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Preface

The Department of Finance first reported on federal tax expenditures in December 1979, and has published estimates and projections of tax expenditures for personal and corporate income taxes as well as for the Goods and Services Tax (GST) since 1994. Beginning in 2000, the tax expenditure report has been separated into two documents. This document, Tax Expenditures and Evaluations, is published annually. It provides estimates and projections for broadly defined tax expenditures as well as evaluations and analytical papers addressing specific tax measures. This year’s edition includes an evaluation of the Charitable Donation Tax Credit as well as a study of interprovincial tax planning by corporate groups in Canada.

The second document, Tax Expenditures: Notes to the Estimates/Projections, is a reference document which presents the objective of each tax expenditure and explains how the estimates and projections are calculated. This document is published periodically and the 2010 edition is available on the Department of Finance website.

Part 1 - Tax Expenditures: Estimates and Projections

Introduction

The principal function of the tax system is to raise the revenues necessary to fund government expenditures. The tax system can also be used directly to achieve public policy objectives through the application of special measures such as low tax rates, exemptions, deductions, deferrals and credits. These measures are often described as “tax expenditures” because they achieve policy objectives at the cost of lower tax revenue.

To identify and estimate tax expenditures, it is necessary to establish a “benchmark” tax structure that applies the relevant tax rates to a broadly defined tax base—e.g., personal income, business income or consumption. Tax expenditures are then defined as deviations from this benchmark. Reasonable differences of opinion exist about what should be considered part of the benchmark tax system and hence about what should be considered a tax expenditure.

This report takes a broad approach and includes estimates and projections of the revenue loss associated with all but the most fundamental structural elements of the tax system, such as the progressive personal income tax rate structure. This includes not only measures that may reasonably be regarded as tax expenditures but also other measures that may be considered part of the benchmark tax system. The latter are listed separately under “Memorandum Items.” For instance, the Dividend Tax Credit is listed under this heading because its purpose is to reduce or eliminate the double taxation of income earned by corporations and distributed to individuals through dividends. Also included under this heading are measures where data limitations do not permit a separation of the tax expenditure and benchmark components of the measure. This approach provides information on a full range of measures.

A more detailed discussion of how the estimates and projections of the tax expenditures are calculated is available in the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections.

Caveats

Care must be taken in interpreting the estimates and projections of tax expenditures presented in this document for the following reasons:

  • The estimates and projections are intended to indicate the potential revenue gain that would be realized by removing individual tax measures. They are developed assuming that the underlying tax base would not be affected by removal of the measure. However, this is an assumption that is unlikely to be true in practice in some cases, as the behaviour of beneficiaries of tax expenditures, overall economic activity and other government policies could change along with the specific tax provision.
  • The cost of each tax measure is determined separately, assuming that all other tax provisions remain unchanged. Many of the tax expenditures do, however, interact with each other such that the impact of several tax provisions at once cannot generally be calculated by adding up the estimates and projections for each provision.
  • The federal and provincial income tax systems interact with each other to varying degrees. As a result, changes to tax expenditures in the federal system may have consequences for provincial tax revenues. In this publication, however, any such provincial effects are not taken into account—that is, the tax expenditure estimates and projections address strictly the federal tax system and federal tax revenue.
  • The tax expenditure estimates and projections presented in this document are developed using the latest available taxation data. Revisions to the underlying data as well as improvements to the methodology can result in substantial changes to the value of a given tax expenditure in successive publications. In addition, estimates and projections for some tax measures, such as the partial inclusion of capital gains, are particularly sensitive to economic parameters and hence may also differ significantly from one publication to the next.

What’s New in the 2014 Report

New tax measures were introduced and others modified in Budget 2014. Changes affecting estimates and projections of tax expenditures are described below.

Personal Income Tax

Adoption Expense Tax Credit

The Adoption Expense Tax Credit is a 15% non-refundable tax credit that allows adoptive parents to claim eligible adoption expenses relating to the completed adoption of a child under the age of 18, up to a maximum of $11,774 in expenses per child for 2014. To provide further tax recognition of adoption-related expenses such as adoption agency fees and legal fees, Budget 2014 increased the maximum amount of eligible expenses to $15,000 per child. This measure applies to adoptions finalized after 2013. Normal indexation will apply to the new maximum amount for taxation years after 2014.

Children’s Fitness Tax Credit

As announced on October 9, 2014, the Government enhanced the Children’s Fitness Tax Credit by increasing the maximum amount that may be claimed under the credit to $1,000 from $500, and by making the credit refundable. The doubling of the maximum amount is effective for the 2014 and subsequent taxation years, and the credit will be made refundable effective for the 2015 and subsequent taxation years.

Donations of Ecologically Sensitive Land

The Ecological Gifts Program provides a way for Canadians with ecologically sensitive land to contribute to the protection of Canada’s environmental heritage. Under this program, certain donations of ecologically sensitive land, or easements, covenants and servitudes on such land, are eligible for special tax assistance. Individual donors are eligible for a Charitable Donation Tax Credit, while corporate donors are eligible for a Charitable Donation Deduction. As with other charitable donations, amounts not claimed for a year may be carried forward for up to five years. In addition, capital gains associated with the donation of ecologically sensitive land are exempt from tax. To permit donors to take greater advantage of tax assistance and thereby encourage larger donations, Budget 2014 extended to ten years the carry-forward period for donations of ecologically sensitive land, or easements, covenants and servitudes on such land. This measure applies to donations made on or after February 11, 2014.

Donations of Certified Cultural Property

For the purpose of calculating a Charitable Donation Tax Credit (for individuals) or a Charitable Donation Deduction (for corporations), the value of a gift of property is deemed to be no greater than its cost to the donor if, generally, the donor acquired the property as part of a tax shelter gifting arrangement or held the property for a short period. Gifts of certified cultural property are exempt from this rule and also benefit from a capital gains exemption. As a result, Canadians are encouraged to donate culturally significant property to designated institutions and public authorities to help preserve Canada’s national heritage.

The donation of certified cultural property could be a target for abuse by tax shelter promoters because of the combination of its favourable tax treatment, inherent uncertainties in appraising the value of art and artifacts, and the exemption from the rule that deems the value of a gift to be no greater than its cost to the donor in certain circumstances. Budget 2014 removed, for certified cultural property acquired as part of a tax shelter gifting arrangement, the exemption from the rule that deems the value of a gift to be no greater than its cost to the donor. Other donations of certified cultural property are not affected by this measure. This measure applies to donations made on or after February 11, 2014.

Medical Expense Tax Credit

The Medical Expense Tax Credit recognizes the effect of above-average medical and disability-related expenses on a taxpayer’s ability to pay income tax. The credit provides federal income tax relief equal to 15% of eligible medical and disability-related expenses in excess of a threshold that is the lesser of 3% of the taxpayer’s net income and an indexed dollar amount ($2,171 in 2014). Budget 2014 expanded the list of eligible expenses under the credit to include costs associated with service animals specifically trained to assist individuals with severe diabetes, such as diabetes alert dogs, as well as costs for the design of an individualized therapy plan. These measures apply to expenses incurred after 2013.

Search and Rescue Volunteers Tax Credit

In recognition of the important role played by search and rescue volunteers in contributing to the security and safety of Canadians, Budget 2014 introduced a Search and Rescue Volunteers Tax Credit to allow eligible ground, air and marine search and rescue volunteers to claim a 15% non-refundable tax credit based on an amount of $3,000. This measure applies to the 2014 and subsequent taxation years.

Tax Deferral for Farmers

Farmers who dispose of breeding livestock due to drought, flood or excess moisture conditions existing in prescribed regions in a given year are permitted to defer up to 90% of the sale proceeds from inclusion in their taxable income until the year following the sale, or a later year if the conditions persist. This allows farmers to use the sale proceeds to fund the acquisition of replacement livestock. The inclusion in taxable income in the year of replacement will be largely offset by the cost of the replacement livestock.

The tax deferral is targeted at breeding livestock because its sale is akin to disposing of long-term productive assets. Budget 2014 extended this tax deferral to bees, and to all types of horses that are over 12 months of age, that are kept for breeding. This measure applies to the 2014 and subsequent taxation years.

Family Package

On October 30, 2014, the Government proposed new measures that would provide tax relief or deliver benefits to Canadian families.1 The proposed measures include:

  • The Family Tax Cut, a federal tax credit that would allow a higher-income spouse to, in effect, transfer up to $50,000 of taxable income to a spouse in a lower tax bracket. The credit would provide tax relief—capped at $2,000—for couples with children under the age of 18, effective for the 2014 and subsequent taxation years. Tax relief would be calculated on the basis of the difference in tax before and after the effective transfer of income.
  • An enhancement of the Universal Child Care Benefit that would provide an increased benefit of $160 per month for children under the age of 6 (up from $100 per month) and a new benefit of $60 per month for children aged 6 through 17, effective January 1, 2015. Enhanced payments for the Universal Child Care Benefit would take effect as of January 2015 and would begin to be reflected in monthly payments to recipients in July 2015. The July 2015 payment would include up to six months of benefits to cover the January to June 2015 period. It is proposed that the treatment of the existing Universal Child Care Benefit for tax and income-tested benefit purposes be extended to the enhanced Universal Child Care Benefit. This measure would affect the tax expenditure in respect of the inclusion of the Universal Child Care Benefit in the income of an eligible dependant for the 2015 and subsequent taxation years.
  • The repeal of the Child Tax Credit for the 2015 and subsequent taxation years since it is proposed that the enhanced Universal Child Care Benefit replace the existing Child Tax Credit. Introduced in Budget 2007, the Child Tax Credit is a non-refundable tax credit based on a fixed amount per child under the age of 18 years ($2,255 in 2014, which amounts to tax relief of up to $338 per child).
  • A $1,000 increase in the maximum dollar amounts that can be claimed under the Child Care Expense Deduction, effective for the 2015 taxation year. This means that the maximum amount would increase to $8,000 from $7,000 per child under age 7, to $5,000 from $4,000 for each child aged 7 through 16 (and infirm dependent children over age 16), and to $11,000 from $10,000 for children who are eligible for the Disability Tax Credit.

No changes to the Canada Child Tax Benefit have been proposed as part of this announcement. Eligible families will continue to receive monthly Canada Child Tax Benefit payments.

Mineral Exploration Tax Credit for Flow-Through Share Investors

The Mineral Exploration Tax Credit is a reduction in tax, available to individuals who invest in flow-through shares, equal to 15% of specified mineral exploration expenses incurred in Canada and transferred to flow-through share investors. The credit was introduced on a temporary basis in 2000 and has generally been extended on an annual basis since then. Budget 2014 extended eligibility for the credit for an additional year to flow-through share agreements entered into on or before March 31, 2015. Under the one-year “look-back” rule, funds raised with the benefit of the credit in 2015, for example, can be spent on eligible exploration up to the end of 2016.

Goods and Services Tax

Exemption for Hospital Parking

On January 24, 2014, the Government announced Goods and Services Tax/Harmonized Sales Tax (GST/HST) relief for hospital parking for patients and visitors in order to help reduce the cost burden on patients accessing the health care they need and to support their families and friends.

Designing Training for Individuals With a Disorder or Disability

Budget 2014 expanded the current GST/HST exemption for training specially designed to help individuals cope with a disorder or disability to include services of designing such training, such as developing a training plan or an individualized therapy plan. The cost associated with this relief is included in the category “Exemption for health care services.”

Acupuncturists’ and Naturopathic Doctors’ Services

Budget 2014 added acupuncturists and naturopathic doctors to the list of health care practitioners whose professional services are exempt from the GST/HST. The cost associated with this relief is included in the category “Exemption for health care services.”

Eyewear Specially Designed to Electronically Enhance the Vision of Individuals With Vision Impairment

Budget 2014 added eyewear specially designed to treat or correct a defect of vision by electronic means to the list of medical and assistive devices that are zero-rated under the GST/HST. The cost associated with this relief is included in the category “Zero-rating of medical devices.”

The Tax Expenditures

Tables 1 to 3 provide tax expenditure values for personal income tax, corporate income tax and the GST for the years 2009 to 2014. Values for the years 2009 to 2012 are generally based on tax data supplied by the Canada Revenue Agency, or are calculated from data supplied by Statistics Canada and other government departments and agencies. Values for the 2013 and 2014 projections are usually determined from the historical relationship between a tax expenditure and relevant economic variables. These economic variables are generally based on the forecast presented in the November 12, 2014 Update of Economic and Fiscal Projections. See Chapter 1 of the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections for additional details on the methodology.

Tax expenditures in each table are grouped according to functional categories. This grouping is provided solely for presentational purposes and is not intended to reflect underlying policy considerations.

All estimates and projections are reported in millions of dollars. The letter “S” (“small”) indicates that the absolute value of the tax expenditure is less than $2.5 million, “n.a.” signifies that data are not available to support a meaningful estimate or projection, a dash means that the tax expenditure is not in effect, and the letter “X” indicates that the estimate or projection is not published for confidentiality reasons. The inclusion in the report of items for which estimates and projections are not available reflects the intention to provide information on measures included in the tax system even if it is not always possible to provide their revenue impacts. Work is continuing to obtain quantitative estimates and projections where possible.

Changes in the estimates and projections from those in last year’s report, as well as variations from year to year, may result from a number of factors, including legislative changes, changes in the economic variables affecting the tax expenditures, the availability of new data, and methodological improvements. Legislative changes affecting the estimates and projections are described in Tax Expenditures: Notes to the Estimates/Projections, in the “What’s New in the 2014 Report” section of this publication and in the notes to the tables.

Broad-based changes to the tax system may affect tax expenditure estimates and projections to the extent that these changes modify the effective tax rates otherwise faced by taxpayers under the benchmark tax system. A reduction (increase) in the effective tax rate under the benchmark tax system will generally result in lower (higher) tax expenditure estimates and projections. During the period covered by this publication, the recent reductions in the general corporate income tax rate (from 19% to 18% on January 1, 2010, 16.5% on January 1, 2011, and 15% on January 1, 2012) had the effect of reducing the estimates and projections for most corporate income tax expenditures, with a few exceptions such as investment tax credits.

Table 1
Personal Income Tax Expenditures*
millions of dollars

The letter "S" ("small") indicates that the absolute value of the tax expenditure is less than $2.5 million.
"n.a." signifies that data are not available to support a meaningful estimate or projection.
A dash means that the tax expenditure is not in effect.
The letter "X" indicates that the estimate or projection is not published for confidentiality reasons.

  Estimates Projections
 

  2009 2010 2011 2012 2013 2014
Charitable Donations and Political Contributions            
Charitable Donation Tax Credit (excluding donations of assets eligible for capital gains exemption)1 2,020 2,180 2,205 2,195 2,250 2,305
Donations of publicly listed securities            
  Charitable Donation Tax Credit 98 140 140 125 145 150
  Non-taxation of capital gains 29 48 42 38 44 45
  Total tax expenditure 127 188 182 163 189 195
Donations of ecologically sensitive land2            
  Charitable Donation Tax Credit 8 5 7 7 5 7
  Non-taxation of capital gains 3 S S S S S
  Total tax expenditure 11 7 9 9 7 9
Donations of cultural property3            
  Charitable Donation Tax Credit 20 18 17 26 23 23
  Non-taxation of capital gains 6 6 5 8 7 7
  Total tax expenditure 26 24 22 34 30 30
Political Contribution Tax Credit4 23 21 31 23 25 25
First-Time Donor’s Super Credit5 5 7
Culture            
Assistance for artists S S S S S S
Children’s Arts Tax Credit6 32 37 40 42
Deduction for artists and musicians S S S S S S
Education            
Adult basic education—deduction for tuition assistance 5 5 5 5 5 5
Apprentice vehicle mechanics’ tools deduction 5 4 4 4 4 4
Education Tax Credit7 200 200 200 200 200 210
Textbook Tax Credit7 33 32 32 32 32 34
Tuition Tax Credit7 255 270 285 290 295 310
Transfer of Education, Textbook and Tuition Tax Credits 520 535 565 565 570 575
Carry-forward of Education, Textbook and Tuition Tax Credits8 480 545 615 700 725 740
Exemption of scholarship, fellowship and bursary income 39 40 43 44 44 45
Registered Education Savings Plans 165 160 165 160 150 155
Student Loan Interest Credit 44 41 42 46 47 46
Employment            
Canada Employment Credit 1,915 1,935 1,995 2,040 2,100 2,145
Child care expense deduction 810 850 900 960 980 1,015
Deduction for income earned by military and police deployed to high-risk international missions 36 37 35 15 14 5
Deduction of home relocation loans S S S S S S
Deduction of other employment expenses 930 945 985 1,000 1,010 1,025
Deduction for tradespeople’s tool expenses 3 3 3 S S S
Deduction of union and professional dues 755 785 825 860 890 915
Deferral of salary through leave of absence/sabbatical plans n.a. n.a. n.a. n.a. n.a. n.a.
Disability supports deduction S S S S S S
Employee benefit plans n.a. n.a. n.a. n.a. n.a. n.a.
Employee stock option deduction9 430 690 740 590 625 750
Moving expense deduction 105 100 100 100 96 100
Non-taxation of certain non-monetary employment benefits n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of strike pay n.a. n.a. n.a. n.a. n.a. n.a.
Northern residents deductions 160 160 170 180 180 185
Overseas Employment Credit10 72 73 75 68 52 35
Tax-free amount for emergency service volunteers 14 14 12 12 12 12
Search and Rescue Volunteers Tax Credit11 4
Volunteer Firefighters Tax Credit12 15 16 16 17
Family            
Adoption Expense Tax Credit13 3 3 3 3 3 4
Caregiver Credit 97 100 105 105 110 115
Child Tax Credit 1,470 1,480 1,510 1,560 1,590 1,620
Deferral of capital gains through transfers to a spouse, spousal trust or family trust n.a. n.a. n.a. n.a. n.a. n.a.
Family Caregiver Tax Credit14 53 60 65
Family Tax Cut15 1,915
Infirm Dependant Credit 5 5 5 5 6 7
Spouse or Common-Law Partner Credit 1,385 1,410 1,425 1,495 1,540 1,570
Eligible Dependant Credit 785 785 790 805 805 810
Inclusion of the Universal Child Care Benefit in the income of an eligible dependant16 5 5 5 5 5
Farming and Fishing            
Lifetime Capital Gains Exemption for farm and fishing property17 320 325 385 475 515 525
Cash basis accounting n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of capital gains through intergenerational rollovers of family farms, family fishing businesses and commercial woodlots n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of income from destruction of livestock S S S S S S
Deferral of income from sale of livestock during drought, flood or excessive moisture years18 n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of income from grain sold through cash purchase tickets19 -10 -10 70 25 -12 -13
Deferral through 10-year capital gain reserve S S S S S S
Exemption from making quarterly tax instalments n.a. n.a. n.a. n.a. n.a. n.a.
AgriInvest (farm savings account) 15 20 25 11 15 15
Agri-Québec (farm savings account)20 5 5 5 5
Flexibility in inventory accounting n.a. n.a. n.a. n.a. n.a. n.a.
Tax treatment of the Net Income Stabilization Account21            
  Deferral of tax on government contributions S
  Deferral of tax on bonus and interest income S
  Taxable withdrawals S
Federal-Provincial Financing Arrangements            
Logging Tax Credit S S S S S S
Quebec Abatement 3,415 3,665 3,885 4,040 4,230 4,435
Transfer of income tax points to provinces 16,260 17,385 18,340 19,115 20,005 20,975
General Business and Investment            
$200 capital gains exemption on foreign exchange transactions n.a. n.a. n.a. n.a. n.a. n.a.
$1,000 capital gains exemption on personal-use property n.a. n.a. n.a. n.a. n.a. n.a.
Accelerated deduction of capital costs n.a. n.a. n.a. n.a. n.a. n.a.
Deduction of carrying charges incurred to earn income 920 1,005 1,085 1,080 1,145 1,200
Deferral through use of billed-basis accounting by professionals n.a. n.a. n.a. n.a. n.a. n.a.
Deferral through five-year capital gain reserve 20 30 30 30 30 30
Investment tax credits 17 16 18 18 16 16
Flow-through share deductions 190 285 345 200 130 125
Mineral Exploration Tax Credit for flow-through share investors22 65 110 100 45 25 35
Reclassification of expenses under flow-through shares19 -11 S -6 -9 -9 -8
Partial inclusion of capital gains23 2,445 3,630 3,800 3,330 4,090 4,970
Taxation of capital gains upon realization n.a. n.a. n.a. n.a. n.a. n.a.
Tax-Free Savings Account 65 165 160 305 435 520
Small Business            
Lifetime Capital Gains Exemption for small business shares17 475 540 595 615 580 590
Deduction of allowable business investment losses 35 35 30 35 30 30
Deferral through 10-year capital gain reserve S S S S S S
Labour-Sponsored Venture Capital Corporations Credit24 125 130 140 150 145 140
Non-taxation of provincial assistance for venture investments in small businesses n.a. n.a. n.a. n.a. n.a. n.a.
Rollovers of investments in small businesses 5 3 4 X 4 4
Health            
Children’s Fitness Tax Credit25 110 110 110 115 115 130
Disability Tax Credit 620 650 675 690 720 750
Medical Expense Tax Credit26 1,000 1,080 1,135 1,200 1,295 1,425
Non-taxation of business-paid health and dental benefits 1,685 1,780 1,850 1,935 2,015 2,065
Income Maintenance and Retirement            
Age Credit 2,295 2,410 2,530 2,700 2,830 2,955
Deferred Profit-Sharing Plans n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of certain amounts received as damages in respect of personal injury or death n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of Guaranteed Income Supplement and Allowance benefits 89 100 115 130 130 135
Non-taxation of investment income from life insurance policies27 n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of RCMP pensions/compensation in respect of injury, disability or death n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of social assistance benefits 145 155 160 170 180 190
Non-taxation of up to $10,000 of death benefits n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of veterans’ allowances, income support benefits, civilian war pensions and allowances, and other service pensions (including those from Allied countries) S S S S S S
Non-taxation of veterans’ disability pensions and support for dependants 135 135 130 125 125 125
Non-taxation of veterans’ Disability Awards 22 32 28 33 39 40
Non-taxation of workers’ compensation benefits 620 625 625 625 625 625
Registered Disability Savings Plans S S 3 5 6 8
Pension Income Credit 965 1,010 1,035 1,065 1,085 1,120
Pension income splitting 865 895 975 1,035 1,085 1,145
Registered Pension Plans28            
  Deduction for contributions 11,945 12,200 12,780 13,270 14,040 14,475
  Non-taxation of investment income 7,145 10,120 10,535 13,675 15,080 15,550
  Taxation of withdrawals -6,605 -7,140 -7,525 -7,610 -8,080 -8,430
  Net tax expenditure 12,485 15,180 15,790 19,335 21,040 21,595
Registered Retirement Savings Plans28            
  Deduction for contributions 7,005 7,245 7,450 7,670 7,985 8,125
  Non-taxation of investment income 4,085 6,755 6,985 9,330 10,555 10,695
  Taxation of withdrawals -4,375 -4,810 -5,250 -5,225 -5,270 -5,580
  Net tax expenditure 6,715 9,190 9,185 11,775 13,270 13,240
Supplementary information: present-value of tax-assisted retirement savings plans29 10,150 10,470 10,945 12,005 12,635 13,115
Saskatchewan Pension Plan S S S S S S
Treatment of alimony and maintenance payments 93 88 88 86 86 86
U.S. Social Security benefits30 S S S S S S
Other Items            
Deduction for certain contributions by individuals who have taken vows of perpetual poverty S S S S S S
Deduction for clergy residence 85 87 87 88 88 87
First-Time Home Buyers’ Tax Credit 120 105 110 110 105 110
Home Renovation Tax Credit31 2,265
Non-taxation of capital gains on principal residences32 3,785 4,105 4,700 3,900 4,165 4,810
Non-taxation of income from the Office of the Governor General of Canada33 S S S S
Non-taxation of income of status Indians and Indian bands earned on reserve n.a. n.a. n.a. n.a. n.a. n.a.
Special tax computation for certain retroactive lump-sum payments S S S S S S
Public Transit Tax Credit 140 150 160 170 180 190
Memorandum Items            
Avoidance of Double Taxation            
Dividend gross-up and credit34 3,805 3,790 4,145 4,450 5,020 4,885
Foreign Tax Credit 660 670 740 860 940 1,020
Non-taxation of capital dividends n.a. n.a. n.a. n.a. n.a. n.a.
Loss Offset Provisions            
Capital loss carry-overs35 230 410 350 300 425 440
Farm and fishing loss carry-overs 11 14 16 15 15 15
Non-capital loss carry-overs 56 49 63 70 66 73
Social and Employment Insurance Programs            
Canada Pension Plan and Quebec Pension Plan            
  Employee-Paid Contribution Credit 2,815 2,880 3,070 3,205 3,320 3,460
  Non-taxation of employer-paid premiums 4,520 4,640 4,945 5,310 5,480 5,645
Employment Insurance and Quebec Parental Insurance Plan            
  Employee-Paid Contribution Credit36 960 985 1,065 1,155 1,235 1,280
  Non-taxation of employer-paid premiums 1,870 1,915 2,075 2,250 2,410 2,465
Refundable Tax Credits Classified as Transfer Payments37            
Canada Child Tax Benefit38 9,753 10,013 10,049 10,266 10,402 10,480
Refundable Medical Expense Supplement 130 135 135 140 145 150
Working Income Tax Benefit 1,025 1,055 1,080 1,100 1,160 1,180
Other            
Basic Personal Amount 27,880 28,350 29,020 30,405 31,380 32,205
Deferral through capital gains rollovers n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of lottery and gambling winnings n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of allowances for diplomats and other government employees posted abroad 39 42 44 25 22 23
Partial deduction of meals and entertainment expenses 175 185 185 200 195 195
* The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the table. See the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections for a discussion of the reasons for this.

Notes:
1 The tax expenditures associated with the Charitable Donation Tax Credit on donations of publicly listed securities, ecologically sensitive land and cultural property are presented separately. The estimates and projections presented on this line reflect the Charitable Donation Tax Credit associated with all other donations. The total tax expenditure for the Charitable Donation Tax Credit would take into account all relevant components.

2 Budget 2014 extended to ten years the carry-forward period for donations of ecologically sensitive land, or easements, covenants and servitudes on such land. See the “What’s New in the 2014 Report” section for details.

3 This measure was changed in Budget 2014. See the “What’s New in the 2014 Report” section for details.

4 The higher level for this tax expenditure in 2011 is due to contributions in respect of the 41st general election.

5 This measure was introduced in Budget 2013, effective 2013. See the “What’s New” section of the 2013 edition of this report for details. The lower value for this tax expenditure relative to the cost presented in Budget 2013 reflects a lower-than-expected take-up of the measure.

6 This measure was introduced in Budget 2011, effective 2011. See the “What’s New” section of the 2011 edition of this report for details. The lower value for this tax expenditure relative to the cost presented in Budget 2011 reflects a lower-than-expected take-up of the measure.

7 These tax expenditures relate to amounts earned and claimed in the year by students (i.e., neither transferred nor carried forward).

8 For a given year, this tax expenditure represents the value of Education, Textbook and Tuition Tax Credits earned in past years and used in that year. The tax expenditure does not include the pool of unused Education, Textbook and Tuition Tax Credits that have been accumulated but will be deferred for use in future years.

9 This measure was changed in Budget 2010, effective March 4, 2010. See the “What’s New” section of the 2010 edition of this report for details.

10 The phase-out of this measure was announced in Budget 2012. See the “What’s New” section of the 2012 edition of this report for details.

11 This measure was introduced in Budget 2014, effective 2014. See the “What’s New in the 2014 Report” section for details.

12 This measure was introduced in Budget 2011, effective 2011. See the “What’s New” section of the 2011 edition of this report for details. The decrease in the value of the tax expenditure for the tax-free amount for emergency service volunteers in 2011 reflects the introduction of the Volunteer Firefighters Tax Credit.

13 This measure was enhanced in Budget 2014. See the “What’s New in the 2014 Report” section for details.

14 This measure was introduced in Budget 2011, effective 2012. See the “What’s New” section of the 2011 edition of this report for details. The lower value for this tax expenditure relative to the cost presented in Budget 2011 reflects a lower-than-expected take-up of the measure.

15 This measure was announced on October 30, 2014, effective 2014. See the “What’s New in the 2014 Report” section for details.

16 This measure was introduced in Budget 2010, effective 2010. See the “What’s New” section of the 2010 edition of this report for details.

17 Budget 2013 increased the Lifetime Capital Gains Exemption (LCGE) to $800,000 from $750,000 effective for the 2014 taxation year. In addition, the LCGE limit will be indexed to inflation for taxation years after 2014. See the “What’s New” section of the 2013 edition of this report for details.

18 Budget 2014 extended this tax deferral to bees, and to all types of horses that are over 12 months of age, that are kept for breeding, effective 2014. See the “What’s New in the 2014 Report” section for details.

19 For an explanation of why this tax expenditure may be negative in some years, see the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections.

20 This measure was introduced in Budget 2011, effective 2011. See the “What’s New” section of the 2011 edition of this report for details.

21 The Net Income Stabilization Account (NISA) and the Canadian Farm Income Program were replaced by the Canadian Agricultural Income Stabilization Program, with the effect that government contributions under NISA ceased as of December 31, 2003. All funds in participant accounts were paid out by March 31, 2009. Tax expenditure estimates reflect the wind-down schedule.

22 This credit was extended in Budget 2014 and is set to expire on March 31, 2015. See the “What’s New in the 2014 Report” section for details.

23 This tax expenditure does not take into account the tax value of current-year capital losses applied against previous-year capital gains.

24 Budget 2013 announced the phase-out of this measure by 2017. See the “What’s New” section of the 2013 edition of this report for details.

25 The increase in 2014 reflects changes announced on October 9, 2014. See the “What’s New in the 2014 Report” section for details.

26 Budget 2010 made expenses incurred for purely cosmetic procedures ineligible for the credit (effective after March 4, 2010). Budget 2011 removed the $10,000 limit on eligible expenses that can be claimed under the Medical Expense Tax Credit in respect of a dependent relative, effective 2011. Budget 2014 expanded the list of eligible expenses under the credit. See the “What’s New in the 2014 Report” section for details.

27 Although this measure provides tax relief for individuals, it is implemented through the corporate income tax system. Tax expenditure amounts are shown under “Investment income credited to life insurance policies” in Table 2.

28 Estimates and projections vary from those in last year’s report due to changes in estimated levels of assets, contributions, investment income, capital gains/losses and withdrawals. 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.

29 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. The present-value estimates do not reflect the potential effect of Tax-Free Savings Accounts on the average tax rate used to calculate the present value of the forgone tax on investment income.

30 This measure was changed in Budget 2010, effective January 1, 2010. See the “What’s New” section of the 2010 edition of this report for details.

31 This temporary measure was introduced in Budget 2009 for the 2009 taxation year only. See note 46 of Table 1 in the 2010 edition of this report for details.

32 The estimates and projections for this tax expenditure reflect the cyclicality of the housing market and its impact on the number of residence resales and on the average price of residences. Estimates and projections are based on housing market data and resale forecasts provided by Canada Mortgage and Housing Corporation and the Canadian Real Estate Association. Data on major additions and renovations obtained from Statistics Canada are used to estimate the average amount of capital expenditures on principal residences, which reduces the estimated amount of capital gains.

33 Budget 2012 repealed this exemption, effective 2013. See the “What’s New” section of the 2012 edition of this report for details.

34 The estimates and projections include the revenue impact associated with both the enhanced Dividend Tax Credit and the ordinary Dividend Tax Credit. Budget 2008 introduced reductions in the enhanced Dividend Tax Credit rate and gross-up factor beginning in 2010 to mirror the general corporate income tax reductions introduced in the 2007 Economic Statement. Budget 2013 introduced changes to the ordinary Dividend Tax Credit and gross-up factor to ensure the appropriate tax treatment of dividend income.

35 This tax expenditure represents the revenue impact resulting from the application of prior years’ capital losses against net capital gains realized in the current year.

36 Effective in 2010, a tax credit is also provided in respect of premiums paid by a self-employed individual under the Employment Insurance Act.

37 As a result of the new accounting standard regarding tax revenues issued by the Public Sector Accounting Board, tax credits that have been reclassified as transfer payments under the new standard are no longer considered tax expenditures, but are shown separately as memorandum items. See the “What’s New” section of the 2012 edition of this report for details.

38 This tax expenditure is presented on a fiscal year basis as reported in the Public Accounts of Canada (e.g., the amount for 2013 corresponds to the expenditure reported in the Public Accounts of Canada for the 2013–14 fiscal year, ending March 31, 2014). The amount for 2014 represents projected spending for the 2014–15 fiscal year.
Table 2
Corporate Income Tax Expenditures*
millions of dollars

The letter "S" ("small") indicates that the absolute value of the tax expenditure is less than $2.5 million.
"n.a." signifies that data are not available to support a meaningful estimate or projection.
A dash means that the tax expenditure is not in effect.
The letter "X" indicates that the estimate or projection is not published for confidentiality reasons.

  Estimates Projections
 

  2009 2010 2011 2012 2013 2014
Charitable Donations, Gifts, Charities and Non-Profit Organizations            
Deductibility of charitable donations1 325 390 395 390 325 340
Donations of publicly listed securities            
  Deductibility of donations2 n.a. n.a. n.a. n.a. n.a. n.a.
  Non-taxation of capital gains 36 62 67 55 69 64
  Total tax expenditure n.a. n.a. n.a. n.a. n.a. n.a.
Donations of ecologically sensitive land3            
  Deductibility of donations 11 S 5 S 5 4
  Non-taxation of capital gains 10 S S S S S
  Total tax expenditure 21 3 5 S 6 4
Donations of cultural property4            
  Deductibility of donations 4 25 6 35 3 15
  Non-taxation of capital gains n.a. n.a. n.a. n.a. n.a. n.a.
  Total tax expenditure n.a. n.a. n.a. n.a. n.a. n.a.
Deductibility of gifts of medicine S S S S S S
Deductibility of gifts to the Crown S S S S S S
Non-taxation of registered charities n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of non-profit organizations (other than registered charities) 140 125 125 80 100 100
Culture            
Non-deductibility of advertising expenses in foreign media S S S S S S
Federal-Provincial Financing Arrangements            
Income tax exemption for certain provincial and municipal corporations n.a. n.a. n.a. n.a. n.a. n.a.
Transfer of income tax points to provinces 1,900 2,050 2,440 2,515 2,650 2,790
Logging Tax Credit 4 8 10 8 19 19
General Business and Investment            
Accelerated deduction of capital costs n.a. n.a. n.a. n.a. n.a. n.a.
Capital Gains            
Deferral through five-year capital gain reserve n.a. n.a. n.a. n.a. n.a. n.a.
Partial inclusion of capital gains 3,210 3,285 3,830 3,870 4,480 4,715
Taxation of capital gains upon realization n.a. n.a. n.a. n.a. n.a. n.a.
Non-Refundable Investment Tax Credits            
Atlantic Investment Tax Credit5            
  Earned and claimed in current year 31 91 61 81 93 61
  Claimed in current year but earned in prior years 22 30 39 81 149 82
  Earned in current year but carried back to prior years 8 12 13 147 189 27
  Total tax expenditure 61 133 113 309 431 170
Scientific Research and Experimental Development Investment Tax Credit5            
  Earned and claimed in current year 835 695 815 785 790 765
  Claimed in current year but earned in prior years 670 715 770 935 940 905
  Earned in current year but carried back to prior years 110 170 45 60 220 60
  Total tax expenditure 1,615 1,580 1,630 1,780 1,950 1,730
Apprenticeship Job Creation Tax Credit            
  Earned and claimed in current year 52 49 52 62 73 74
  Claimed in current year but earned in prior years 9 11 14 18 20 20
  Earned in current year but carried back to prior years 4 6 5 4 4 4
  Total tax expenditure 65 66 71 84 97 98
Investment Tax Credit for Child Care Spaces S S S S S S
Small Business            
Deduction of allowable business investment losses 16 15 27 8 9 15
Low tax rate for small businesses6 4,370 4,185 3,825 3,145 3,030 3,170
Non-taxation of provincial assistance for venture investments in small businesses n.a. n.a. n.a. n.a. n.a. n.a.
International            
Exemption from tax of income earned by non-residents from the operation of a ship or aircraft in international traffic n.a. n.a. n.a. n.a. n.a. n.a.
Exemption from tax for international banking centres7 X X X X X X
Exemptions from non-resident withholding tax            
  Dividends8 1,315 1,725 2,150 2,265 2,320 2,425
  Interest 1,675 1,455 1,395 1,545 1,545 1,615
  Rents and royalties 350 345 360 440 420 440
  Management fees 160 155 170 225 210 220
Non-taxation of life insurance companies’ foreign income n.a. n.a. n.a. n.a. n.a. n.a.
Tax treatment of active business income of foreign affiliates of Canadian corporations and deductibility of expenses incurred to invest in foreign affiliates n.a. n.a. n.a. n.a. n.a. n.a.
Sectoral Measures            
Farming            
Cash basis accounting n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of income from destruction of livestock S S S S S S
Deferral of income from sale of livestock during drought, flood or excessive moisture years n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of income from grain sold through cash purchase tickets9 -9 -8 42 16 -7 S
Flexibility in inventory accounting n.a. n.a. n.a. n.a. n.a. n.a.
Agricultural co-operatives—patronage dividends paid as shares 5 5 8 8 8 8
AgriInvest (farm savings account) S 3 3 S S S
Agri-Québec (farm savings account)10 S S S S
Exemption for farmers’ and fishers’ insurers 5 6 7 10 9 9
Natural Resources            
Corporate Mineral Exploration and Development Tax Credit11 22 13 76 60 14 21
Deductibility of contributions to a qualifying environmental trust12 S S 5 S S S
Earned depletion 5 S S S S S
Flow-through share deductions 69 69 82 53 33 32
Reclassification of expenses under flow-through shares9 -3 S S S S S
Other Sectors            
Exemption from branch tax for transportation, communications, and iron ore mining corporations 6 43 40 12 20 25
Special tax rate for credit unions13 79 79 65 41 27 20
Surtax on the profits of tobacco manufacturers X X X X X X
Other Items            
Deductibility of countervailing and anti-dumping duties n.a. n.a. n.a. n.a. n.a. n.a.
Deductibility of earthquake reserves S S S S S S
Deferral through use of billed-basis accounting by professional corporations n.a. n.a. n.a. n.a. n.a. n.a.
Holdback on progress payments to contractors 32 30 43 43 59 62
Investment income credited to life insurance policies 275 260 285 275 270 275
Tax status of certain federal Crown corporations X X X X X X
Memorandum Items            
Avoidance of Double Taxation—Integration of Personal and Corporate Income Tax            
Investment corporation deduction n.a. n.a. n.a. n.a. n.a. n.a.
Refundable capital gains for investment and mutual fund corporations 51 185 195 105 225 235
Refundable taxes on investment income of private corporations            
  Additional Part I tax14 -1,700 -1,735 -2,315 -2,780 -3,315 -3,460
  Part IV tax -3,350 -2,785 -3,035 -3,460 -3,790 -3,960
  Dividend refund 6,190 5,185 5,610 6,305 7,070 7,385
  Net tax expenditure 1,140 665 260 65 -35 -35
Loss Offset Provisions            
Capital loss carry-overs            
  Net capital losses carried back 445 300 87 115 105 110
  Net capital losses applied to current year 210 445 475 420 425 425
Farm and fishing loss carry-overs            
  Farm and fishing losses carried back 14 14 11 12 13 12
  Farm and fishing losses applied to current year 45 49 69 47 48 50
Non-capital loss carry-overs            
  Non-capital losses carried back 3,290 2,805 2,080 1,890 3,120 2,200
  Non-capital losses applied to current year 4,445 3,950 4,175 4,320 3,875 3,935
Refundable Tax Credits Classified as Transfer Payments15            
Atlantic Investment Tax Credit 13 13 14 17 16 16
Scientific Research and Experimental Development
Investment Tax Credit
1,540 1,500 1,500 1,445 1,455 1,405
Canadian Film or Video Production Tax Credit 215 200 230 270 270 280
Film or Video Production Services Tax Credit 73 82 92 94 105 110
Other            
Deferral through capital gains rollovers n.a. n.a. n.a. n.a. n.a. n.a.
Deduction for intangible assets n.a. n.a. n.a. n.a. n.a. n.a.
Partial deduction of meals and entertainment expenses 265 270 280 280 265 275
Patronage dividend deduction 345 285 335 240 230 255
* The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the table. See the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections for a discussion of the reasons for this.

Notes:
1 This tax expenditure excludes the deductibility of charitable donations of ecologically sensitive land and cultural property. The estimates and projections presented on this line reflect the deductibility of all other charitable donations. The total tax expenditure for the deductibility of charitable donations would take into account all relevant components.

2 There are no data available that allow this tax expenditure to be separated from the “Deductibility of charitable donations” category. Therefore, the value of this tax expenditure is included under “Deductibility of charitable donations.”

3 Budget 2014 extended to ten years the carry-forward period for donations of ecologically sensitive land, or easements, covenants and servitudes on such land. See the “What’s New in the 2014 Report” section for details.

4 This measure was changed in Budget 2014. See the “What’s New in the 2014 Report” section for details.

5 Estimates and projections of the tax expenditure in respect of the refundable portion of this credit are shown separately under “Refundable Tax Credits Classified as Transfer Payments” (see note 15). The total amount of tax assistance provided by this credit is the sum of its non-refundable and refundable components. Changes to this measure were announced in Budget 2012. See the “What’s New” section of the 2012 edition of this report for details.

6 The reduction in the tax expenditure between 2009 and 2012 primarily reflects the reduction in the general corporate income tax rate, which reduced the difference between the general and small business rates, the basis for the tax expenditure.

7 Budget 2013 announced the elimination of the International Banking Centre rules, effective for taxation years that begin on or after March 21, 2013. See the “What’s New” section of the 2013 edition of this report for details.

8 This category includes the tax expenditure attributable to the exemption of estate and trust income distributions, including distributions by income trusts.

9 For an explanation of why this tax expenditure may be negative in some years, see the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections.

10 This measure was introduced in Budget 2011, effective 2011. See the “What’s New” section of the 2011 edition of this report for details.

11 The phase-out of this measure was announced in Budget 2012. See the “What’s New” section of the 2012 edition of this report for details.

12 This measure was expanded in Budget 2011 to include trusts established after 2011 that are required to be established to fund reclamation costs associated with pipelines. No impact on the tax expenditure is anticipated from these changes until 2015. See the “What’s New” section of the 2011 edition of this report for details.

13 The phase-out of this measure was announced in Budget 2013. See the "What's New” section of the 2013 edition of this report for details.

14 This item includes the additional 6 2/3% refundable tax on investment income as well as the Part I tax paid on investment income in excess of the benchmark rate.

15 As a result of the new accounting standard regarding tax revenues issued by the Public Sector Accounting Board, tax credits that have been reclassified as transfer payments under the new standard are no longer considered tax expenditures, but are shown separately as memorandum items. See the “What’s New” section of the 2012 edition of this report for details.
Table 3
GST Tax Expenditures*
millions of dollars

The letter "S" ("small") indicates that the absolute value of the tax expenditure is less than $2.5 million.
"n.a." signifies that data are not available to support a meaningful estimate or projection.
A dash means that the tax expenditure is not in effect.
The letter "X" indicates that the estimate or projection is not published for confidentiality reasons.

  Estimates Projections
 

  2009 2010 2011 2012 2013 2014
Status Indians and Aboriginal Self-Governments            
Non-taxation of personal property of status Indians and Indian bands on reserve n.a. n.a. n.a. n.a. n.a. n.a.
Refunds for Aboriginal self-governments 5 5 5 5 5 5
Business            
Exemption for domestic financial services n.a. n.a. n.a. n.a. n.a. n.a.
Exemption for ferry, road and bridge tolls 15 15 15 15 15 15
Exemption and rebate for legal aid services 20 20 20 25 25 25
Non-taxability of certain importations n.a. n.a. n.a. n.a. n.a. n.a.
Foreign Convention and Tour Incentive Program 10 10 15 15 15 15
Small suppliers’ threshold 185 170 175 180 185 190
Zero-rating of agricultural and fish products and purchases S S S S S S
Zero-rating of certain purchases made by exporters S S S S S S
Charities and Non-Profit Organizations            
Exemption for certain supplies made by charities and non-profit organizations 895 890 870 885 875 865
Rebate for poppies and wreaths S S S S S
Rebate for registered charities 265 270 285 285 295 305
Rebate for qualifying non-profit organizations 70 75 70 60 65 65
Education            
Exemption for educational services (tuition) 580 630 670 720 745 775
Rebate for book purchases made by qualifying public institutions 25 20 20 20 20 20
Rebate for colleges 80 100 100 85 85 90
Rebate for schools 370 360 375 380 395 415
Rebate for universities 225 260 260 235 240 255
Health Care            
Exemption for health care services1 515 565 605 625 645 670
Exemption for hospital parking2 30
Rebate for hospitals 520 560 615 585 605 620
Rebate for specially equipped motor vehicles S S S S S S
Zero-rating of medical devices1 290 300 310 315 320 335
Zero-rating of prescription drugs 665 695 725 730 755 785
Households            
Exemption for child care and personal services 135 140 150 155 160 170
GST/HST Credit 3,645 3,760 3,870 3,995 4,090 4,205
Travellers’ exemption 155 170 190 205 225 240
Zero-rating of basic groceries 3,490 3,555 3,685 3,810 3,920 4,075
Housing            
Exemption for sales of used residential housing and other personal-use real property n.a. n.a. n.a. n.a. n.a. n.a.
Exemption for residential rent (long-term) 1,395 1,455 1,465 1,495 1,580 1,665
Rebate for new housing 580 585 575 565 585 580
Rebate for new residential rental property 50 55 55 65 65 65
Municipalities            
Exemption for municipal transit 155 165 170 175 185 190
Exemption for water and basic garbage collection services 185 195 210 210 215 225
Rebate for municipalities 1,895 2,050 2,040 2,105 2,155 2,205
Memorandum Items            
Recognition of Expenses Incurred to Earn Income            
Rebate to employees and partners 75 75 70 65 70 70
Other            
Partial input tax credits for meals and entertainment expenses 135 140 150 150 150 155

* The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the table. See the 2010 edition of Tax Expenditures: Notes to the Estimates/Projections for a discussion of the reasons for this.

Notes:
1 These measures were expanded in Budget 2014. See the “What’s New in the 2014 Report” section for details.

2 This measure was announced on January 24, 2014. See the “What’s New in the 2014 Report” section for details.


1 At the time of production of this report, these measures were still subject to Parliamentary approval.

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