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FROM: SEP-OCT 2007 | BY VERN KRISHNA
Tax law is beset with invisible boomerangs. Nowhere is this truer than in the rules governing the deductibility of childcare expenses for working mothers. Prime Minister Harper’s budget proposal to extend childcare benefits by $100 a month is minimal incentive to a growing crisis in the professions.
At university graduation ceremonies across Canada in 2007, over 60 per cent of new accountants, doctors, and lawyers were women. These are not transitional numbers but long-term shifts in university demographics. The retention of these graduates should be a high government priority.
Childcare expenses have escalated in the last 30 years as more mothers go out of the home to work. However, unlike some personal expenses – such as food and shelter – that one incurs whether or not one works, childcare has a strong impact on business. If a mother cannot work without access to childcare and the family needs her income, any incremental cash that the family pays for such care is clearly income-related.
There are many circumstances where parents, particularly women, incur childcare expenses primarily for the purpose of allowing them to work. Indeed, in many families, both parents must work for economic survival. While all parents must care for their children, parents who work outside the home as employees or business owners incur incremental childcare expenses that can be linked directly and solely to the purpose of earning income. Hence, childcare expenses could be deductible as business expenses under conventional tax principles.
The present regime of childcare deductions and benefits is a haphazard conglomerate of rules that are not particularly effective or well suited to the needs of the new economy. The government should amend the tax statute to allow for more generous deductions of childcare expenses or an option to deduct such expenses as business expenses for professional women earning business income.
The $1,200 annual grant will help some, but is not likely to address the impending crisis as increasing numbers of professional women withdraw their services during the critical years of family care.
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