Ottawa’s Initiative: Proposing Sales Tax Exemption for Counselling and Psychotherapy Services

Proposing Sales Tax Exemption for Counselling and Psychotherapy Services

Did you know that 1 in 5 Canadians experiences a mental illness in any given year? Even more alarming, approximately 4,000 Canadians lose their lives to suicide annually. The nation is unequivocally in the midst of a mental health crisis, underscoring the heightened significance of accessible treatments.

Fortunately, Canada offers numerous mental health services for widespread access. Many of these services enjoy tax-exempt status, with the notable exception of psychotherapy and counselling therapy.

The federal government’s removal of the sales tax on psychotherapy and mental health 

services is anticipated to incur a consistent annual cost of $10 million over the next five years, marking a $14 million reduction compared to projections by the Parliamentary Budget Officer (PBO). 

The estimated financial impact, amounting to $64 million over the specified period, was disclosed by Parliament’s fiscal watchdog. 

However, the PBO cautioned about inherent limitations in available tax data on mental health services, acknowledging complexities in estimation due to the exclusion of potential behavioural changes resulting from the tax removal. The exemption, announced in the 2023 fall economic statement, aims to facilitate Canadians’ access to necessary support. 

The PBO’s report, relied on data from the Canada Revenue Agency (CRA) pertaining to service providers registered under the agency’s specific code for mental health practitioners, excluding physicians. The PBO highlighted uncertainties arising from limitations in available tax data, emphasising potential distortions caused by larger companies reporting revenues on behalf of branches in other provinces. 

Additionally, it acknowledged that tax revenues provided by the CRA might encompass amounts collected on other services not subject to exemption.

The proposed initiative aligns counsellors and psychotherapists with various other healthcare providers, such as dentists, optometrists, and midwives, by exempting their services from sales tax. 

This move, included in a suite of measures under the Fall Economic Statement (FES), is geared towards enhancing affordability for middle-class Canadians. Mental health services, including counselling and psychotherapy, have gained prominence, especially following the COVID-19 pandemic, prompting a recognition of their integral role in healthcare. 

The government acknowledges the financial burden associated with these services, with hourly appointments often surpassing $100, escalating further for specialised services like those provided by psychologists. 

The estimated annual cost of this exemption is $10 million, with the intended implementation scheduled for the fiscal year 2024-25. As a tax measure, this change necessitates legislation and will become effective upon receiving royal assent.

Key Takeaway

The federal government’s initiative to remove the sales tax on these essential mental health services is a significant step towards addressing this disparity. Anticipated to incur an annual cost of $10 million over the next five years, this move aligns with a broader effort to enhance affordability for middle-class Canadians. 

The Parliamentary Budget Officer’s caution about inherent limitations in available tax data highlights the complexities in estimating the financial impact accurately, considering potential behavioural changes resulting from the tax removal.

This move emphasises the government’s commitment to fostering a supportive and accessible mental health landscape for all Canadians.


Q1: Which medical services are exempt from GST in Canada?

In line with the tax policy, fundamental health services, including consultative, diagnostic, treatment, and other healthcare services, are exempt from the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) in Canada.

Q2: Are medical services subject to sales tax in Canada?

According to the Canada Revenue Agency (CRA), the general rule is that any basic healthcare service provided to an individual by a healthcare professional specifically identified in Part II of Schedule V to the Excise Tax Act (ETA) is exempt from sales tax. This underscores the exemption of essential health care services from the application of GST/HST.

Q3: Is healthcare 100% free in Canada?

Essentially, yes. Canadian residents contribute to Medicare through their taxes, and medical services are accessible free of charge at the point of use. However, it’s important to note that while Medicare covers a broad range of health services, not all aspects are included. Private health insurance is commonly used to fill these gaps, ensuring comprehensive healthcare coverage for residents.