Child Care – A Taxing Issue?

Faculty Author Type

Current Faculty [Claire Young]

Published In

McGill Law Journal

Document Type


Publication Date



Canada; Income Tax; Child Care


While child care policy has been the subject of many governmental inquiries and much lobbying activity during the past twenty years. little substantive progress has been made towards implementing comprehensive state funding for child care. State funding of child care in Canada 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 disproportionate impact that the child care provision has on Canadian women. The author discusses the 1993 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 Income Tax Act is a comprehensive provision that precludes the additional deduction of child care costs. The author uses Symes to illustrate 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.