Tax Forum
An Unhealthy Decision
If you buy medication at a health food store, rather than a pharmacy, don't expect to claim the medical expense tax credit.
FROM: SEP-OCT 2002 ISSUE | BY DON GOODISON
Recently a client of mine asked if she could claim vitamins and other health food supplements as a medical expense. When I told her she couldn't, she commented that the tax rules lacked foresight. She claimed that by taking these "medicines," she was maintaining her health and not costing the health care system a lot of money. She then wondered if anyone had ever challenged the rules. Well, I had just seen a case on that very subject. The case, Michael Melnychuk (appellant) v. Her Majesty the Queen (respondent) [Tax Court of Canada; 2001-2232(IT)I], was an appeal by the taxpayer of claims for the cost of vitamin, herb and metal supplements as medical expenses.
In September 1999, Melnychuk began treatment at the Phoenix Chelation Clinic in Edmonton, Alberta, after having previously had bypass surgery. When he was examined at the clinic, the doctor discovered that three of the bypassed arteries were 70 per cent occluded and one native vessel was 100 per cent stenosed. In other words, his arteries were hardening up again. Another bypass surgery was considered dangerous and possibly unhelpful. So, Melnychuk began chelation therapy, which removes heavy metals from the body. Removing these heavy metals can lessen the hardening of the arteries.
Taking balanced vitamin and mineral supplements is a mandatory part of chelation therapy at the Phoenix Clinic. The supplements were prescribed by the clinic's doctors and could be purchased at the clinic itself or a health food store. The advantage to purchasing them at a health food store or the clinic, rather than at a pharmacy, was that they were specifically mixed for the patient and in the correct strength.
In his 1999 tax return, Melnychuk claimed $1,073 for his medical expense tax credit. Revenue Canada (now the CCRA) disallowed the full amount, but subsequently allowed $100. The claim was disallowed on the basis that the vitamins and supplements did not fall under the provisions of paragraph 118.2(2)(n) of the Income Tax Act, which states:
(2) Medical expenses — For the purposes of subsection (1), a medical expense of an individual is an amount paid
. . .
(n) for drugs, medicaments or other preparations or substances [other than those described in paragraph (k)] manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder, abnormal physical state, or the symptoms thereof or in restoring, correcting or modifying an organic function, purchased for use by the patient as prescribed by a medical practitioner or dentist and as recorded by a pharmacist.
In Melnychuk's appeal to the Tax Court of Canada, the tax department conceded that Melnychuk met all of the provisions of paragraph 118.2(2)(n), except for one — "as recorded by a pharmacist." Melnychuk admitted that the expenses in dispute did not meet this condition, but called on the court to use fairness and disregard the requirement. He referred to the Tax Court's decision in Frank v. the Queen [(2001) 3 CTC 2596], in which Judge Teskey stated:
"Recorded" by a pharmacist could be the pharmacist's purchase or sales slips. Both are recordings by the pharmacist. The late Mr. Justice Sopinka of the Supreme Court of Canada, in the Case that dealt with strike pay, said that where the Act is such that there is a doubt as to the meaning of the words, the doubt has to be given to the taxpayer....
Although Judge Teskey gave a liberal meaning to the phrase "recorded by a pharmacist," Melnychuk had not even purchased his supplies at a pharmacy. The court felt that the requirement that the purchase be recorded by a pharmacist could not be ignored and disallowed the appeal.
The court expressed its sympathy with Melnychuk's position. The vitamins were prescribed by a medical doctor and acquired through the doctor's clinic. The Phoenix Chelation Clinic is an Alberta Medical Association approved facility. In addition, the treatment had been successful in preventing a second bypass operation. Common sense would dictate that the claim should be allowed, but the court was unable to give Melnychuk relief. The court summed up its position with a quote from Judge Bowman of the Tax Court of Canada in Banman v. the Queen [(2001)2CTC2111], a case that was similar to this one:
I might just add one further point. I am aware from what the Appellant tells me and I am aware generally that alternative medicines and homeopathic treatment are making great progress these days. I can well understand why in paragraph (n) the government requires that certain medications be prescribed by a medical practitioner, because there is as yet not very much control in the labelling or the sale of alternative medicines and that needs to be done.
Sooner or later, however, I think the government is going to have to face the fact that homeopathic medicines, alternative forms of treatment, herbs, natural healing, that sort of thing are so prevalent it should consider an amendment to the Income Tax Act that would permit a tax credit in respect of these things....
Over the last few years, I've noticed a definite trend toward "healthy" living. More people I know are turning vegetarian, particularly younger people. They take vitamin supplements and herbal concoctions designed to make them live longer, healthier lives. This bodes well for our future health care budgets, since these people will use the system less than those of us who regularly block our arteries with greasy — but tasty — foods. Natural remedies are no longer the exclusive domain of naturopaths; more and more medical doctors are prescribing them. If a recognized medical practitioner prescribes such remedies, they should be allowed as medical expenses. The fact that they were prescribed should be the only requirement; the fact that they are not purchased in a pharmacy should not matter. Perhaps a way around this is for health food stores or clinics, such as the Phoenix Chelation Clinic, to have a pharmacist on staff to record the sales.
I agree with the comments of Melnychuk's doctor, Dr. Wiancko, who stated in a letter to the court:
Reducing the cost of health care is a prime object in the federal and provincial budgets. If patients are willing to take responsibility for their health and purchase their health giving vitamins/supplements elsewhere than a pharmacy, is it not contradictory and counterproductive to this aim to force them into using the health care system more?
Perhaps it's time for the government to rethink the legislation and allow claims such as Melnychuk's, thus encouraging healthy lifestyles. In the long run, it could very well save the government — and taxpayers — money. Eggplant anyone?
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Don Goodison, CFP, FCGA, is a partner of Kemp Harvey Goodison, Certified General Accountants, in Burnaby, B.C. E-mail goodison@axionet.com.