Human sperm sold in Canada is taxed at zero percent. Human eggs sold in Canada are taxed at the regular rates. And this is despite the fact that a federal law forbids their purchase.
In 2013, Haimant Bissessar, president of CAN-AM Cryoservices, noticed something odd. He'd been importing sperm since 2001, but now he had begun to import human eggs as well. Sperm was "zero-rated" for tax, meaning that it was taxed at a rate of zero percent. But eggs, he learned, got no such special treatment.
For over a quarter century, a tax known as the Goods and Services Tax (GST) has been charged on almost everything purchased in Canada. The Excise Tax Act (ETA) spells out how the GST is applied. The law exempts some types of products and zero-rates others. Among those blessed with a tax rate of zero are various groceries, prescription drugs, medical devices, and, yes, right there in Section 5 of Part I of Schedule VI, "a supply of human sperm."
As a seller of sperm and eggs, Bissessar was required by law to collect any relevant tax and remit it to the government. In the case of sperm, there was nothing to collect and remit. In the case of eggs, depending on the province in which it was sold — some combined the GST with a provincial sales tax, creating a "harmonized sales tax" or HST — the tax rate could be anywhere between 5 percent and 15 percent. At today's egg prices, that means tax alone can add as much as $2715 to the bill.
In May 2014, Bissessar wrote to the Canada Revenue Agency (CRA), the government body responsible for administering the ETA, and pointed out the discrepancy. Surely, he suggested, the intention was to treat both male and female gametes equally. Surely, both should be zero-rated.
After reviewing the language in the law, the CRA respectfully disagreed.
Be careful what you wish for
Like other curiosities of law and tax, zero-rated sperm was part historical accident. As he recalls it, Arthur Leader, a fertility doctor and founder of the Ottawa Fertility Centre, was visiting a friend in hospital when he bumped into another friend, who happened to be an assistant deputy minister. The conversation turned to sperm, as it does, and Leader made the case for zero-rating it. After a conference call with some higher-ups, the idea was accepted, he says.
Back then, the market in human eggs was small-to-non-existent, since eggs could only be provided fresh and were not easily imported or stored. So they weren't included. In the last few years, however, egg freezing techniques have improved, and frozen eggs are being imported in increasing numbers. Like Bissessar, Leader has tried and failed to have eggs folded into the ETA.
The result is that Bissessar's CAN-AM Cryoservice, which imports and distributes frozen eggs, has to charge tax on the eggs it sells, but not the sperm. CAN-AM's eggs are sold in batches of six, eight or twelve, for between $11,625 and $18,100. Individual intended parents in Canada also sometimes import frozen eggs, and they too are required to pay the relevant tax. Any brokers who have purchased or sold eggs would also be required to make good on the tax.
When private, for-profit fertility clinics import eggs, however, the obligation is less clear. A cryptic item titled "Importation of oocytes" in a November 2015 CRA newsletter reads, "... where a patient of a fertility clinic or other health care facility undergoes treatment ... which includes the implantation of a human donor oocyte, the CRA considers that the supply of human donor oocytes made by the clinic to the patient in these circumstances may generally be part of an exempt supply of an institutional health care service."
Ultimately, the CRA only interprets and administers the law; it can't change it. That job falls to the ministry of finance. Earlier this year, Bissessar contacted that office, too, and urged the minister to zero-rate eggs alongside sperm. "The tax on feminine hygiene products was removed with the swipe of a pen," Bissessar points out. But the response he got was a generic letter touting new jobs, low unemployment and gender equality — with nary a mention of the issue at hand. Bissessar's follow-up correspondence has gone unanswered.
What Bissessar wants, he says, is a level playing field, although he's mindful that it could go either way. Currently, sperm is regulated under the Food and Drugs Act. Regulatory changes to the Assisted Human Reproduction Act (AHRA), expected this fall, may bring sperm under its jurisdiction. "My concern is, if they move the sperm regs into the AHR Act, would they then start to tax sperm?" asks Bissessar. "Or would they remove the tax on eggs?"
A commodity and not a commodity
The irony, of course, is that purchasing human sperm and eggs is prohibited in Canada. A founding principle of the Assisted Human Reproduction Act (AHRA) is that "trade in the reproductive capabilities of women and men and the exploitation of children, women and men for commercial ends raise health and ethical concerns that justify their prohibition." The law states clearly that "no person shall purchase, offer to purchase or advertise for the purchase of sperm or ova from a donor or a person on behalf of a donor." The penalties include serious fines and jail time.
Nonetheless, the importation of foreign commercial sperm — sperm paid for in the very manner that is outlawed within Canada — has continued pretty much uninterrupted, despite the passing of the AHRA in 2004. Francoise Baylis, a bioethicist at Dalhousie University in Halifax, long ago highlighted this contradiction.
In 2013, Baylis and a colleague, Jocelyn Downie, a law professor also at Dalhousie, wrote to Health Canada for clarification of whether or not the practice was legal. Health Canada's reply appears to suggest that, in their view, importation of commercial sperm or eggs is consistent with the AHRA. They fudged on whether paying for them inside our borders violates the Act: "The location of an activity is a matter of fact," they wrote. "In some situations, it is clear that a transaction or activity has taken place in Canada; in other situations, the location(s) of an activity or transaction may be a matter for a court to determine."
Imported sperm was only supposed to fill the gap while the domestic supply ramped up, says Bissessar. Once the AHRA was fully implemented, importation of paid-for sperm was to be shut down. None of those things — the ramping up, the implementation or the shutting down — ever happened. Instead, we muse about the tax rates on gametes we aren't supposed to buy.
Vanessa Gruben, a law professor at the University of Ottawa, argues that the human reproduction law and the tax law are inconsistent. "The principle underlying the prohibition on the purchase of gametes in the AHRA is non-commodification -- sperm and eggs should not be assigned any commercial value," says Gruben. "And yet the provisions of the ETA appear to acknowledge that sperm and ova do have commercial value, which under certain circumstances, should be taxed."
No matter. The tax court has made it clear that such inconsistencies are irrelevant. If GST is owing, GST must be paid. For now, that's the only level playing field we have.
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