39

funding of child care is primarily delivered through two systems. Under the
Canada Assistance Plan, the federal government pays 50 percent of proyincial
and municipal costs of providing social assistance to persons “in need” and
social services to those “in need” or “likely to become in need”. These services
include child care. In 1991, however, the federal government limited the amount
of these payments, effectively capping them at the 1990 rate for provinces not
receiving equalization payments.68 If a family is not eligible for payments under
the Canada Assistance Plan, its only available source of funding is the tax sys-
tem and its deduction for child care expenses. As discussed above,69 despite
recent amendments to the Act to increase the amount of this deduction, it does
not reflect the actual cost of child care and its operation is inequitable. Never-
theless, it remains the tool preferred by the federal government to subsidize
child care, and consequently, it makes sense to think about improvements that
can be made to it.7″

Much has been written about the role that the lack of child care plays as
an impediment to the entry or re-entry of women into the paid labour force.7
It has been calculated that women unable to participate in the paid labour force
because they are unable to obtain child care form a significant percentage of the
“hidden unemployed ’72 –
those persons who are no longer included in the offi-
cial unemployment figures because they have given up looking for full-time
work.73

Lack of adequate child care also dictates the nature of the work many
women are able to do. For some women it means not working outside the home,
and for others it means part-time woric, shift work or work at a location close
to home, children or school.74 Overall, the limited availability of affordable,

1992), in which the author provides an historical analysis of the relationship between the family
and the State.

68Expenditures Restraint Act, supra note 50.
69See text accompanying note 30.
7This article was completed in January 1994. At the time of writing, there has, as yet, been no
indication that the Liberal government, elected in November 1993. is considering other methods
of funding child care.

5:5 Social Infopac 5.

7’See e.g. Cooke Report. supra note 3; Eichler, supra note 54; Canadian Advisory Council on
the Status of Women, Women and Labour Market Poverty by Morley Gunderson & Leon Mus-
zynski with Jennifer Keck (Ottawa: Canadian Advisory Council on the Status of Women, 1990);
Women in Canada 1992, supra note 2; Ann Duffy & Norene Pupo, Part-Time Paradox: Connect.
ing Gender, Work and Family (Toronto: McLelland & Stewart, 1992).
72Social Planning Council of Metropolitan Toronto, “Hidden Unemployment Updated” (1986)
73Despite the barrier imposed by the lack of available and affordable child care, women with
children are entering the paid labour force in greater numbers than ever. Between 1976 and 1990,
the annual average participation rate for mothers with children younger than three increased from
31.7 percent to 60.1 percent (Statistics Canada & Health and Welfare Canada, “Parental Work Pat-
terns and Child Care Needs” in vol. 4, National Child Care Study, supra note 37). In 1991, 64 per-
cent of women with children under six worked outside the home (Women in Canada 1992. supra
note 2).

74 0f persons with the primary care of at least one child under thirteen, almost one half do not
work a standard work week. (A standard work week consists of weekdays only on a fixed early
day or daytime schedule generally ending before 6:00 p.m.) (“Parental Work Patterns and Child
Care Needs”. ibid. at 74). See also the discussion of the National Child Care Study in Alanna

1994]

CHILD CARE – A TAXING ISSUE?

accessible child care adds to the stress experienced by women with children
who participate in the paid labour force. Family responsibilities are also cited
as a common reason that women leave their employment.75

Child care is also an economic issue for women in a broader sense. Women
earn less than men,76 and lack of access to affordable child care contributes to
this inequality in several ways. Obviously, the part-time work done by so many
women is less remunerative than full-time work, but the child care crisis also
means that many women work in jobs that require fewer overtime hours or that
permit them to take unpaid time off during school vacations. Women without
access to child care also forego education or training opportunities that could
lead to jobs with higher salaries. it should be stressed that this is not just a work-
place equality issue. Women’s abilities to pursue other activities, both in and
outside the home, are also affected by their child care responsibilities. This may
manifest itself in several ways, including the inability of women with children
to engage in remunerative activities in the home, like artistic endeavours, or
non-remunerative but socially vital activities outside the home, like volunteer
work. In fact, one of the recommendations made by the Canadian Advisory
Council on the Status of Women in its brief to the Cooke Committee was that
“child care services should be available to those parents who have no paid
employment for a maximum of one day a week.”

An examination of child care policy raises complex questions about the
interconnection between the State and the family78 and the role played by the
dominant perception of women, particularly mothers, as the primary carers for
children. 9 We must recognize that universal child care is not perceived as desir-
able by those with an interest in ensuring that women continue to work in the
home and provide child care for free. Additionally, if women are able to partic-
ipate in the paid labour force in greater numbers and on a full-time basis, men
will face, in times of high unemployment like the present, competition for jobs
that women were not previously in a position to seek. The social and economic
complexity of child care subsidization is emphasized by the absence of consen-
sus amongst child care advocacy groups, whose demands vary. Differences
among the various child care lobby groups and other organizations that speak
on the issue of child care tend to arise over three specific issues. The first is the

Mitchell, “Irregular Shifts Cause Child-Care Woes, Study Says: Survey Finds 45 Percent of Work-
ing Parents with Children under 13 Don’t Work 9 to 5” The [Toronto] Globe and Mail (28 July
1992) A6.

75National Council of Welfare, Incentives and Disincentives to Work (Ottawa: Supply & Services

Canada, 1993) at 19.

76The average wage for full-year, full-time employment in 1991 was $38,567 for men and
$26,842 for women, meaning that women earn 69.6 percent of what men earn (Statistics Canada,
Earnings of Men and Women 1991 (Ottawa: Minister of Industry, Science and Technology, 1993)).
77Caring for Our Children, supra note 3 at 3. The recommendation further stated, “The CACSW
also recognizes the important contribution that stay-at-home parents make in the nurturing of chil-
dren and realizes that 24-hour child care is stressful.”

78For more discussion of this issue, see Ursel, supra note 67.
79For a discussion of the role of ideology in the child care debate, see Katherine Teghtsoonian,
“Families, Ideologies and Child Care Policy Debates in Canada” (Paper presented at the annual
meeting of the Canadian Political Science Association, June 1992) [unpublished].

REVUE DE DROIT DE McGILL

[Vol. 39

topic of this article: the method of delivering funding for child care and, in par-
ticular, whether or not the primary funding should be through the tax system or
through direct grants to child care facilities. The second significant difference
arises over the respective roles of the public sector (the State) and the private
sector (including the family) in providing child care. Some argue for more reli-
ance on the State as the provider of these services, on the grounds that recourse
to the private sector does not address the structural problems of the current
patriarchal system. Others are more prepared to see a role for private arrange-
ments as a means of increasing access to child care.”0 The third issue –
that of
choice –
grows out of this debate because for some women universal day care
is not the preferred option, as they wish to be able to care for their children
themselves within the home and be compensated for providing that care. Differ-
ences also occur over strategies for change.”‘ There are, however, some com-
mon themes. These include universality- (or some degree thereof), affordability
and high quality child care.’

IV. Symes and the Tax Debate

The issue of subsidizing child care through the tax system has received
much attention lately because of the Supreme Court of Canada’s recent decision
in Symes.”3 The taxpayer, a full-time practising lawyer and, at that time, a part-
ner in a law firn, claimed that her child care expenses should be deductible as
a business expense under section 9 and paragraph 18(l)(a) of the Act. 4 The
Court held that child care expenses could not be deducted as Trbusiness expense
on the basis that section 63 (the current child care deduction) precluded any fur-
ther deduction for these expenses. In additibri to tli direct restriction of the
deductibility of child care expensesimposed by Symes, this case also illustrates
another limitation of using the tax system to fund child care. There is no ques-
tion that, had Ms Symes been successful and been permitted to deduct these
expenses as a business expense, the result would have favoured some women
over others, thereby providing the subsidy in an unfair manner. This does not
mean, however, that the tax system should not be used to deliver this subsidy.
Rather, we must recognize the limitations illustrated so clearly by Symes and
devise a model that avoids them and is equitable for all women.

8 0For a discussion of this issue, see Evelyn B. Ferguson, Another Look at Woman’s Place: Lib-
eral and Socialist Feminist Perspectives on Childcare (Working Paper on Social Welfare in Canada
No. 20) (Toronto: University of Toronto Press, 1986).
81For an analysis of some of these differences see Katherine Teghtsoonian, “Promises, Promises:
‘Choices for Women’ in Canadian and American Child Care Policy Debates” (1994) Feminist
Studies [forthcoming].

82See e.g. Martha Friendly, “Child Care in a Public Policy Context” (Paper presented to the
National Child Care Conference and Lobby, 15 October 1992) [unpublished], who noted that the
goals of the Canadian Day Care Advocacy Association are that child care be universally accessible,
publicly funded, comprehensive and high-quality.

8 3Supra note 4.
Z:;ection Y proviaes mat a taxpayer’s income from business is the profit fruim the business,
and paragraph 18(l)(a) provides that no expense is deductible “except to the extent that it was
made or incurred by the taxpayer for the purpose of gaining or producing income from the busi-
ness …

1994]

CHILD CARE – A TAXING ISSUE?

Symes made a two-part argument. She contended, first, that the salary paid
to the nanny who cared for her children was a business expense incurred to gain
or produce business income. Had she not had child care help, she would not
have been able to practise law, and consequently, would have earned no income
from her business. Her second argument was that to disallow her the deduction
of these business expenses was to deny her the equal benefit of the law on the
basis of her sex, in contravention of subsection 15(1) of the Charter, because the
disallowance has a disproportionate impact on women who are primarily
responsible for child care.

At the Federal Court (Trial Division),”5 Cullen J. held that Ms Symes’s
expenses should be deductible under section 9 and paragraph 18(1)(a) of the Act
for two reasons. He found, first, that the issue had to be interpreted in light of
the “social and economic realities of the times.”8” He relied on the expert evi-
dence of Dr. Patricia Armstrong, a sociologist, that the influx of women with
children into the workforce in the 1970s and 1980s represented a significant
social change. He then held that Symes had “exercised good business and com-
mercial judgment in deciding to dedicate part of her resources from the law
practice to the provision of child care,”87 and that, consequently, the child care
expenses not already deductible under section 63 were deductible as a business
expense. He held, further, that Revenue Canada’s denial of the deduction was
discrimination against Ms Symes on the basis of her sex, noting that as a result
she was “not treated like a serious business person with a serious expense
incurred for a legitimate purpose.” 8

That decision was overturned by the Federal Court of Appeal. Ddcary J.A.,
writing for the Court, held that child care expenses were not a business expense
under paragraph 18(1)(a) because they were a “parental” expense under section
63 and were only deductible in accordance with that section. 9 He also rejected
Ms Symes’s Charter argument because, unlike Cullen J., who viewed Ms
Symes as a business woman standing next to a business man, Ddcary J.A. chose
to compare Ms Symes to other women who did not earn business income. He
pointed out that Ms Symes was not arguing that, if she were successful, the Act
would then discriminate against women employees in favour of self-employed
women. He stated, “I am not prepared to concede that professional women make
up a disadvantaged group against whom a form of discrimination recognized by
section 15 has been perpetrated.”

The Supreme Court of Canada upheld the decision of the Federal Court of
Appeal. Iacobucci J., for the majority, held that the expenses were not deduct-

85Symes (F.C.T.D.), supra note 4 at 72.
86Jbid. at 73.
87Ibid. at 71.
ralbid. at 81. It shotild be noted that because Cullen J. had already ruled that the expense was

a deductible business expense his application of the Charter was not gratuitous.

8 9Symes (F.C.A.), ibid. at 525. This reasoning was not advanced at the trial level because counsel
for Revenue Canada conceded that if the child care expenses were proper business expenses under
sections 3 and 9 and paragraph 18(1)(a) of the Act, then section 63 would not prevent them from
being deductible as business expenses.

9Ibid. at 531.

McGILL LAW JOURNAL

[Vol. 39

ible under section 9 and paragraph 18(l)(a) of the Act because, he wrote, “the
Income Tax Act intends to address child care expenses, and does so in fact,
entirely within s. 63.”9′ Iacobucci J. endorsed D~cary J.A.’s description of sec-
tion 63 as a self-contained and complete code for the deduction of child care
expenses, which precludes any further deduction for these expenses.92 He also
characterized the Charter issue in terms of whether section 63 of the Act dispro-
portionately limited the deduction with respect to child care expenses incurred
by women. He reached the conclusion that it did not. In a statement with which
L’Heureux-Dub6 J. strongly disagreed in her dissent, Iacobucci J. said, “[T]he
appellant taxpayer has failed to demonstrate an adverse effect created or con-
tributed to by s. 63, although she has overwhelmingly demonstrated how the
issue of child care negatively affects women in employment terms. Unfortu-
nately, proof that women pay social costs is not sufficient proof that women pay
child care expenses.

In dissent, L’Heureux-Dub6 J. disagreed on all of these issues. She held
that the child care expense was deductible under section 9 and paragraph
18(1)(a) of the Act as a business expense. She stated, first, that the presence of
section 63 did not preclude the deduction of child care expenses under another
provision of the Act. She then asked whether the expenses ought to be deduct-
ible as business expenses. Acknowledging the necessity of child care for women
with children who wish to participate in the paid labour force, she found that
they should be. L’Heureux-Dub6 J. also discussed the gender-biased nature of
the relevant tax provisions, describing the interpretation of “business expense”
as. one “wrought with male perspective and subjectivity.” She concluded that
“[t]he concept of business expense should be interpreted in a way that takes into
account the realities of businesswomen’s expenses in relation to child care.”95
The facts in Symes illustrate not only the problems inherent in the opera-
tion of section 63, including the inadequate amount of the subsidy, but also illus-
trate many other negative consequences of arguing for more subsidization of
child care through the tax system. Indeed, those negative consequences form a
subtext to the Symes case and the remedy sought by the appellant. Put generally,
any legal challenge to a tool used to deliver a subsidy is first constrained by the
limitations of that tool. To the extent that our tax system privileges wealth, any
challenge to it, with respect to the funding of a programme such as child care,
is constrained by that privilege. Symes provides a graphic example of this point.
The Act allows self-employed taxpayers to deduct expenses incurred to
gain or produce income, but specifically prohibits the deduction of expenses

91Symes (S.C.C.), ibid. at 750.
921t should be noted that lacobucci J. did address the issue of whether child care expenses could
be a deductible business expense under section 9 and paragraph 18(l)(a) of the Act, although he
did not reach a conclusion on the issue.

93Symes (S.C.C.), supra note 4 at 765. L’Heureux-Dub6 J. responded that Symes “has proven
that she has incurred an actual and calculable price for child care and that this cost is dispropor-
tionately incurred by women” (ibid. at 821).

“Ibid. at 807.
951bid. at 816-17. It should also be noted that Iacobucci J. suggested, in his discussion of par-
agraph 18(1)(a) (ibid. at 744), that there might be a need to reconceptualize the concept of business
expense in light of the changing composition of the business class.

1994]

CHILD CARE – A TAXING ISSUE?

incurred to earn employment income.’ The appellant claimed a deduction for
child care expenses in the computation of her business income, a deduction
which, had she been successful, would not have been available to the vast
majority of women.97 Women form less than 25 percent of the self-employed in
Canada.” If the Act is used to subsidize child care for the self-employed, the
result is merely more privilege for the already privileged. 9 Since the govern-
ment has acknowledged that funding for child care is limited, success for Ms
Symes and a consequent diversion of existing funds (or a limited amount of new
funding) to those privileged by wealth and/or class would have been inappropri-
ate. It would have served to reinforce the inequitable provision of the subsidy,
especially for those who are economically or socially disadvantaged. Further-
more, if child care expenses had been held to be a deductible business expense
under section 9 and paragraph 18(1)(a), they would have been deductible by all
business persons, including men. Because women earn an average of 69.6 per-
cent of what men earn,”r
it seems likely that in heterosexual couples in which
both partners earn business income and incur child care expenses, the male part-
ner would take the deduction since it would be worth more to the partner with
the greater income. As men form 75 percent of the self-employed, it is also
likely that the male partner would be the only one able to take advantage of this
deduction. Obviously, this result would have been inconsistent with the policy
underlying the current section 63 deduction for child care expenses, which is to
reduce the disincentive for women to participate in the paid labour force.

V. Recommendations for Change

Despite the problems identified above, it is my opinion that the tax system
may play a role as a tool to deliver some subsidy for child care expenses. In this
Part, I suggest some changes designed to make the current rules fairer and more
effective. I also recommend some additional tax measures directed at making
child care less of a private matter and more of a public responsibility.

96Subsection 8(2) prohibits the deduction of any expense incurred to earn employment income,
other than one of the very limited expenses listed in section 8. Child care expenses are not so listed
and therefore would not be deductible.

97While the majority of the Supreme Court in Symes did not give this as a reason for holding
that the expense was not deductible, lacobucci J. did refer to it in his discussion of section 1 of
the Charter. He said:

We were invited to consider the Charter only with respect to self-employed women,
and it was suggested to us that a remedy could be granted, without the need to consider
the position of other women, other parents, or the government’s overall response to
child care needs. ….
This Court was invited to use the Charter to rectify a disadvantage allegedly suffered
by businesswomen vis di vis businessmen, and, in the process, this Court was invited
to ignore the effect of allowing a complete deduction on the rest of the system. At the
s. I stage of Charter analysis, however, such an instrumental approach is inappropriate
(Symes (S.C.C.),’supra note 4 at 773).

9 Statistics Canada, Women in Canada: A Statistical Report, 2d ed. (Ottawa: Supply & Services

Canada, 1990) at 90.

“For further analysis of this issue, see Claire Young, “Child Care and the Charter: Privileging

the Privileged” (1994) Rev. Constit. Studies [forthcoming].

1’aStatistics Canada, Earnings of Men and Women, 1991 (Ottawa: Minister of Industry, Science

and Technology, January 1993).

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[Vol. 39

My starting proposition is that child care funding through the tax system
is not a total solution to the child care crisis. It is important to recognize the
role that the tax system has to play as only one part of a multi-faceted strategy
aimed at providing affordable, accessible child care. Despite the numerous
reports and recommendations made over the years, many of which have rec-
ommended an approach to the funding of child care that is not so reliant on
tax measures, the tax system remains its primary source of funding. Current
political reality dictates that it is highly unlikely that in the immediate future
the government will go beyond the tax system to subsidize child care. As Joe
Clark, then Minister for Constitutional Affairs, commented in 1992,
“Whether or not Canada has a national child care programme is a matter of
political will.”‘0′ It seems that, with the abandonment of the National Strat-
egy on Child Care, the political will for universal child care has evaporated.,02
Indeed, the only measures included in the National Strategy on Child Care
that have been implemented are those related to changes to the tax provisions,
including increasing the deductible amounts under section 63. It is therefore
appropriate to consider how the tax system can be most effectively used in
this area.

A. Tax Credit

Perhaps the most significant inequities in the application of the deduc-
tion for child care expenses arise because the expense is a deduction and not
a tax credit. In order to redress this inequality, the current deduction should
be converted to a tax credit and function as a subsidy which would be worth
the same to all taxpayers. Its value, in other words, would not depend on the
taxpayer’s tax rate.0 3 The amount of the credit should also bear a closer rela-
tionship to the cost of child care than does the current deduction. This latter
change would not only more accurately reflect the actual cost of child care,
but could also go some way towards remedying the undervaluation of child
care work, perhaps resulting in an increase in salaries paid to child care work-
ers. If it is considered appropriate to limit the amount of the tax credit, this
should be carried out in a progressive manner.’ 4 Such a measure would
adhere to the concept of basing tax liability on the ability to pay by ensuring
that those who most need the benefit would receive a greater tax subsidy than
would those with higher incomes.

17 September 1992) [unpublished].

10 The Right IIonourable Joe Clark, Address (Faculty of Law, University of British Columbia,
‘0 2The question of whether or not the National Strategy on Child Care might be revived in the
future was dealt with rather succinctly by Donald Blenkarn, a Conservative Member of Parliament
and Chair of the Finance Committee, who described the strategy as “down the sewer. It is not a
program that can be or should be” (Kirk Makin, “A Tory Feminist Faces a Choice” The [Toronto]
Globe and Mail (7 April 1993) Al). See also the Liberal government’s position on this issue (supra
note 13).

’03This is not a novel suggestion and has been made by the National Council of Welfare (supra
note 3 at 20), the Ontario Fair Tax Commission (supra note 17 at 31), and the Special Committee
on Child Care (supra note 3).

14A useful model is the new child tax benefit (section 122.6), which provides a tax credit that

is gradually reduced for families above certain income thresholds.

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CHILD CARE – A TAXING ISSUE?

B. Eligibility for the Tax Credit

An important question is whether the restrictions on the types of activity
that currently qualify the taxpayer to claim the deduction should be retained.
The Act limits the deduction to taxpayers who require child care in order to
work outside the home in the paid labour force, or to take occupational training
for which they receive funding under the National Training Act,”0 5 or to carry
out grant-funded research.” It is clear that for many women the government’s
stated policy of removing impediments to their full participation in the labour
force is meaningless. What about women with children who are actively seeking
employment but have no income, women who take non-eligible training or
skills-updating courses after childbirth, or women who are full-time students
studying prior to employment? All these women face the same child care
expenses as women eligible to take the deduction, but receive no tax subsidy for
them. Lack of affordable, accessible child care is more than an issue of work-
place equality. The needs of women who choose to work in the home and care
for their children in that environment should also be recognized by the tax sys-
tem, as has been proposed by the Canadian Advisory Council on the Status of
Women.'” I suggest that eligibility for the credit be drafted in a manner that
does not tie it so closely to activities that generate income. Eligibility require-
ments should take into account the needs of all women with children who are
studying or training prior to entering or re-entering the paid labour force.'”

C. Refundability of the Tax Credit

Whether or not the credit is restricted to those currently eligible for the
deduction or expanded to include all or some of the groups described above, it
should be fully refundable in order to ensure that those without taxable income
receive the benefit. Its delivery should also be modelled on that of the child tax
benefit which, in addition to being fully refundable, provides for cheques to be
issued monthly for amounts calculated on the basis of the previous year’s
income. Providing the benefit up front and on a regular basis instead of delaying
“payment” until a tax return is filed, signifies that the credit for child care
expenses is a subsidy that is part of a social programme.

D. Receipts

The statutory requirement that receipts which include the social insurance
number of the payee be filed by the taxpayer with her return should be removed.
Presumably the reason that a receipt and the social insurance number of the
payee are required is to minimize the number of fraudulent claims and to ensure
that, where a deduction is taken, the payee includes the amount in her income.

105R.S.C. 1985, c. N-19.
106Act, supra note 5, s. 63(3)(a).
’07Caring for Our Children, supra note 3 at 3.
“UConsideration should also be given to the needs of women who do not work outside the home,
for to discriminate against them by denying them the tax credit is to perpetuate the misconception
that work outside the home is of more value than the work performed in the home. It perpetuates
the further misconception that work inside the home has no cost attached to it.

McGILL LAW JOURNAL

[Vol. 39

Yet why child care expenses are singled out for this restriction and not, for
example, moving expenses (section 62) or attendant care expenses (section 64),
is not clear. The presumption may be that child care expenses are more likely
to be incurred in the informal market where the provision of receipts is not the
norm –

the same point, however, could be made about moving expenses.

The requirement is sexist in effect because it is in respect of a deduction
for an expense primarily incurred by women for services also primarily pro-
vided by women. It is also racist in effect. Child care services, particularly in
the private sector, are often provided by immigrant women.’09 By statutorily
requiring child care workers to provide their social insurance numbers, while
not requiring the same of providers of other tax deductible services, the govern-
ment places an added burden primarily on these immigrant women. The ratio-
nale for this policy is questionable, particularly in light of the fact that child care
workers are so grossly underpaid. Many of those providing the service do not
earn enough to be liable for income tax, so the requirement for provision of their
social insurance numbers is not strictly a tax enforcement measure. If, as one
can speculate, it is really an attempt to enforce the Immigration Act”‘ and to
ensure that only those with legal status in Canada, who are consequently able
to secure a social insurance number, may work in Canada, then it is highly inap-
propriate to use tax legislation in this manner. It is also probably ineffective.
Denying the tax deduction to a woman who is trying to obtain child care in a
market where the demand is significant and the supply limited does not auto-
matically result in her use of only those providers who have social insurance
numbers. It often simply means she resorts to the informal market and the pro-
vision of services in the underground economy.”‘ It also signals how the tax sys-
tem perpetuates the invisibility and undervaluation of child care. I suggest that
the rules that apply to most other deductible expenses –
that receipts be main-
tained and submitted on demand-

should apply to child care expenses.” 2

E. Advertisement of Entitlement

There is evidence that many women eligible to deduct child care expenses
do not do so.”‘ Since the tax system is the primary method of funding child
care, Revenue Canada should embark on an advertising campaign to inform
women about the availability of the current deduction. If the deduction is con-
verted to a tax credit, it is even more critical that it be well advertised. Unlike

101or a discussion of this issue, see Macklin, supra note 66.
“0R.S.C. 1985, c. 1-2.
“‘the recent appointment process in the United States of an Attorney General illustrates this
point. Zoe Baird, who was nominated by President Clinton for the position of Attorney General,
was forced to step down during the Senate Committee hearings when it was revealed that she had
employed an illegal immigrant as a nanny for her children.
” 21t is highly likely that the requirement for the provision of receipts is disproportionately oner-
ous for poor women. They are more likely to resort to the informal market for child care services,
because they are unable to afford the usually more expensive licensed child care.
” 3See Cooke Report, supra note 3 at 170: “In the 1981 taxation year, child care expenses were
claimed for the care of 575, 881 children, or about 44 percent of the estimated number of children
receiving non-parental care.”

19941

CHILD CARE – A TAXING ISSUE?

the personal tax credit, eligibility for which is determined by Revenue Canada
when a return is filed, if the child care expense credit were not claimed by the
taxpayer, entitlement would not be determinable on assessment. Publicity about
eligibility will also be essential because women with no taxable income might
not file returns at all and therefore would not receive the refundable credit.
Advertising entitlement to a tax credit is not a novel concept, having been
undertaken with respect to the refundable Goods and Services Tax credit.

F. Primary Caregiver

The child care expenses credit should go to the primary caregiver’ 4 of the
child, and in the case of heterosexual couples, there should be a rebuttable pre-
sumption that the primary caregiver is the female partner.”‘ A model for this
suggestion is the child tax benefit, which replaces the family allowance and
refundable child tax credit, and is payable to the parent who “primarily fulfils
the responsibility for the care and upbringing””‘ 6 of the child. This parent is
“presumed to be the female parent.””‘ 7 The Act does not define “care and
upbringing” but provides that factors to be considered in determining what con-
stitutes care and upbringing may be set out in regulations made on the recom-
mendation of the Minister of National Health and Welfare.” 8 At present no such
regulations have been issued.

As I have discussed,’ child care continues to be performed primarily by
women, and this has contributed to its invisibility and undervaluation. Including
a rebuttable presumption that a woman is the primary caregiver of her child for
the purposes of the child tax credit may, to the extent that it reinforces this state
of affairs, be problematic. But the purpose of this change would be to recognize
through the law, specifically through the tax system, the role that women do
play as primary caregivers. This legal legitimation of the role would go some
way towards removing both the undervaluation and invisibility of this work. A
second aspect to this point is that the presumption operates in the context of a
law that is designed to remove one of the barriers to women’s participation in
the paid labour force. That increased participation may also play a role, together
with more structural changes, in shifting the current gendered division of child
care labour.” 9

11

4For a description of the primary caregiver presumption in child custody law, see Susan
B. Boyd, “Potentialities and Perils of the Primary Caregiver Presumption” (1990) 7 Can. Fam.
L.Q. 1.
“5Consideration must be given to how such a proposal would affect those families that do not
fit the model of the “traditional” family. Such families might include those who live in extended
families, such as First Nations and other groups, in which primary child care is provided by family
members other than a parent. I suggest that, because the presumption is rebuttable, there is scope
within this rule to recognize and respect such caregiving relationships.

16Act, supra note 5, s. 122.6(“eligible individual”)(b).
t17lbid., s. 122.6(“eligible individual”)().
“‘bid., s. 122.6C’eligible individual”)(h).
“9See Boyd (supra note 114) for a discussion of the limitations of the primary caregiver pre-
sumption for problems like the gendered division of child care, as well as a potential role for it
in conjunction with more structural changes.

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[Vol. 39

G. Accelerated Capital Cost Allowance

Tax measures intended to assist in achieving the goal of accessible, afford-
able child care need not be limited to deductions or credits for the person who
incurs child care expenses. Other measures that would work towards the same
goal include, for example, giving an accelerated capital cost allowance for cap-
ital expenditures associated with the cost of constructing and operating child
care facilities. This would permit those who construct or operate these facilities,
often employers, to claim a deduction for depreciation of the assets at a rate in
excess of the actual rate of depreciation. This could result in a significant tax
saving. Capital cost allowance is, of course, currently available for these
expenditures at varying rates depending on the nature of the capital asset, but
increasing it to, for example, 100 percent for the capital costs associated with
the construction of a building, would ensure a full deduction of those expend-
itures once the building was in use. If a taxpayer with a federal-provincial com-
bined marginal tax rate of 50 percent incurred capital expenditures of $500,000,
the tax saving would be $250,000.’2 Furthermore, if accelerated capital cost
allowances were available for capital assets like equipment acquired during the
operation of child care facilities, the tax subsidy would continue beyond the
period of immediate use and form an ongoing tax incentive.

H. Zero-Rating for the Purposes of the Goods and Services Tax

Another innovative use of the tax system to reduce the cost of child care
would be to zero-rate the cost of all child care spaces for the purposes of the
Goods and Services Tax. This would ensure that no GST was payable on these
services and would permit the supplier of these services to claim back any GST
paid on the goods and services provided to him or her. At present, child care ser-
vices are exempt from the GST,’2′ but any perceived advantage to this exemp-
tion is illusory for those who use child care services. This occurs because even
though child care services themselves are not taxed, the supplier of those ser-
vices is taxed on the goods and services she or he uses to provide them. Because
the child care service is exempt from tax, the supplier does not receive an input
tax credit with respect to the GST paid on the goods and services used to pro-
vide the child care service. Presumably this inability to recover the GST paid
results in the GST being passed on to the consumer through higher charges for
child care services. Zero-rating would ensure that no GST would be payable,
either by the supplier of the services or the consumer.

VI. Consequences of Using the Tax System to Deliver the Subsidy for

Child Care

As I have indicated, there are potential problems with using the tax system
to deliver a subsidy for child care. None of these problems are, in my opinion,
insurmountable, as I shall discuss in this Part.

120100 percent capital cost allowance is currently available for Class 12 assets which include,
among other things, certified feature films. The fast “write-off’ of capital cost allowance acts as
a significant incentive to investment (Income ar Regulations, C.R.C., c. 945, Sch. II).

‘2 1Excise Tar Act, R.S.C. 1985, c. E-15. Sch. V, part IV.

19941

CHILD CARE – A TAXING ISSUE?

Perhaps the most persuasive argument against using the tax system to fund
child care is that this method of public subsidization contributes to the privati-
zation of child care. Unlike direct subsidies paid in the form of operating or cap-
ital grants to non-profit child care facilities, tax subsidies are received by indi-
viduals, with respect to any child care expense. There are no limits on the forms
of the child care that qualify for the subsidy. That is, any child care service pro-
vided by any person, other than the parent of the child or a relative under eigh-
teen, in the case of the current section 63 deduction, may be deducted. But it is
irrelevant for tax purposes whether the child care is provided by the private or
public sector and, in the case of a day care facility, whether the facility is
licensed or unlicensed, or whether it is a non-profit facility or one that is run for
profit.

This non-accountability for the nature of child care services, combined
with the lack of spaces for children in licensed child care facilities, contributes
to the privatization of child care.” 2 The role of the State is therefore contradic-
tory. It does provide a subsidy for child care; in that respect, it takes some
responsibility for the provision of child care and recognizes that it is not the sole
responsibility of the family. But at the same time, the State ceases to play a role
once that subsidy has been provided, leaving the availability and nature of child
care to the private sector and the “market”.

Many of those who lobby for improved child care have been careful to
stress the need for a system that involves more participation by the State – par-
ticipation that goes beyond funding. The Canadian Day Care Advocacy Asso-
ciation has lobbied strongly for both increased funding for public non-profit
child care facilities and increased government regulation of child care.” The
Cooke Committee noted that parents prefer to use licensed, regulated child care
if it is available, and consequently, it recommended that all new financing ini-
tiated by the federal government be directed only to services licensed and mon-
itored by provincial or municipal governments. 4 The National Council of Wel-
fare also recommended the creation of more licensed child care spaces and less
reliance on informal arrangements.”z None of these recommendations has been
implemented, .and the result is the considerable and continued recourse to pri-
vate arrangements, such as the use of nannies and other domestic workers. A
significant problem with a child care system which operates primarily in the pri-
vate sphere is that domestic workers are underpaid and, in most cases, are non-

t22National Child Care Study, supra note 37.
’23See Judith Martin, “High Quality Child Care: A Pre-Condition to Equality of Employment”
(1991) 11 Canada Woman Studies 91; Canadian Day Care Advocacy Association, Vision (Ottawa:
Canadian Day Care Advocacy Association, 1990).

124Cooke Report, supra note 3 at 99-101. It should be noted that the licensing and regulation of
child care is a contentious issue. Some feminists argue that the professionalization of child care
is not always in the best interests of children or their mothers. For a discussion of this issue, see
Ferguson, supra note 61 at 87-88.

‘ -‘he National Council of Welfare stated, “I’he federal government should reverse its decision
to supplement the refundable child tax credit as part of its child care strategy and should use the
money instead to increase the supply of licensed child care spaces and to provide more subsidies
for maintaining those spaces” (supra note 3 at 40).

McGILL LAW JOURNAL

[Vol. 39

unionized.’26 Furthermore, many of these workers are immigrant women who
work for low wages under conditions which may subject them to racism and
other forms of exploitation. They are required by the Immigration Act 27 to live
in the home of their employers, increasing their vulnerability to abuse. The use
of the tax system to provide a subsidy that will be used in the private sector
serves to reinforce the subordination and oppression of these women. One can-
not, however, assume that a less private child care system, such as one that
relies primarily on publicly-funded licensed day care facilities, would automat-
ically redress the problems of racism and the oppression of immigrant domestic
workers. The issue is a complex one; many factors, like current immigration
policies and the undervaluation of child care work, contribute to the present
state of affairs.

Those who believe the reluctance of the State to recognize the importance
of child care is a significant impediment to equality for women find it difficult
to argue in favour of a measure that, while it involves the expenditure of public
funds, will likely increase reliance on the private sector. But it must be recog-
nized that the “private” nature of child care is not solely the result of its funding
through the tax system. Perceptions of the family and its responsibilities con-
tribute to this privatization.” In an ideal world, there would be a national child
care programme through which the State and society generally would take more
responsibility for the regulation and provision of the service. Unfortunately,
there has never been such a programme in Canada, and the demise of the pro-
posed National Strategy on Child Care, as well as public pronouncements by
politicians,’29 suggest that creating such a programme does not appear to be part
of the political agenda at present. It is important to ensure, therefore, that the
current system is not simply dismissed as flawed. Rather, steps should be taken
to recognize its weaknesses and to improve tax measures so that they are more
fair and more responsive to the ‘needs of women with children. For example,
recent studies indicate that, given a choice, parents prefer to use licensed day
care facilities. 3’ The tax system, as I have indicated, can be used to address this
issue directly by selectively providing tax deductions such as accelerated capital
cost allowances for initial and ongoing capital expenditures. The availability of
the deduction could be dependent upon specific criteria being met by the oper-

126See Ferguson, supra note 61 at 38.
‘271nimigration Regulations, C.R.C., c. 940, s. 2(1) (definition of “live-in caregiver”).
128See Boyd, supra note 114.
’29See Clark’s statement in the text accompanying note 101, and Blenkam’s comment, supra

note 102.

’30See Donna Lero & Irene Kyle, “Day Care Quality: Its Definition and Implementation” in
Child Care: Standards and Quality (Ottawa: Supply & Services Canada, 1985); Cooke Report,
supra note 3 at 98-99. It seems that little progress is being made in the effort to provide more pub-
licly licensed and regulated child care spaces. The National Action Committee on the Status of
Women states:

Between 1990 and 1991 the number of regulated child care spaces in Canada grew by
only 2.95%, the lowest percentage increase since 1978. While it may seem progressive
that regulated child care is increasing at all, in reality the number of children with
working mothers has grown at a much greater rate. In 1991, there were 800,000 more
children with a working mother for whom there was no regulated child care space than
there were in 1974 (supra note 30 at 19).

19941’

CHILD CARE – A TAXING ISSUE?

ators of the day care facility, which would ensure that certain minimum stand-
ards are met. This mechanism could be used to subsidize both the creation of
the child care spaces and the ongoing operation of child care facilities.

Another concern is that the use of the tax system to partially subsidize
child care may lessen demands on the State to provide a national child care pro-
gramme. Funding through the tax system has, in the past, been used to justify
the limited funds available for subsidizing public sector child care. For example,
when the National Strategy on Child Care was abandoned in 1992, it was done
at the same time that the limits on the deductible amounts under section 63 were
increased. One can also speculate about the effect a successful appeal by Ms
Symes would have had in terms of removing the pressure from the State to
respond to the current child care problem. Potentially, there might have been
some demobilization of the child care lobby if self-employed women had been
permitted to deduct their child care costs as a business expense. As Brenda
Cossman said, “[Symes] has divided the child care lobby, and … demobilized a
powerful section of that lobby –
upper income self-employed professional par-
ents – who stand to benefit from the business expense deduction..”

Clearly, in the past, the fact that some relief for child care expenses has
been provided by the tax system has allowed the State to claim that action is
being taken to address the child care crisis. The future may, however, be dif-
ferent. As more women enter the paid labour force, the issue of child care
underfunding is increasingly taken up by diverse lobby groups. For example,
the lack of affordable, accessible child care has been addressed in many very
recent reports, including several that had different issues as their primary fo-
cus.” Symes has also fostered considerable discussion of the child care fund-
ing issue in the media and elsewhere. It is not an issue that is likely to disap-
pear. Improving the current provisions of the Act so that they operate more
equitably and efficiently could, therefore, be ah important first step. Such a
measure might, by reducing the restrictions on eligibility for tax relief for child
care expenses, increase the demand for child care which cannot be met by the
informal market, thereby putting pressure on the State to provide more child
care spaces.

The tax system is increasingly being used to fund social programmes.
Funding child care in this manner is consistent with this trend. A recent example
of a social programme that is now funded under the Act is the new child tax ben-
efit, ‘ which is a composite benefit that includes two previous tax measures (the
child tax credit and the refundable child .tax credit) as well as the family allow-
ance, a benefit not previously delivered by the tax system. One reason the gov-

13 1″Dancing in the Dark: A Review of Gwen Brodsky and Shelagh Day’s Canadian Charter
Equality Rights for Women: One Step Forward or Two Steps Back?” (1990) 10 Windsor Y.B.
Access Just. 223.
132The most recent example of a report on child care is the National Child Care Study (supra
note 37), which consists of eight volumes. Other recent reports which have not focused directly
on the issue, but have considered it as part of the larger issue of women’s equality, include the
Ontario Fair Tax Commission’s report (supra note 17 at 27), and that of the National Action Com-
mittee on the Status of Women (supra note 30 at 19).

133Act, supra note 5, ss. 122.6-122.64.

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[Vol. 39

emiment appears to favour using this strategy is that the universality of social
programmes can be diminished by including them in a progressive tax system.
In the case of the child tax benefit, the amount of the benefit is reduced for tax-
payers with incomes above certain threshold amounts. It is interesting to note,
however, that in the case of child care, at present the reverse is true; that is, the
amount of the benefit increases as income increases.

Use of the tax system to fund social programmes is frequently criticized
because the amount expended on a particular programme may be difficult to
ascertain. That criticism is not as valid today as it was in the days prior to the
publication of itemized tax expenditure accounts. While there have been signif-
icant gaps in time between the release of the several tax expenditure accounts,
it does appear that the government is committed to their publication.’34 The most
recent documentation available is the Government of Canada Personal Income
Tax Expenditures, released in December 1992, which put the amount expended
on the child care deduction at $245 million for 1988 and $265 million for 1989.
While the considerable length of time between the making of the expenditure
and the publication of its total amount is regrettable, if the government contin-
ues to release tax expenditure accounts, it will be possible to monitor the
amount spent on child care through the tax system.

It has also been argued that a tax expenditure is an inferior policy instru-
ment because it is administered by Revenue Canada, not by the government
department with expertise in the particular social programme.3 Does Revenue
Canada have the skills necessary to administer a child care subsidy programme?
The answer depends to a certain extent on how specialized the particular pro-
gramme is. Currently the child care deduction is relatively unrestricted by fac-
tors that require specialized administration, so I suggest that this is not a prob-
lem. Should changes be made to the subsidy that would require expertise in
child care, either with respect to policy or administration, the Department of
Finance and Revenue Canada would have to enlist the talents of those with
experience in child care policy issues.

There is a final, added advantage to delivering subsidies for programmes
like child care under the Act –
political expediency. Politicians are familiar and
relatively comfortable with using the Act to subsidize activities. Each year there
is a budget and the Act is opened up for amendment. The budget system allows

a

134Tax expenditure accounts were released in 1979, 1980, 1985 and 1992. See Department of
Finance, Government of Canada Tar Expenditures Account: A Conceptual Analysis and Account
of Tax Preferences in the Federal Income Tax and Commodity Tax Systems (Ottawa: Department
of Finance, 1979); Department of Finance, Government of Canada Tax Expenditure Account: An
Accoumt of Tax Preferences in Federal Income and Commodity Tax Systems, 1976-1980 (Ottawa:
Department of Finance, December 1980); Department of Finance, Account of the Cost of Selective
Tax Measures (Ottawa: Supply & Services Canada, August 1985); Department of Finance, supra
note 14. See also Satya Poddar, Integration of Tax Expenditures into the Expenditure Management
System: The Canadian Experience in Neil Bruce, ed., Tar Expenditures and Government Policy
(Kingston, Ont.: John Deutsch Institute for the study of tconomic Policy, Queen’s University,
1988) 259, where he discusses the important role that tax expenditure analysis has played in the
federal government’s policy making.

135See Neil Brooks, “‘Comment” in Bruce, ed., ibid. at 328.

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CHILD CARE – A TAXING ISSUE?

changes to be made on a frequent basis and, unlike, for instance, the now
defunct Canada Child Care Bill, amendments to the Act that make it to bill form
are usually enacted. This means less uncertainty in terms of legislative change
and also allows more frequent fine-tuning of particular provisions.

Conclusion

Despite the structural inequities that I have discussed and the limitations on
the transformative power of law, my conclusion is that there is still a role for
the tax system to play in delivering a subsidy for child care. The current pro-
vision has, as I have indicated, many flaws, including the limited amount of the
subsidy and the fact that it is worth more to a taxpayer with a higher income.
The remedy sought by Ms Symes was not appropriate because its application
was limited to self-employed women and would have provided a deduction
favouring those with higher incomes. However, a provision can be designed
which does not replicate these inequities. Other tax measures, including subsi-
dies for those who establish or operate child care facilities, can also be devised.
These recommendations will not, of course, substitute for measures like direct
grants to subsidize the operation of child care facilities. But given the govern-
ment’s historical attachment to the tax system as the primary method of funding
child care, it makes sense to think about strategies to improve its current pro-
visions.