Notes:

¹ The increase in the tax expenditure in 2006 reflects the elimination in that year of capital gains tax on donations to public charities of both publicly listed securities and ecogifts. The further increase in 2007 reflects Budget 2007's announcement of an extension to private foundations of the elimination of capital gains tax on donations of listed securities. Finally, the slight increase in 2008 reflects Budget 2008's elimination of capital gains tax on donations of exchangeable shares.

The total tax expenditure cost of this measure has two components: the revenue forgone as a result of the reduced inclusion rate (which is shown in the main table), and the increased cost of the charitable donations credit from any increase in donations that results from the measure. If all of the donations of listed securities and ecologically sensitive land would have been made in the absence of this measure, then (as shown in the main table) the total cost ranges from $6 million to $46 million between 2003 and 2010. If, on the other hand, all donations of listed securities and ecologically sensitive land came about as a result of the reduced inclusion rate on capital gains, and if in the absence of the measure the shares and land would have been sold instead of donated, then the cost of the measure ranges from $49 million to $201 million between 2003 and 2010, as shown below (in millions of dollars):

The true costs fall somewhere between the lower and upper bounds set by the ranges indicated.

² Estimates and projections vary from those in prior reports due partly to a methodological change in how the Canadian Cultural Property Export Review Board represents the value of its determinations in a given fiscal year. In addition, assumptions regarding the marginal tax rates of donors of certified cultural property have been changed to match those used in the calculation of the tax expenditure for donations of ecologically sensitive land and publicly listed securities.

The total tax expenditure cost of this measure has two components: the revenue forgone as a result of the reduced inclusion rate (which is shown in the main table), and the increased cost of the charitable donations credit from any increase in donations that results from the measure. If all of the donations of cultural property would have been made in the absence of this measure, then (as shown in the main table) the total cost ranges from $8 million to $18 million between 2003 and 2010. If, on the other hand, all donations of cultural property came about as a result of this measure, and if the property would otherwise have been sold instead of donated, then the cost of the measure ranges from $15 million to $72 million between 2003 and 2010, as shown below (in millions of dollars):

The true costs fall somewhere between the lower and upper bounds set by the ranges indicated.

³ The increase in the tax expenditure in 2004 reflects both the impact of contributions in respect of the 38th general election and an increase of $200 in the three political contribution tax credit thresholds, for 2004 and subsequent years. The higher levels for the tax expenditure in 2005 and 2006 reflect the fact that contributions in respect of the 39th general election were spread over two calendar years. The tax expenditure is expected to be higher in 2008 as a result of contributions in respect of the 40th general election. It is assumed that the next general election will be held at a time beyond the period covered by these estimates.

⁴ Estimates presented in last year's document were based on Statistics Canada data on the number of apprentices in eligible trades and on the typical costs they incur. Tax data now available indicate that the value of this tax expenditure was lower in 2005 than previously estimated. Amounts for future years have been adjusted accordingly.

⁵ This tax expenditure relates to amounts earned in the year and claimed by the student (i.e. neither transferred nor carried forward).

⁶ This measure was introduced in Budget 2006, effective January 1, 2006.

⁷ For a given year, the tax expenditure represents the value of education, tuition and textbook tax credits earned in past years, and used in that year. The tax expenditure does not include the pool of unused education, tuition and textbook tax credits that have been accumulated but will be deferred for use in future years. For example, in taxation year 2008, it is projected that taxpayers will defer $39 million of education, tuition and textbook tax credits (tax value) accumulated in past years, for use in 2009 and future taxation years. The tax expenditure for this measure increases substantially in 2008 and later years due to the impact of the Canada employment credit, the textbook tax credit and the full exemption of scholarship, fellowship and bursary income, which were introduced in Budget 2006, as well as the increase in the basic personal amount that was implemented in the 2007 Economic Statement. These measures contribute to reduce the amount of tax payable, resulting in more credit amounts not being used by students while studying but rather being carried forward.

⁸ The tax expenditure for the transfer of these credits for 2006 and beyond increases substantially due to the impact of the Canada employment credit, the textbook tax credit and the full exemption of scholarship, fellowship and bursary income, which were introduced in Budget 2006, as well as the increase in the basic personal amount that was implemented in the 2007 Economic Statement. These measures contribute to reducing the amount of tax payable by students, resulting in more credit amounts not being used while studying but rather being transferred.

⁹ The tax expenditure equals the tax revenue forgone from exempting scholarship, fellowship and bursary income from tax. Budget 2006 introduced a measure that makes all amounts received for post-secondary scholarships, fellowships and bursaries exempt from tax, where these amounts are received in connection with enrolment in a program for which the student can claim the education tax credit. Budget 2007 extended this treatment to elementary and secondary school students, effective 2007. All other scholarships, fellowships and bursaries receive a tax exemption on the first $500.

¹⁰ The tax expenditure equals the tax revenue forgone on the tax-sheltered income earned on Registered Education Savings Plan (RESP) assets, minus the revenue from taxing withdrawals of income (as an Educational Assistance Payment or Accumulated Income Payment) from RESPs. Projections for 2008 and 2009 are lower than in last year's report due to lower estimates of RESP income, which is estimated based on the rate of return on government bonds, and a revised projection methodology based on administrative data from Human Resources and Social Development Canada.

¹¹ This measure was introduced in Budget 2006. Because this measure started in July 2006, the maximum amount on which the credit is calculated for the 2006 taxation year is $250. For 2007, the maximum amount on which the credit is calculated was increased from $500 to $1,000. This maximum amount is indexed for years subsequent to 2007.

¹² This measure was introduced in Budget 2004, effective for 2004 and later years. The tax expenditure declined in 2005, largely as a result of the reduction in the Canadian component of the NATO-led Stabilization Force mission in Bosnia-Herzegovina. The growth in the Canadian Forces presence in Afghanistan is largely responsible for the tax expenditure increase for 2006 and beyond.

¹³ The projected year-over-year changes in the value of the S&P/TSX Composite Index have been used as a proxy to assess the projected tax expenditures beyond 2007 (see footnote 29).

¹⁴ Budget 2008 announced a 10-per-cent increase in the maximum daily residency deduction, effective 2008.

¹⁵ This measure was introduced in Budget 2006, effective May 2, 2006.

¹⁶ This measure was announced in Budget 2007, effective 2007.

¹⁷ This measure was introduced in Budget 2005, effective 2005.

¹⁸ This measure was introduced in Budget 2007, effective 2007.

¹⁹ Budget 2007 and the 2007 Economic Statement announced enhancements of the spouse or common-law partner credit, effective 2007. At the same time, however, pension income splitting reduces the value of this measure starting in 2007 (see footnote 43 for details). Also, Universal Child Care Benefit (UCCB) payments are included in the net income of the lower-income spouse or common-law partner, thus reducing the value of this measure. UCCB payments commenced in July 2006, and 2007 is the first full year for these payments.

²⁰ Budget 2007 and the 2007 Economic Statement announced enhancements to this measure, effective 2007.

²¹ Budget 2006 extended the lifetime capital gains exemption (LCGE) to qualifying fishing property, effective May 2, 2006. Budget 2007 announced an increase in the LCGE to $750,000 from $500,000, effective March 19, 2007. To reflect the potential impact of recent financial market developments on LCGE claims for qualifying farming and fishing property, no growth in the tax expenditure is projected beyond 2007.

²² The tax expenditure estimate for 2004 is higher than in other years due to the effects of the outbreak of avian flu in British Columbia. Because this provision is a deferral measure, the deferred income from 2004 was reported in 2005, resulting in a negative tax expenditure for that year.

²³ Estimates are based on Statistics Canada data available up to 2005, which includes cash purchase tickets for wheat, barley, oats, canola, flax and rye. Projections are calculated using a historical average growth rate.

²⁴ The data for the Net Income Stabilization Account (NISA) program are observed values up to 2004. NISA and the Canadian Farm Income Program were replaced by the Canadian Agricultural Income Stabilization (CAIS) program, with the effect that government contributions under NISA, as well as other program elements, ceased as of December 31, 2003. All funds in participant accounts will have to be paid out by March 31, 2009. Tax expenditure estimates and projections reflect the wind-down schedule. It should also be noted that CAIS does not result in a tax expenditure.

²⁵ This measure was announced in Budget 2007. The tax expenditure represents the deferral of federal income taxes on contributions to AgriInvest accounts.

²⁶ See the description of the estimation methodology in the "What's New in the 2008 Report" section.

²⁷ The credit was introduced on a temporary basis in 2000 and has been extended since. It is currently set to expire on March 31, 2009. The negative figures for 2009 and 2010 are a result of the rule that requires an individual who earns the credit in a year to include in income for the following year an amount equal to the credit. Since the individual has been allowed to claim a deduction for the full amount of the eligible exploration expense transferred to him or her, this effectively reverses the deduction in respect of the portion of the expense that was effectively paid for by the credit.

²⁸ See the description of the estimation methodology in the "What's New in the 2008 Report" section. The small tax expenditure for 2007 and subsequent years reflects a projected decline in exploration from 2006 to 2007.

²⁹ Projections for 2006 and 2007 are based on preliminary tax return information. Projections beyond 2007 are based on actual and forecast year-over-year changes in the value of the S&P/TSX Composite Index. It is assumed that market prices observed at the end of October 2008 are maintained for the remainder of the year and throughout 2009, and will increase in 2010 at a pace more in line with long-term growth rates. This results in a year-over-year decline in the S&P/TSX Composite Index of 9 per cent in 2008 and 21 per cent in 2009, and 5 per cent growth in 2010. As in previous years, the approach does not take account of the ability of individuals to apply capital losses against previous-year capital gains.

³⁰ The Tax-Free Savings Account (TFSA) was introduced in Budget 2008 and is effective January 1, 2009 (see the "What's New in the 2008 Report" section).

³¹ Budget 2007 announced an increase in the lifetime capital gains exemption to $750,000 from $500,000, effective March 19, 2007. The year-over-year changes in the value of the S&P/TSX Composite Index have been used as a proxy to assess the projected tax expenditures beyond 2007 (see footnote 29).

³² The projections of this tax expenditure for 2006 and 2007 are based on preliminary information regarding sales of shares of labour-sponsored venture capital corporations. Projections assume sales remain constant after 2007.

³³ This measure was introduced in Budget 2006, effective 2007. Budget 2007 enhanced this measure for children with disabilities (see the "What's New in the 2007 Report" section in the 2007 Tax Expenditures and Evaluations for details). In prior years' publications, tax expenditure estimates for this credit were based on the original cost estimates for the measure, as published in Budget 2006. The decline in this tax expenditure relative to last year's publication reflects the availability of preliminary tax data for 2007.

³⁴ The increase in the projected tax expenditure reflects enhancements to the credit announced in Budget 2005 and Budget 2006. Specifically, Budget 2005 increased the maximum amount of the supplement from $571 to $750 per year, effective 2005, and Budget 2006 subsequently increased the maximum amount from $767 to $1,000, effective 2006.

³⁵ The age credit amount was increased by $1,000, from $4,066 to $5,066, in the Tax Fairness Plan (announced October 31, 2006, and confirmed in Budget 2007), effective 2006.

³⁶ The projected declines in this tax expenditure starting in 2006 are mainly explained by increases to the basic personal amount and other non-refundable credits relevant to seniors (such as the age credit and the pension income credit).

³⁷ Although this measure does provide tax relief for individuals, it is implemented through the corporate tax system. See "Interest credited to life insurance policies" in Table 2 of this report for an estimate of the value of this tax expenditure.

³⁸ The decline in this tax expenditure starting in 2006 reflects recent increases in the basic personal amount, reductions in the lowest personal income tax rate, increases in the spouse or common-law partner amount, and the introduction of the child tax credit.

³⁹ This tax expenditure is based on data received from Veterans Affairs Canada. As part of the New Veterans Charter, in 2006 the Canadian Forces Income Support Benefit was established as a tax-free amount for eligible low-income veterans.

⁴⁰ This tax expenditure is based on data received from Veterans Affairs Canada. As of 2006, the new Disability Award has replaced the Veterans Disability Pension for eligible new applicants (current disability pensioners have been grandfathered).

⁴¹ This measure was introduced in Budget 2007, effective 2008.

⁴² Budget 2006 increased the maximum amount that can be claimed under the pension income credit from $1,000 to $2,000 for the 2006 and subsequent taxation years. The introduction of pension income splitting in 2007 will increase the number of individuals claiming the pension income credit and thus increase the value of this tax expenditure.

⁴³ This measure, announced on October 31, 2006 in the Tax Fairness Plan and confirmed in Budget 2007, allows Canadian residents to allocate up to one-half of eligible pension income to their resident spouse or common-law partner, effective 2007.

Pension income splitting will have an impact on other tax expenditures starting in 2007. This measure reduces the effective tax rate on Registered Pension Plan (RPP) benefits and withdrawals from Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds, thus increasing the net value of the RPP/RRSP tax expenditures. Also, since eligible pension income allocated to a lower-income spouse retains its character, some couples will be able to receive a second pension income credit where previously only one was available. This increases the pension income credit tax expenditure. At the same time, since eligible pension income allocated to a lower-income spouse or common-law partner will raise his or her net income, estimates for the spouse or common-law partner credit tax expenditure are lower than they would be in the absence of pension income splitting.

⁴⁴ Estimates and projections vary from those in last year's report due to changes in tax rates and projected levels of contributions, withdrawals and investment income. In general, tax expenditure estimates and projections will be higher in years in which assets grow strongly, reflecting the tax forgone on that investment income, and lower in years in which assets grow slowly or decline. Recent financial market developments are reflected in the projections after 2007, mainly through lower forgone tax revenues on investment income. Recent market developments could also eventually result in increases in Registered Pension Plan contributions required to finance funding deficits, which would increase the tax expenditure. The required contributions, however, could be spread over several years. The 2008 Economic and Fiscal Statement allowed plans to extend their solvency funding payment schedule from 5 to 10 years (in respect of solvency deficiencies as at December 31, 2008).

⁴⁵ Estimates and projections vary from those in last year's report due to changes in tax rates and projected levels of contributions, withdrawals and investment income. In general, tax expenditure estimates and projections will be higher in years in which assets grow strongly, reflecting the tax forgone on that investment income, and lower in years in which assets grow slowly or decline. Recent financial market developments are partly reflected in the projections after 2007, mainly through lower forgone tax revenues on investment income. The projections also reflect a 25-per-cent reduction in the required minimum withdrawal from a Registered Retirement Income Fund for 2008 (see the "What's New in the 2008 Report" section for details).

⁴⁶ The present-value estimates reflect the lifetime cost of a given year's contributions. This definition is different from that used for the cash-flow estimates and thus the two sets of estimates are not directly comparable. Further information on how these estimates are calculated is contained in the paper "Present-Value Tax Expenditure Estimates of Tax Assistance for Retirement Savings," which was published in the 2001 edition of this report.

⁴⁷ The estimates and projections for this tax expenditure can vary from year to year, reflecting the cyclicality of the housing market and its impact on the number of residence resales and in the average price of residences. Estimates and projections are based on housing market data and forecasts provided by Canada Mortgage and Housing Corporation and the Canadian Real Estate Association.

⁴⁸ This measure was introduced in Budget 2006, effective July 1, 2006. Budget 2007 extended the credit to electronic fare cards and weekly passes used on an ongoing basis. In prior years' publications, tax expenditure estimates for this credit were based on the original cost estimates for the measure as published in Budget 2006 and Budget 2007. This year's publication reflects the availability of preliminary tax data for the 2006 and 2007 taxation years. The decline in this tax expenditure relative to last year's publication partly reflects tax changes introduced in Budget 2007 and the 2007 Economic Statement that reduced the number of individuals subject to tax.

⁴⁹ The projections include the revenue impact associated with both the enhanced dividend tax credit introduced in 2006, mainly applicable to dividends from large businesses, and the basic dividend tax credit applicable to other dividends, mostly from small businesses. Budget 2008 announced changes to the dividend gross-up and enhanced dividend tax credit beginning in 2010 to reflect general corporate income tax reductions announced in the 2007 Economic Statement.

⁵⁰ Prior to 2006, some families with young children who claimed little or no child care expenses were eligible to receive the Canada Child Tax Benefit (CCTB) under-7 supplement. Thus the value of the tax expenditure was partially offset by the increase in the CCTB under-7 supplement that would follow any decrease in the amount of child care expenses claimed. The increase in the tax expenditure in 2006 and later years reflects the phase-out of the CCTB under-7 supplement as of June 30, 2006, for children under the age of 6, and June 30, 2007, for 6-year-old children.

⁵¹ Budget 2004 replaced the attendant care deduction with a broader disability supports deduction, beginning with the 2004 taxation year. Budget 2005 expanded the list of expenses eligible for the disability supports deduction.

⁵² This tax expenditure represents the revenue impact resulting from the application of previous-year capital losses against the net capital gains realized in a particular year.

⁵³ Self-employed individuals may deduct the employer share of their Canada Pension Plan/Québec Pension Plan contributions paid for their own coverage. This is included in the tax expenditure for the non-taxation of employer-paid premiums.

⁵⁴ Projections include contributions paid to the Quebec Parental Insurance Plan (QPIP). The QPIP became effective January 1, 2006.

⁵⁵ The basic personal amount was increased by amounts over and above the inflation protection provided by full indexation in Budget 2005, Budget 2006 and the 2007 Economic Statement.

⁵⁶ Tax expenditure estimates and projections for this measure are not available, mainly because data on payouts/winnings are incomplete. Data on payouts at casinos, video lottery terminals, horseracing, and racetrack slot machines, which constitute a rising share of total spending on gaming, is fragmentary. In addition, no data are available on the payouts/winnings from activities sponsored by charities and other non-government organizations.

It is important to note that under federal-provincial agreements negotiated in 1979 and 1985, the federal government, in exchange for an ongoing payment, undertook to refrain from re-entering the field of gaming and betting to ensure that the rights of the provinces in that field are not reduced or restricted.

⁵⁷ The tax expenditure has been adjusted to reflect the incorporation of new detailed administrative data supplied by the Department of National Defence for the 2007–08 fiscal year.

⁵⁸ Deductions of meals and entertainment expenses declined in 2004 and 2005 relative to 2003. This affects the projected tax expenditure for future years. Budget 2007 increased the deductible portion of the cost of food and beverages consumed by long-haul truck drivers during eligible periods of travel. Thus, the projected tax expenditure increases starting in 2007.