Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2017

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Part 3 – Descriptions of Tax Expenditures

Introduction

This part presents detailed information on the tax expenditures presented in this report. The following information is provided for each tax expenditure:

Description

A short description is provided of the key design features of the tax expenditure, as applicable on December 31, 2016 (unless otherwise noted).

Type of tax

Whether a measure is a tax expenditure under the personal income tax, the corporate income tax and/or the GST.

Beneficiaries

Indicates the group of taxpayers (e.g., families, seniors, small businesses) benefiting from the tax expenditure.

Type of measure

One of the following types of measures is attributed to the tax expenditure:

Exemption: The non-taxation of certain taxpayers, income or gains.

Exemption and zero-rating under the GST: No GST is charged on exempt goods and services, while the GST applies on zero-rated goods and services, but at a zero GST rate. Vendors of zero-rated goods and services are entitled to claim input tax credits to recover the full amount of GST they paid on inputs used to produce zero-rated products; in contrast, vendors of exempt goods and services are not entitled to claim input tax credits to recover the GST they paid on their inputs. A number of GST expenditures are not exemptions or zero-rating provisions from a legal perspective, yet have the effect of not imposing the GST on certain goods and services (e.g., travellers’ exemption, small suppliers’ threshold). These measures are classified as “other”.

Deduction: An amount subtracted from total income in determining net income, or from net income in determining taxable income.

Credit (refundable, non-refundable): An amount subtracted from tax payable. A credit is refundable when any excess of the credit over the amount of tax payable is refunded to the taxpayer.

Rebate and refund: An amount of tax paid that is refunded to the taxpayer.

Preferential tax rate: A tax rate that is lower than the general benchmark rate.

Surtax: A tax that is imposed in addition to the basic tax payable.

Timing preference: A measure that permits the deferral of tax relative to the benchmark tax treatment, for instance by delaying the time income or gains are brought into income, or by accelerating the use of deductions.

Legal reference

Indicates the legal provisions that relate to the tax expenditure. Only the main acting provision is generally indicated, but more than one provision may be indicated when a tax expenditure results from the interaction of multiple key provisions.

Implementation and recent history

Indicates the date or year the tax expenditure was implemented and became effective. Key recent developments are also reported.

Objective

Indicates the objective(s) being pursued by the tax expenditure, as officially stated by the Government when the tax expenditure was introduced or subsequently. When no official statement could be found, the objective(s) currently pursued by the tax expenditure is indicated, as can be determined from the design and effects of the tax expenditure.

For presentation purposes, objectives have been classified in the following standard categories:

Objectives that are internal to the tax system:
To reduce administration or compliance costs
To provide relief for special circumstances
To assess tax liability over a multi-year period
To prevent double taxation
To recognize non-discretionary expenses (ability to pay)
To recognize expenses incurred to earn employment income
To recognize education costs
To promote the fairness of the tax system
To ensure a neutral tax treatment across similar situations
To implement intergovernmental tax arrangements
To implement a judicial decision
Other objectives:
To extend or modify the unit of taxation
To encourage savings
To encourage or attract investment
To encourage investment in education
To encourage employment
To support competitiveness
To support business activity
To achieve an economic objective - other
To achieve a social objective

Category

The category indicates whether the measure is structural or non-structural. A structural tax measure is one whose main objective is internal to the tax system (see above list under “Objective”). When a measure pursues both structural and non-structural objectives, it is categorized based on an assessment of whether the structural or non-structural component predominates; for instance, the Home Accessibility Tax Credit supports independent living and as such is classified as non-structural, even though this credit also provides tax recognition for some non-discretionary expenses, which is a structural objective. The classification of a tax expenditure as structural or non-structural is not indicative of the relevance and performance of the measure.

Refundable tax credits (with the exception of the GST/HST Credit) are treated as direct spending for government accounting purposes, and for that reason are assigned to a separate category.

Reason why this measure is not part of benchmark tax system

Indicates the manner(s) in which the tax expenditure is departing from the benchmark tax system (see the section “Main Types of Tax Expenditures” in Part 1 of the report). Measures that are part of the benchmark tax system are indicated as such.

Subject

Tax expenditures are classified based on their subject matter. This classification is provided solely for presentational purposes and is not intended to reflect underlying policy considerations. The following subjects have been identified:

Arts and culture
Business - farming and fishing
Business - natural resources
Business - research and development
Business - small businesses
Business - other
Donations, gifts, charities and non-profit organizations
Education
Employment
Environment
Families and households
Health
Housing
Income support
Intergovernmental tax arrangements
International
Retirement
Savings and investment
Social
Other

Canadian Classification of Functions of Government 2014 code

The Canadian Classification of Functions of Government (CCOFOG) is a classification used by Statistics Canada in reporting government finance, fiscal and public sector statistics. This classification is a variant of the international functional expenditure classification standard that was developed by the Organisation for Economic Co-operation and Development to facilitate international comparisons. The full 2014 CCOFOG can be accessed on the Statistics Canada website.

Other relevant government programs

This provides background information on spending programs of the federal government that are relevant to the policy area of the tax expenditure. Additional information on these programs can be found in the table at the end of Part 3 and in the Departmental Plans and Departmental Performance Reports of the relevant departments and agencies.[1]

Source of data

Indicates the source of the data used in calculating the cost estimates and projections for the tax expenditure.

Estimation method

Provides a short description of the method used to calculate the cost estimates for the tax expenditure. For additional details, see the section “Calculation of the Tax Expenditure Estimates and Projections” in Part 1 of the report.

Projection method

Provides a short description of the method used to calculate the cost projections for the tax expenditure. For additional details, see the section “Calculation of the Tax Expenditure Estimates and Projections” in Part 1 of the report.

Number of beneficiaries

Provides information (when available) on the number of individuals, families, corporations or other organizations that benefit from the tax expenditure. A taxpayer benefits from a measure when the measure reduces his or her net tax payable. Some taxpayers are not taxable and may not get any tax relief from a given measure even though, for instance, they claim a particular deduction or credit on their tax returns. In some cases, in lieu of information on the number of beneficiaries, information on the number of claimants or other information providing some indication of the number of potential beneficiaries is provided.

Cost information

Cost estimates and projections for the tax expenditure, when available, are copied from the table in Part 2 for convenience. Additional details are also provided for some measures.

Cost estimates and projections are presented on a calendar year basis. The fiscal period of a corporation may overlap more than one calendar year; when this is the case, the value of a tax expenditure is allocated to the calendar year in which the corporation’s fiscal period ends.

Totals may not add due to rounding.

Notes:

Amounts under $500,000 are reported as "S" ("small"), amounts between $500,000 and $5 million are rounded to the nearest $1 million and amounts above $5 million are rounded to the nearest $5 million.

n.a.
No data available to support a meaningful estimate or projection
n/a 
Not applicable
Tax expenditure not in effect
X
Not published for confidentiality reasons
P
Projection

List of Tax Expenditures

$200 capital gains exemption on foreign exchange transactions

Accelerated capital cost allowance for clean energy generation equipment

Accelerated capital cost allowance for computer equipment

Accelerated capital cost allowance for liquefied natural gas facilities

Accelerated capital cost allowance for manufacturing or processing machinery and equipment

Accelerated capital cost allowance for mining and oil sands assets

Accelerated capital cost allowance for vessels

Accelerated deductibility of Canadian Renewable and Conservation Expenses

Accelerated deductibility of some Canadian Exploration Expenses

Additional deduction for gifts of medicine

Adoption Expense Tax Credit

Age Credit

Apprentice vehicle mechanics’ tools deduction

Apprenticeship Job Creation Tax Credit

Atlantic Investment Tax Credit

Canada Child Benefit

Canada Employment Credit

Canadian Film or Video Production Tax Credit

Capital gains exemption on personal-use property

Capital loss carry-overs

Caregiver Credit

Cash basis accounting

Charitable Donation Tax Credit

Child care expense deduction

Child Tax Credit

Children’s Arts Tax Credit

Children’s Fitness Tax Credit

Corporate Mineral Exploration and Development Tax Credit

Credit for the Basic Personal Amount

Deductibility of certain costs incurred by musicians

Deductibility of charitable donations

Deductibility of contributions to a qualifying environmental trust

Deductibility of costs of capital assets and eligibility for investment tax credits before asset is put in use

Deductibility of countervailing and anti-dumping duties when paid

Deductibility of earthquake reserves

Deductibility of expenses by employed artists

Deduction for certain contributions by individuals who have taken vows of perpetual poverty

Deduction for clergy residence

Deduction for self-employed artists

Deduction for tradespeople’s tool expenses

Deduction for tuition assistance for adult basic education

Deduction of allowable business investment losses

Deduction of carrying charges incurred to earn income

Deduction of other employment expenses

Deduction of union and professional dues

Deferral for asset transfers to a corporation and corporate reorganizations

Deferral of capital gains through intergenerational rollovers of family farms or fishing businesses

Deferral of capital gains through transfers to a spouse, spousal trust or alter ego trust

Deferral of income from destruction of livestock

Deferral of income from grain sold through cash purchase tickets

Deferral of income from sale of livestock in a region of drought, flood or excessive moisture

Deferral through 10-year capital gain reserve

Deferral through five-year capital gain reserve

Deferral through rollover of capital gains and capital cost allowance recapture  in respect of dispositions of land and buildings

Deferral through rollover of capital gains and capital cost allowance recapture in respect of involuntary dispositions

Deferral through use of billed-basis accounting by professionals and professional corporations

Deferred Profit-Sharing Plans

Disability supports deduction

Disability Tax Credit

Dividend gross-up and tax credit

Earned depletion

Education Tax Credit

Eligible Dependant Credit

Employee benefit plans

Employee stock option deduction

Exemption for insurers of farming and fishing property

Exemption for international shipping and aviation by non-residents

Exemption from branch tax for transportation, communications, and iron ore mining corporations

Exemption from GST and rebate for legal aid services

Exemption from GST for certain residential rent

Exemption from GST for certain supplies made by charities and non-profit organizations

Exemption from GST for child care

Exemption from GST for domestic financial services

Exemption from GST for ferry, road and bridge tolls

Exemption from GST for health care services

Exemption from GST for hospital parking

Exemption from GST for municipal transit

Exemption from GST for personal care services

Exemption from GST for sales of used residential housing and other personal-use real property

Exemption from GST for short-term accommodation

Exemption from GST for tuition and educational services

Exemption from GST for water, sewage and basic garbage collection services

Exemption from tax for international banking centres

Exemption of scholarship, fellowship and bursary income

Exemptions from non-resident withholding tax

Expensing of advertising costs

Expensing of current expenditures on scientific research and experimental development

Expensing of employee training costs

Expensing of incorporation expenses

Expensing of purchases of capital equipment used for scientific research and experimental development

Family Caregiver Tax Credit

Family Tax Cut

Film or Video Production Services Tax Credit

First-Time Donor’s Super Credit

First-Time Home Buyers’ Tax Credit

Flexibility in inventory accounting

Flow-through share deductions

Foreign Convention and Tour Incentive Program

Foreign tax credit for individuals

Goods and Services Tax/Harmonized Sales Tax Credit

Holdback on progress payments to contractors

Home Accessibility Tax Credit

Inclusion of the Universal Child Care Benefit in the income of an eligible dependant

Income tax exemption for certain public bodies

Infirm Dependant Credit

Investment corporation deduction

Investment Tax Credit for Child Care Spaces

Labour-Sponsored Venture Capital Corporations Credit

Lifetime Capital Gains Exemption

Logging Tax Credit

Medical Expense Tax Credit

Mineral Exploration Tax Credit for flow-through share investors

Moving expense deduction

Non-capital loss carry-overs

Non-deductibility of advertising expenses in foreign media

Non-taxation of allowances for diplomats and other government employees posted abroad

Non-taxation of allowances for members of legislative assemblies and certain municipal officers

Non-taxation of benefits from private health and dental plans

Non-taxation of benefits in respect of home relocation loans

Non-taxation of capital dividends

Non-taxation of capital gains on donations of cultural property

Non-taxation of capital gains on donations of ecologically sensitive land

Non-taxation of capital gains on donations of publicly listed securities

Non-taxation of capital gains on principal residences

Non-taxation of certain importations

Non-taxation of certain non-monetary employment benefits

Non-taxation of certain veterans’ benefits

Non-taxation of Guaranteed Income Supplement and Allowance benefits

Non-taxation of income earned by military and police deployed to international high and moderate-risk operational missions

Non-taxation of income from the Office of the Governor General of Canada

Non-taxation of investment income on certain amounts received as damages in respect of personal injury or death

Non-taxation of life insurance companies’ foreign income

Non-taxation of lottery and gambling winnings

Non-taxation of non-profit organizations

Non-taxation of personal property of status Indians and Indian bands situated on reserve

Non-taxation of provincial assistance for venture investments in small businesses

Non-taxation of RCMP pensions and other compensation in respect of injury, disability or death

Non-taxation of registered charities

Non-taxation of social assistance benefits

Non-taxation of strike pay

Non-taxation of up to $10,000 of death benefits

Non-taxation of veterans’ Disability Awards and Critical Injury Benefits

Non-taxation of workers’ compensation benefits

Northern Residents Deductions

Overseas Employment Tax Credit

Partial deduction of and partial input tax credits for meals and entertainment

Partial inclusion of capital gains

Partial inclusion of U.S. Social Security benefits

Patronage dividend deduction

Patronage dividends paid as shares by agricultural cooperatives

Pension Income Credit

Pension income splitting

Political Contribution Tax Credit

Pooled Registered Pension Plans

Preferential tax rate for small businesses

Public Transit Tax Credit

Quebec Abatement

Rebate for book purchases made by certain organizations

Rebate for hospitals, facility operators and external suppliers

Rebate for municipalities

Rebate for new housing

Rebate for new residential rental property

Rebate for poppies and wreaths

Rebate for qualifying non-profit organizations

Rebate for registered charities

Rebate for schools, colleges and universities

Rebate for specially equipped motor vehicles

Rebate to employees and partners

Reclassification of expenses under flow-through shares

Refundable capital gains tax for investment and mutual fund corporations

Refundable Medical Expense Supplement

Refundable taxes on investment income of private corporations

Refunds for aboriginal self-governments

Registered Disability Savings Plans

Registered Education Savings Plans

Registered Pension Plans

Registered Retirement Savings Plans

Rollovers of investments in small businesses

Saskatchewan Pension Plan

Scientific Research and Experimental Development Investment Tax Credit

Search and Rescue Volunteers Tax Credit

Small suppliers’ threshold

Special tax computation for certain retroactive lump-sum payments

Special tax rate for credit unions

Spouse or Common-Law Partner Credit

Student Loan Interest Credit

Surtax on the profits of tobacco manufacturers

Tax status of certain federal Crown corporations

Tax treatment of active business income of foreign affiliates of Canadian corporations and deductibility of expenses incurred to invest in foreign affiliates

Tax treatment of alimony and maintenance payments

Tax treatment of Canada Pension Plan and Quebec Pension Plan contributions and benefits

Tax treatment of Employment Insurance and Quebec Parental Insurance Plan premiums and benefits

Tax treatment of farm savings accounts (AgriInvest and Agri-Québec)

Tax treatment of investment income from life insurance policies

Taxation of capital gains upon realization

Tax-free amount for emergency services volunteers

Tax-Free Savings Account

Teacher and Early Childhood Educator School Supply Tax Credit

Textbook Tax Credit

Transfer of income tax points to provinces

Travellers’ exemption

Tuition Tax Credit

Volunteer Firefighters Tax Credit

Working Income Tax Benefit

Zero-rating of agricultural and fish products and purchases

Zero-rating of basic groceries

Zero-rating of feminine hygiene products

Zero-rating of medical and assistive devices

Zero-rating of prescription drugs


1 These documents can be accessed on the Government of Canada website under “Government-wide reporting”. Departmental Plans were entitled “Reports on Plans and Priorities” prior to the 2017–18 release.