Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2018

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Part 3 – Descriptions of Tax Expenditures: 1 of 4

$200 capital gains exemption on foreign exchange transactions
  Value
Description The first $200 of net capital gains of an individual on foreign exchange transactions is exempt from tax.
Tax Personal income tax
Beneficiaries Individuals
Type of measure Exemption
Legal reference Income Tax Act, subsections 39(1.1) and (2)
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
  • Technical legislative changes to move the $200 exception for individuals from subsection 39(2) into subsection 39(1.1) were adopted on June 26, 2013.
Objective – category To reduce administration or compliance costs
Objective This measure was introduced to minimize record keeping and simplify administration with respect to modest foreign exchange transactions.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax income or gains that are included in a comprehensive income tax base.
Subject Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs n/a
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated capital cost allowance for clean energy generation equipment
  Value
Description Specified clean energy generation equipment that generates electricity and/or heat from renewable energy sources (e.g., wind, solar, small hydro) and from waste (e.g., wood waste, landfill gas) or by making efficient use of fossil fuels (e.g., high efficiency cogeneration) and that is acquired by a taxpayer after February 21, 1994 can be depreciated on a declining-balance basis at an accelerated capital cost allowance (CCA) rate of 30% (Class 43.1). If acquired after February 22, 2005 and before 2020, such equipment can be depreciated on a declining-balance basis at an accelerated CCA rate of 50% (Class 43.2). The eligibility criteria for these two classes are generally the same, except that cogeneration systems that use fossil fuels must meet a higher efficiency standard for Class 43.2 than for Class 43.1, electric vehicle charging stations must meet a higher power threshold and electrical energy storage equipment must be connected to an electricity generation system that is eligible for Class 43.2. Without Class 43.1 and Class 43.2, depending on their nature or use, many of these assets would be depreciated at lower rates of 4%, 8% or 20%. A related measure addresses specified intangible start-up costs of clean energy projects (see the measure “Accelerated deductibility of Canadian Renewable and Conservation Expenses”).
Tax Personal and corporate income tax
Beneficiaries Businesses using clean or efficient energy generation equipment
Type of measure Timing preference
Legal reference Income Tax Regulations, Classes 43.1 and Class 43.2 of Schedule II
Implementation and recent history
  • The predecessor Class 34, introduced in 1976, provided an accelerated CCA rate of 50% on a straight-line basis for a range of energy generation and conservation equipment.
  • Class 43.1 was introduced in Budget 1994, effective for assets acquired after February 21, 1994.
  • Class 43.2 was introduced in Budget 2005, effective for assets acquired after February 22, 2005 and before 2012. Budget 2007 extended the eligibility for Class 43.2 to assets acquired before 2020.
  • The range of assets covered by these CCA classes has been expanded several times, most recently in Budget 2017 to include a broader range of geothermal energy projects and equipment.
Objective – category To encourage or attract investment
Objective This measure encourages businesses to invest in specified clean energy generation and energy efficiency equipment (Technical Guide to Class 43.1 and 43.2, Natural Ressources Canada, 2013).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Environment
Business - other
CCOFOG 2014 code 70435 - Economic affairs - Fuel and energy - Electricity
70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified
Other relevant government programs Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on acquisitions by unincorporated businesses of specified clean energy generation equipment is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated capital cost allowance for computer equipment
  Value
Description Eligible computers and software acquired after January 27, 2009 and before February 2011 could be depreciated at a 100% capital cost allowance (CCA) rate. The half-year rule, which generally allows one half of the CCA write-off otherwise available in the year the asset is first available for use, did not apply to these acquisitions. As a result, a business was able to fully deduct the cost of an eligible computer and software in the first year that CCA deductions were available. If not for this measure, these assets would have been depreciated at a 55% CCA rate on a declining-balance basis, subject to the half-year rule.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Timing preference
Legal reference Income Tax Regulations, subparagraph 1100(1)(a)(xxxiii) and Class 52 of Schedule II
Implementation and recent history
  • Introduced in Budget 2009. Effective for eligible computers and software acquired after January 27, 2009 and before February 2011.
Objective – category To encourage or attract investment
Objective This temporary measure provided stimulus by assisting businesses to increase or accelerate investment in computers (Budget 2009).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permitted the depreciation of a capital asset faster than its useful life.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on computer purchases by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated capital cost allowance for liquefied natural gas facilities
  Value
Description An accelerated capital cost allowance (CCA) is available for certain property acquired for use in facilities in Canada that liquefy natural gas. The accelerated CCA takes the form of an additional 22% allowance that, combined with the regular CCA rate of 8%, brings the CCA rate up to 30% for liquefaction equipment used in Canada in connection with natural gas liquefaction. A second additional allowance equivalent to 4% brings the CCA rate up to 10% from 6% for non-residential buildings that are part of facilities that are used to liquefy natural gas. These additional allowances may only be claimed against income of the taxpayer that is attributable to the liquefaction of natural gas at the facility. 
Tax Personal and corporate income tax
Beneficiaries Businesses in the natural gas liquefaction industry
Type of measure Timing preference
Legal reference Income Tax Regulations, paragraph 1100(1)(yb), subsection 1101(4i) and paragraph (b) of Class 47 of Schedule II
Implementation and recent history
  • Introduced in 2015 (Prime Minister of Canada news release, February 19, 2015). Effective for capital assets acquired after February 19, 2015 and before 2025.
Objective – category To encourage or attract investment
Objective This measure is intended to encourage investment in facilities that liquefy natural gas to supply emerging international and domestic markets (Prime Minister of Canada news release, February 19, 2015).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - natural resources
CCOFOG 2014 code 70455 - Economic affairs - Transport - Pipeline and other transport
Other relevant government programs Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on investment in liquefied natural gas facilities by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated capital cost allowance for manufacturing or processing machinery and equipment
  Value
Description Machinery and equipment acquired by a taxpayer after March 18, 2007 and before 2016 and that is primarily for use in Canada for the manufacturing or processing of goods for sale or lease can be depreciated on a straight-line basis at an accelerated capital cost allowance (CCA) rate of 50% (Class 29 of Schedule II to the Income Tax Regulations). Machinery and equipment acquired after 2015 but before 2026 is depreciable on a declining-balance basis at an accelerated CCA rate of 50% (Class 53). Machinery and equipment acquired outside of these periods is included in Class 43 and qualifies for a CCA rate of 30% calculated on a declining-balance basis.
Tax Personal and corporate income tax
Beneficiaries Businesses in the manufacturing and processing industry
Type of measure Timing preference
Legal reference Income Tax Regulations, subparagraphs 1100(1)(t) and (ta), subsection 1102(16.1), and Classes 29 and 53 of Schedule II
Implementation and recent history
  • The accelerated CCA provided at a rate of 50% on a straight-line basis was introduced in Budget 2007, effective for eligible manufacturing and processing machinery and equipment acquired on or after March 19, 2007.
  • Extended in Budgets 2008, 2009, 2011 and 2013.
  • Budget 2015 introduced the 50% accelerated CCA on a declining-balance basis, effective for eligible assets acquired after 2015 and before 2026.
Objective – category To encourage or attract investment
Objective This temporary measure provides an incentive for manufacturing and processing businesses to accelerate or increase capital investment (Budget 2008). Providing this incentive for an extended period of time helps to provide businesses with planning certainty for larger projects where the investment may not be completed until several years after the investment decision is made and for longer-term investments with multiple phases (Budget 2015).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on acquisitions by unincorporated businesses of manufacturing or processing machinery and equipment is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries About 13,900 corporations made additions to the relevant CCA class in 2015. No data is available for unincorporated businesses.
Accelerated capital cost allowance for mining and oil sands assets
  Value
Description In addition to the regular capital cost allowance (CCA) deduction of 25% per year (Class 41), for assets used in mining, an accelerated CCA has been provided for assets acquired for use in new mines, including oil sands mines, and major mine expansions (i.e., expansions that increase the capacity of a mine by at least 25%). The additional allowance allows the taxpayer to deduct up to 100% of the remaining cost of the eligible assets in computing income for a taxation year, not exceeding the taxpayer’s income for the year from the mine (calculated after deducting the regular CCA). This measure is being phased out and will no longer be available after 2020.
Tax Personal and corporate income tax
Beneficiaries Businesses in the mining and oil and gas industry
Type of measure Timing preference
Legal reference Income Tax Regulations, subsection 1100(1) and Classes 41, 41.1 and 41.2 of Schedule II
Implementation and recent history
  • Introduced in Budget 1971, effective 1972.
  • Extended in Budget 1996 to in-situ oil sands projects (that is, projects that use oil wells rather than open-pit mining techniques to extract bitumen). This change ensured that both types of oil sands projects are accorded the same CCA treatment. Budget 1996 also extended the accelerated CCA to expenditures on eligible assets acquired in a taxation year for use in a mine or oil sands project, to the extent that the cost of those assets exceeds 5% of the gross revenue for the year from the mine or project.
  • Budget 2007 announced the phase-out over the 2011-2015 period of the accelerated CCA for oil sands projects.
  • Budget 2013 announced the phase-out over the 2017-2020 period of the accelerated CCA for all other mining projects.
Objective – category To encourage or attract investment
Objective This measure was introduced to maintain an incentive for mining investment while eliminating the three-year exemption for corporate profits that was previously provided for new mines, which was considered in many circumstances to be too generous (Proposals for Tax Reform, 1969).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - natural resources
CCOFOG 2014 code 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels
7043 - Economic affairs - Fuel and energy
Other relevant government programs Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on Class 41 expenditures by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated capital cost allowance for vessels
  Value
Description New vessels (including furniture, fittings, radio communication equipment and other equipment) that are constructed and registered in Canada and that were not used for any purpose whatsoever before acquisition by their owners can be depreciated at a maximum capital cost allowance (CCA) rate of 33⅓% on a straight-line basis. Vessels that do not qualify for this treatment are depreciable at a CCA rate of 15% on a declining-balance basis.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Timing preference
Legal reference Income Tax Regulations, paragraph 1100(1)(v)
Implementation and recent history
  • Introduced in 1967 (Order in Council P.C. 1967-1668). Effective for assets acquired on or after March 23, 1967.
Objective – category To encourage or attract investment
Objective This measure encourages investment in new vessels built and registered in Canada.
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on acquisitions of vessels by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated deductibility of Canadian Renewable and Conservation Expenses
  Value
Description Canadian Renewable and Conservation Expenses (CRCE) can be deducted in full in the year incurred even though some of these expenses are capital in nature. CRCE generally includes intangible start-up costs of renewable energy and energy efficiency projects for which at least 50% of the cost of depreciable assets can reasonably be expected to be property that is eligible for accelerated capital cost allowance (CCA) under CCA Class 43.1 or Class 43.2. CRCE also include expenses such as the cost of engineering and feasibility studies, which may be considered analogous to exploration expenses incurred by firms in the non-renewable resource sector. As a type of Canadian Exploration Expense, CRCE can be carried forward indefinitely or transferred to flow-through share investors. For more information, see the related measures “Accelerated capital cost allowance for clean energy generation equipment” and “Flow-through share deductions”.
Tax Personal and corporate income tax
Beneficiaries Businesses using clean or efficient energy generation equipment
Type of measure Timing preference
Legal reference Income Tax Act, subsection 66.1(6)
Income Tax Regulations
, section 1219
Implementation and recent history
  • Introduced in Budget 1996. Effective for expenditures incurred after December 5, 1996.
  • CRCE treatment has been expanded several times as a result of the broadening of the range of assets covered by CCA classes 43.1 and 43.2. Budget 2017 announced the inclusion of a broader range of geothermal energy projects and equipment.
Objective – category To encourage or attract investment
Objective This measure encourages investments in clean energy generation and energy conservation projects and makes the tax treatment of the renewable and non-renewable energy sectors more similar (Budget 1996; Technical Guide to Canadian Renewable and Conservation Expenses, Natural Resources Canada, 2012).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Environment
Business - other
CCOFOG 2014 code 70435 - Economic affairs - Fuel and energy - Electricity
70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified
Other relevant government programs Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on CRCE incurred by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Accelerated deductibility of some Canadian Exploration Expenses
  Value
Description Canadian Exploration Expenses (CEE) are deductible at a rate of 100% in the year incurred. CEE includes certain intangible costs incurred to determine the existence, location, extent or quality of a crude oil or natural gas reservoir or of a mineral resource not previously known to exist. For the mining sector (including oil sands mines), CEE have also included intangible pre-production development expenses—costs incurred for the purpose of bringing a new mine into production in reasonable commercial quantities. However, the eligibility of these latter expenses will be phased out by 2018.
Exploration expenses are undertaken to create an asset (the reserves discovered), and as with generally accepted accounting tax principles, the benchmark tax treatment would be to capitalize and amortize the expenses of successful exploration over the life of the asset. Unsuccessful efforts that do not result in an exploitable asset could be expensed. In practice, it is often not possible to determine whether or not exploration spending has been successful in the year when the expenses are incurred, since it is often several years afterwards before decisions on production are made.
Tax Personal and corporate income tax
Beneficiaries Businesses in the mining and oil and gas industry
Type of measure Timing preference
Legal reference Income Tax Act, section 66.1
Implementation and recent history
  • Budget 1974 introduced CEE as a category distinct from Canadian Development Expenses.
  • Budget 1978 expanded coverage to include certain expenditures relating to the development of a new mine.
  • Budget 2011 announced the phasing out by 2016 of the eligibility for CEE of pre-production development expenses for oil sands mines.
  • Budget 2013 announced the phasing out by 2018 of the eligibility for CEE of pre-production development expenses for all other mines.
  • Budget 2017 announced that expenses incurred after 2018 that are associated with oil and gas discovery wells will be treated as CDE, rather than as CEE, unless and until they are deemed unsuccessful.
Objective – category To encourage or attract investment
Objective This measure recognizes the challenges facing mining and oil and gas companies—a low probability of success, large capital requirements and long timeframes before reporting positive cash flow—as they explore for resources (Budget 2015).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - natural resources
CCOFOG 2014 code 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels
70432 - Economic affairs - Fuel and energy - Petroleum and natural gas
Other relevant government programs Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on CEE incurred by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Additional deduction for gifts of medicine
  Value
Description Corporations that donate medicines from their inventory to an eligible charity can claim an additional deduction equal to the lesser of:
  • 50% of the amount by which the fair market value of the donated medicine exceeds its cost; and
  • the cost of the medicine.
An eligible charity is a registered charity that meets the conditions prescribed by regulation. In particular, the registered charity was required to:
  • deliver the medicine received outside Canada;
  • act in a manner consistent with the principles and objectives of the Guidelines for Drug Donations issued by the World Health Organization;
  • have expertise in delivering medicines to the developing world; and
  • implement appropriate policies and practices with respect to the delivery of international development assistance.
Budget 2017 announced the elimination of the deduction, effective for gifts made on or after March 22, 2017. Unused deductions may continue to be carried forward for up to five years.
Tax Corporate income tax
Beneficiaries Corporate donors
Type of measure Deduction
Legal reference Income Tax Act, paragraph 110.1(1)(a.1)
Implementation and recent history
  • Introduced in Budget 2007. Effective for gifts made on or after March 19, 2007.
  • Amended in Budget 2008 to ensure that the charities to which the medicines are donated have appropriate oversight and accountability practices.
  • Budget 2017 announced the elimination of the measure, effective for gifts made on or after March 22, 2017.
Objective – category To achieve a social objective
Objective This measure provides an incentive for corporations to donate medicines for use in international programs for the distribution of medicines (Budget 2007).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is not incurred to earn income.
The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.
Subject Donations, gifts, charities and non-profit organizations
CCOFOG 2014 code 70711 - Health - Medical products, appliances, and equipment - Pharmaceutical products
Other relevant government programs Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.
Source of data T2 Corporation Income Tax Return
Estimation method T2 micro-simulation model
Projection method The tax expenditure is projected to grow in line with nominal gross domestic product.
Number of beneficiaries A small number of corporations (fewer than 20) claim this deduction each year.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Corporate income tax S S S S S S S S
Adoption Expense Tax Credit
  Value
Description Adoptive parents can claim the Adoption Expense Tax Credit in respect of the cost of adopting a child under the age of 18. The non-refundable credit is calculated by applying the lowest personal income tax rate to eligible adoption expenses, which are capped at $15,670 per child (2017, indexed to inflation). Eligible adoption expenses cover a range of expenses, including adoption agency fees, legal expenses, and travel and living expenses for themselves and the child, but do not include any expenses for which the adoptive parent has been or is entitled to be reimbursed. Eligible adoption expenses may be incurred for domestic adoptions or for a child adopted from outside of Canada. They must also have been incurred during the “adoption period”, as defined in the legislation. Parents are able to claim the credit in the taxation year in which the adoption is finalized. The two adoptive parents can split the amount if the total combined claim for eligible expenses for each child is not more than the amount before the split.
Tax Personal income tax
Beneficiaries Adoptive parents
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 118.01
Implementation and recent history
  • Introduced in Budget 2005. Effective for the 2005 and subsequent taxation years.
  • Budget 2013 extended the adoption period to allow for the eligibility of additional adoption-related expenses (e.g., fees for a mandatory home study and adoption courses).
  • Budget 2014 increased the maximum eligible expenses claimable to $15,000.
Objective – category

To recognize non-discretionary expenses (ability to pay)
To achieve a social objective

Objective This measure provides tax recognition to parents for costs that are unique to the decision to adopt a child (Budget 2005).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
Subject Families and households
CCOFOG 2014 code 71049 - Social protection - Family and children
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 1,900 individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 2 2 2 2 2 2 2
Age Credit
  Value
Description The Age Credit is provided to individuals aged 65 and over. The value of the credit is calculated by applying the lowest personal income tax rate to the annually indexed credit amount ($7,225 for 2017). The credit is income-tested—the credit amount is reduced by 15% of net income in excess of an annually indexed threshold amount ($36,430 for 2017). The credit is completely phased out at an income level of $84,597 in 2017. Any unused portion of the credit may be transferred to a spouse or common-law partner.
Tax Personal income tax
Beneficiaries Seniors
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 118(2)
Implementation and recent history
  • Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous age exemption.
  • The 2006 Tax Fairness Plan increased the Age Credit amount by $1,000 to $5,066 effective for the 2006 taxation year.
  • Budget 2009 increased the Age Credit amount by $1,000 to $6,408 (indexed thereafter).
Objective – category To provide income support or tax relief
To achieve a social objective
Objective This measure was introduced to reduce the tax burden borne by elderly Canadians (Budget 1972; Budget 2009).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
The tax benefit from this measure is transferable between spouses or common-law partners.
Subject Social Retirement
CCOFOG 2014 code 71029 - Social protection - Old age
Other relevant government programs Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 5.5 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2,725 2,890 3,025 3,170 3,310 3,475 3,650 3,830
Apprentice vehicle mechanics’ tools deduction
  Value
Description Registered apprentice vehicle mechanics may deduct, in computing their employment income subject to income tax, the extraordinary portion of the cost of new tools they purchase in the taxation year or in the last three months of the previous taxation year if the apprentice is in his or her first year. The extraordinary tool costs are those that exceed either the combined value of the deduction for tradespeople’s tool expenses ($500) and the Canada Employment Credit ($1,178 in 2017) or 5% of the taxpayer’s income, whichever is greater.
Tax Personal income tax
Beneficiaries Apprentice vehicle mechanics
Type of measure Deduction
Legal reference Income Tax Act, paragraph 8(1)(r) and  subsection 8(6)
Implementation and recent history
  • Introduced in Budget 2001. Effective for tools acquired after 2001.
  • In Budget 2007, the threshold for recognition of tool costs was integrated with the new deduction for tradespeople’s tool expenses and Canada Employment Credit.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure recognizes that apprentice vehicle mechanics have reduced ability to pay tax relative to other taxpayers with the same income due to the extraordinary portion of the cost of new tools they have to provide as a condition of their employment (Budget 2001; Budget 2007).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
Education
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70959 - Education - Education not definable by level
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T777 Statement of Employment Expenses
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 5,500 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 4 4 3 3 3 3 3 3
Apprenticeship Job Creation Tax Credit
  Value
Description Employers can claim a 10% non-refundable tax credit in respect of wages paid to qualifying apprentices in the first two years of their contract, to a maximum of $2,000 per apprentice per year. A qualifying apprentice is defined as someone working in a prescribed trade in the first two years of their apprenticeship contract. This contract must be registered with the federal government or a provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. Prescribed trades include the trades currently listed as Red Seal Trades. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 127
Implementation and recent history
  • Introduced in Budget 2006. Effective in respect of salaries and wages paid to qualifying apprentices on or after May 2, 2006.
Objective – category To encourage employment
Objective This measure encourages employers to hire new apprentices and to support apprentices in their training (Budget 2006).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.
Subject Employment
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return
Estimation method The estimates are based on actual amounts earned and claimed by employers.
Projection method Personal income tax: The tax expenditure is projected based on historical growth.
Corporate income tax: The tax expenditure is projected to grow in line with total employment.
Number of beneficiaries About 1,000 individuals and 12,500 corporations claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 2 2 2 2 2 2 2
Corporate income tax
  Earned and claimed in current year 60 70 70 70 70 70 70 75
  Claimed in current year but earned in prior years 20 20 20 20 20 20 20 20
  Earned in current year but carried back to prior years 4 4 5 4 5 5 5 5
  Total – corporate income tax 85 90 95 95 95 95 100 100
Total 85 90 95 100 95 100 100 105
Atlantic Investment Tax Credit
  Value
Description A 10% credit is available for qualifying acquisitions of new buildings, machinery and equipment and prescribed energy and conservation property used primarily in qualified activities in the Atlantic provinces, the Gaspé Peninsula and their associated offshore regions. Qualified activities include farming, fishing, logging, manufacturing and processing, the storing of grain, the harvesting of peat, and the production or processing of electrical energy or steam. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years. Where the credit exceeds the amount of tax payable in a year, 40% of the credit is refundable for small Canadian-controlled private corporations and individuals.
Tax Personal and corporate income tax
Beneficiaries Businesses in the Atlantic provinces and the Gaspé region
Type of measure Credit, refundable and non-refundable
Legal reference Income Tax Act, section 127
Implementation and recent history
  • Introduced in Budget 1977.
  • Budget 2012 announced the reduction of the credit rate from 10% to 5% for assets for use in oil and gas and mining activities acquired in 2014 and 2015. The tax credit ceases to be available for such assets acquired after 2015.
Objective – category To encourage or attract investment
Objective This measure promotes economic development of the Atlantic provinces and the Gaspé region (Budget 1977).
Category Non-structural tax measure and refundable tax credit
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.
The portion of this measure that is refundable is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return
Estimation method The estimates are based on actual amounts earned and claimed by businesses.
Projection method Personal income tax: The cost of this measure is projected based on historical growth.
Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product.              
Number of beneficiaries About 4,900 individuals and 5,700 corporations claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 10 10 10 10 10 10 10 10
Corporate income tax
  Non-refundable portion
    Earned and claimed in current year 100 70 110 60 45 50 55 60
    Claimed in current year but earned in prior years 40 155 70 140 110 120 130 135
    Earned in current year but carried back to prior years 130 135 10 60 20 15 5 5
    Total – non-refundable portion 270 360 190 260 175 185 190 200
  Refundable portion 15 15 15 20 20 20 20 25
  Total – corporate income tax 285 380 205 285 195 205 210 220
Total 295 390 215 295 205 215 220 230
Canada Caregiver Credit
  Value

Description
The Canada Caregiver Credit consolidated and replaced the previous system of caregiver credits (including the Caregiver Credit, Infirm Dependant Credit and Family Caregiver Tax Credit). In 2017, the amount of the credit is:
  • $6,883 in respect of infirm dependants who are parents/grandparents, brothers/sisters, aunts/uncles, nieces/nephews, adult children of the claimant or of the claimant’s spouse or common-law partner;
  • $2,150 in respect of an infirm dependent spouse or common-law partner in respect of whom the individual claims the spouse or common-law partner amount, an infirm dependant for whom the individual claims an eligible dependant credit, or an infirm child who is under the age of 18 years at the end of the tax year.
In cases where an individual claims a spouse or common-law partner amount or an eligible dependant amount in respect of an infirm family member, the individual must claim the Canada Caregiver Credit at the lesser amount ($2,150). Where this results in less tax relief than would be available if the higher amount ($6,833) were claimed, an additional amount will be provided to offset this difference. The value of the non-refundable credit is calculated by applying the lowest personal income tax rate to the credit amount per eligible dependant. The credit is reduced dollar-for-dollar by the dependant’s net income above $16,163 (in 2017) and is fully phased out when the dependant’s income reaches $23,046 (in 2017). Both the credit amount and the income threshold at which the credit starts to be reduced are indexed to inflation. The dependant is not required to live with the caregiver in order for the caregiver to claim the new credit and no credit is available in respect of non-infirm seniors who reside with their adult children.  
Tax Personal income tax
Beneficiaries Caregivers
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 118(1)
Implementation and recent history
  • Introduced in 2017, effective for the 2017 and subsequent taxation years.
Objective – category To recognize non-discretionary expenses (ability to pay)
Objective This measure recognizes that individuals providing care for infirm family members have reduced ability to pay tax compared to other taxpayers with similar income (Budget 2017).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
Subject Families and households
Health
CCOFOG 2014 code 71049 - Social protection - Family and children
71011 - Social protection - Sickness and disability - Sickness
71012 - Social protection - Sickness and disability - Disability
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.  
Source of data T1 Income Tax and Benefit Return and information from Statistics Canada’s Canadian Survey on Disability and General Social Survey
Estimation method T1 micro-simulation model; estimates for the value of this measure, as well as for the number of individuals with infirm dependants not living in the individual’s home and the number of individuals living with non-infirm seniors, were derived using the Statistics Canada survey results.
Projection method T1 micro-simulation model
Number of beneficiaries It is estimated that about 520,000 individuals will claim this credit in 2017.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 300 310 325
Canada Child Benefit
  Value
Description For the 2017-18 benefit year, the Canada Child Benefit provides a maximum benefit of $6,400 per child under the age of 6 and $5,400 per child aged 6 through 17. The Canada Child Benefit is income-tested based on adjusted family net income with the benefit phase-out rate depending on the number of children. On the portion of adjusted family net income between $30,000 and $65,000, the benefit is phased out at a rate of 7% for a one-child family, 13.5% for a two-child family, 19% for a three-child family and 23% for larger families. Where adjusted family net income exceeds $65,000, remaining benefits are phased out at rates of 3.2% for a one-child family, 5.7% for a two-child family, 8% for a three-child family and 9.5% for larger families, on the portion of income above $65,000. Indexation to inflation of the maximum benefit amounts and phase-out thresholds is to begin as of the 2018-19 benefit year. With indexation, for the 2018-19 benefit year, the maximum amounts will be increased to $6,496 per child under the age of 6 and $5,481 per child aged 6 through 17, and the phase-out thresholds will be increased to $30,450 and $65,975.
The Child Disability Benefit is an additional amount provided to families caring for a child eligible for the Disability Tax Credit. For the 2017-18 benefit year, the Child Disability Benefit provides up to $2,730 in benefits per eligible child. The phase-out of this additional amount generally aligns with the Canada Child Benefit. It is phased out at a rate of 3.2% for families with one eligible child and 5.7% for families with more than one eligible child, on adjusted family net income in excess of $65,000. This additional amount, which is included in Canada Child Benefit payments made to eligible families, will also be indexed to inflation as of the 2018-19 benefit year. With indexation, for the 2018-19 benefit year, the Child Disability Benefit amount will be increased to $2,771 and the phase-out threshold to $65,975. Canada Child Benefit payments are made monthly and are non-taxable. The payment cycle runs from July to June.
Tax Personal income tax
Beneficiaries Families with minor children
Type of measure Credit, refundable
Legal reference Income Tax Act, section 122.6
Implementation and recent history
  • The Child Tax Benefit (the precursor to the Canada Child Tax Benefit) was introduced in Budget 1992 and replaced, effective January 1993, the former refundable child tax credit, family allowance and non-refundable tax credit.
  • The Canada Child Tax Benefit and National Child Benefit supplement were introduced in 1998. The Child Disability Benefit was introduced in 2003.
  • The Canada Child Benefit was introduced in Budget 2016 and replaced the Canada Child Tax Benefit, including the National Child Benefit supplement, and the Universal Child Care Benefit. Payments of the Canada Child Benefit began in July 2016.
  • The 2017 Fall Economic Statement announced the indexation to inflation of the maximum benefit amounts and phase-out thresholds for the Canada Child Benefit as of the 2018-19 benefit year, rather than as of the 2020-21 as was legislated. The Child Disability Benefit will also be indexed to inflation as of the 2018-19 benefit year.
Objective – category To recognize non-discretionary expenses (ability to pay)
To achieve a social objective
Objective This measure gives families more money to help with the high cost of raising their children.
Category Refundable tax credit
Reason why this measure is not part of benchmark tax system This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.
Subject Families and households
CCOFOG 2014 code 71049 - Social protection - Family and children
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Public Accounts of Canada
T1 Income Tax and Benefit Return
Estimation method This measure is presented on a fiscal year basis as reported in the Public Accounts of Canada (e.g., the amount for 2010 corresponds to the expenditure reported for the 2010–11 fiscal year).
Projection method Projections of the value of this measure are calculated based on projected inflation and growth in family income and population.
Number of beneficiaries It is estimated that about 3.2 million families will receive the Canada Child Benefit in 2017.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 2017 (P) 2018 (P) 2019 (P)
Personal income tax 10,265 10,400 10,370 10,510 19,900 23,350 23,625 23,930
Canada Employment Credit
  Value
Description Taxpayers with employment income may qualify for the Canada Employment Credit. The value of the credit is calculated by applying the lowest personal income tax rate to the lesser of $1,178 (in 2017) and the individual’s employment income for the year. The maximum amount is indexed to inflation.
Tax Personal income tax
Beneficiaries Employees
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 118(10)
Implementation and recent history
  • Introduced in Budget 2006. Effective July 1, 2006. The maximum amount in 2006 was $500, doubling to $1,000 on January 1, 2007.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure provides general tax recognition of work-related expenses (Budget 2006).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
Subject Employment
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 17.7 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2,040 2,110 2,185 2,270 2,300 2,380 2,445 2,505
Canadian Film or Video Production Tax Credit
  Value
Description Qualified corporations can claim a 25% refundable tax credit in respect of salaries and wages of an eligible Canadian film or video production. The maximum amount of Canadian labour cost qualifying for the credit is 60% of the total cost of a film or video production. The Canadian Audio-Visual Certification Office of the Department of Canadian Heritage is responsible for certifying productions that are eligible for the credit.
Tax Corporate income tax
Beneficiaries Corporations in the film and video production industry
Type of measure Credit, refundable
Legal reference Income Tax Act, section 125.4
Implementation and recent history
  • Introduced in Budget 1995 at a rate of 25% of the cost of eligible salaries and wages incurred after 1994 and up to a maximum of 12% of the total cost of production. It replaced the film tax shelter mechanism for certified Canadian films in place prior to 1995.
  • The maximum amount of the credit was increased to 15% of total production cost for productions, effective for expenditures incurred on or after November 14, 2003. 
  • Talk shows were made eligible for the Canadian Film or Video Production Tax Credit by removing the reference to “talk shows” from the definition of “excluded production” for the purposes of the credit. This change applies to productions for which the principal photography starts after February 16, 2016.
Objective – category To achieve a social objective
To support business activity
Objective This measure encourages Canadian programming and the development of an active domestic independent production sector (Canadian Heritage news release, December 12, 1995).
Category Refundable tax credit
Reason why this measure is not part of benchmark tax system This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.
Subject Arts and culture
CCOFOG 2014 code 70829 - Recreation, culture, and religion - Cultural services
Other relevant government programs Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T2 Corporation Income Tax Return
Estimation method The estimates are based on actual amounts earned and claimed by businesses.
Projection method The cost of this measure is projected to grow in line with nominal gross domestic product.
Number of beneficiaries About 1,300 corporations received this benefit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Corporate income tax 260 250 250 260 270 295 310 320
Capital gains exemption on personal-use property
  Value
Description Personal-use property is held primarily for the use and enjoyment of the owner rather than as an investment. In calculating the capital gain on personal-use property, both the proceeds of disposition and the adjusted cost base of the property are deemed to be no less than the greater of $1,000 and the actual proceeds of disposition or adjusted cost base, as appropriate.
Consequently, no capital gain is recognized if the proceeds of disposition are $1,000 or less. If the proceeds exceed $1,000, the owner of the property could realize a capital gain if the proceeds exceed the cost of the property; however, the capital gain is reduced in situations where the adjusted cost base of the property, as it would be determined in the absence of this measure, is actually less than $1,000.
Personal-use property of a corporation is property owned mainly for the personal use or enjoyment of an individual who is related to the corporation.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Exemption
Legal reference Income Tax Act, section 46
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
  • Budget 2000 introduced rules that prevent the $1,000 deemed adjusted cost base and deemed proceeds of disposition for personal-use property from applying if the property is acquired after February 27, 2000 as part of an arrangement or scheme in which the property is donated as a charitable gift.
Objective – category To reduce administration or compliance costs
Objective This measure was introduced to minimize record keeping and simplify administration with respect to the purchase and disposal of personal-use items (Summary of 1971 Tax Reform Legislation, 1971).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax income or gains that are included in a comprehensive income tax base.
Subject Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs n/a
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Capital loss carry-overs
  Value
Description Net capital losses may be carried back three years and forward indefinitely to offset capital gains of other years. Notwithstanding these rules, net capital losses realized in the year in which a taxpayer dies may be deductible against all forms of income for that taxation year and the immediately preceding year. Unused net capital losses from prior years carried forward to the year of death may also be deductible against all forms of income for that taxation year and the immediately preceding year.
Tax Personal and corporate income tax
Beneficiaries Individual and corporate investors
Type of measure Timing preference
Legal reference Income Tax Act, subsections 111(1) and 111(2)
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
  • Budget 1983 extended the carry-back for capital losses from one year to three years.
Objective – category To assess tax liability over a multi-year period
Objective This measure supports investors by reducing the risk associated with investment (Budget 1983).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.
Subject Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs n/a
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return
Estimation method Personal income tax: T1 micro-simulation model. The estimate for a given year represents the tax relief associated with the carry-forward to that year of losses incurred in prior years and the deductibility of losses in the year of death of a taxpayer. Data on losses carried back to a previous year is not available.
Corporate income tax: The estimate for a given year represents the tax relief associated with both the carry-forward to that year of losses incurred in prior years and the carry-back to previous years of losses incurred in that year. The estimate is equal to the amount of losses carried over multiplied by the tax rate applicable in the year in which the losses are applied.
Projection method Personal income tax: T1 micro-simulation model
Corporate income tax: The value of this measure is projected to grow in line with corporate capital gains.
Number of beneficiaries About 568,000 individuals and 55,000 corporations made use of this measure in 2015 (not counting individuals that carried back losses only).
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax
  Carried back n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
  Applied to current year 305 420 530 425 360 475 485 505
  Total – personal income tax n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Corporate income tax
  Carried back 130 120 110 355 215 180 195 205
  Applied to current year 415 445 710 525 350 390 415 440
  Total – corporate income tax 545 565 820 875 570 570 610 645
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Caregiver Credit
  Value
Description The Caregiver Credit was replaced with the Canada Caregiver Credit in 2017. The Caregiver Credit provided tax relief to individuals providing in-home care to a parent or grandparent 65 years of age or over or an infirm adult dependent relative, including a child or grandchild, a brother, a sister, an aunt, an uncle, a niece or a nephew. The value of the non-refundable credit was calculated by applying the lowest personal income tax rate to the credit amount per eligible dependant ($4,668 in 2016). The credit was reduced when the dependant’s net income exceeded $15,940 and was fully phased out when the dependant’s income reached $20,608. Both the credit amount and the income threshold at which the credit started to be reduced were indexed to inflation
Tax Personal income tax
Beneficiaries Caregivers
Type of measure Credit, non-refundable
Legal reference Income Tax Act, paragraph 118(1)(c.1)
Implementation and recent history
  • Introduced in 1998. Effective for the 1998 and subsequent taxation years. Repealed in Budget 2017 as of the 2017 taxation year.
Objective – category To recognize non-discretionary expenses (ability to pay)
Objective This measure recognizes that individuals providing in-home care for elderly or infirm family members have reduced ability to pay tax compared to other taxpayers with similar income (Budget 1998).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
Subject Families and households Health
CCOFOG 2014 code 71049 - Social protection - Family and children
71011 - Social protection - Sickness and disability - Sickness
71012 - Social protection - Sickness and disability - Disability
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 251,000 individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 120 130 140 145 145 - - -
Cash basis accounting
  Value
Description Under the benchmark tax system, income is taxable when it accrues, and expenses are deductible in the period when the related revenue is reported. Individuals and corporations engaged in farming and fishing activities may elect to include revenues when received, rather than when earned, and deduct expenses when paid rather than when the related revenue is reported. This measure allows farmers and fishers to better match cash receipts with cash expenses, and may enable them to defer paying tax on income realized but not yet received.
Cash basis accounting may result in non-capital losses that are not reflective of the actual losses that would have been created under an accrual system of accounting. This happens because income and expenses are not necessarily matched under the cash basis system. As a result of loss carry-forward and carry-back limitations (i.e., 20 years forward and 3 years back), farming businesses under the cash-based system may not be able to use these losses to reduce taxable income in some instances. A mandatory inventory adjustment and optional inventory adjustment are provided for farming businesses, which act to lessen this outcome.
Tax Personal and corporate income tax
Beneficiaries Farming and fishing businesses
Type of measure Timing preference
Legal reference Income Tax Act, section 28
Implementation and recent history
  • Prior to 1948, cash basis accounting was an acceptable method for determining business income for tax purposes. Amendments to the Income Tax Act in 1948 introduced the concept of profit and the use of accrual accounting, but at the same time preserved the ability of taxpayers who had been using cash basis accounting to continue to use that method.
  • In 1955, a provision specifically allowing farmers to use cash basis accounting was introduced.
  • In 1958, the provision preserving the ability for other taxpayers to continue to use cash basis accounting was repealed.
  • The optional inventory adjustment was implemented in Budget 1973, effective for the 1972 and subsequent taxation years.
  • In 1980, cash basis accounting was confirmed for fishers on a retroactive basis to 1972.
  • The mandatory inventory adjustment was introduced following the 1987 Tax Reform (Department of Finance Canada news release 88-89, June 30, 1988), effective for fiscal years commencing after 1988.
  • In 1996, a provision was introduced to prevent prepaid expenses (other than for inventory) relating to a taxation year at least two years after the year of payment from reducing cash basis income in the year of payment. This provision was effective for amounts paid after April 26, 1995.
Objective – category To provide relief for special circumstances
To reduce administration or compliance costs
Objective This measure recognizes that requiring all farmers and fishers to adopt the accrual method of income reporting could result in accounting and liquidity problems (Report of the Royal Commission on Taxation, vol. 4, 1966; Proposals for Tax Reform, 1969).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure is a departure from the accrual basis of taxation.
Subject Business - farming and fishing
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Charitable Donation Tax Credit
  Value
Description The Charitable Donation Tax Credit is a non-refundable tax credit on donations to registered charities, registered Canadian amateur athletic associations and other qualified donees. In 2017, the formula for determining the credit for individuals is linked to the lowest, second-highest and highest federal tax rates. The credit rate is 15% on the first $200 of total annual gifts and 29% on total annual gifts over $200, with the exception of donors with taxable income exceeding $202,800, who may claim a 33% tax credit on the portion of total annual donations over $200 made from taxable income greater than $202,800.
In general, the credit may be claimed on donations totalling up to 75% of an individual’s net income (up to 100% of net income for donations of ecologically sensitive land and cultural property or in certain other circumstances) and may be carried forward for up to 5 years (up to 10 years for donations of ecologically sensitive land).
Tax Personal income tax
Beneficiaries Individual donors
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 118.1 and subsections 248(30) to (41)
Implementation and recent history
  • Introduced in 1917 as a deduction “for amounts paid during the year to the Patriotic and Red Cross Funds, and other patriotic and war funds approved by the Minister.”
  • The general income limit on donations was increased in several stages from 10% in 1970 to 75% in 1997.
  • In 1988, the deduction for donations made by individuals was converted to a two-tier tax credit as part of the 1987 Tax Reform.
  • Budget 1994 reduced the threshold to which the higher rate applies from $250 to $200.
  • Budget 1995 eliminated the net income limit for donations of ecologically sensitive land eligible for the tax credit.
  • In Budget 2014, the carry-forward period for donations of ecologically sensitive land was extended from 5 to 10 years.
  • In 2016, the Government amended the Charitable Donation Tax Credit to allow donors with taxable income that is subject to the 33% marginal tax rate to also claim a 33% tax credit on the portion of donations (greater than $200) made from that income. Any donations that exceed the amount of a donor’s taxable income that is subject to the 33% marginal tax rate will be subject to the 29% credit rate. This change is effective for the 2016 and subsequent taxation years.
Objective – category To achieve a social objective
Objective This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966; 1987 Tax Reform).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.
The tax benefit from this measure is transferable between spouses or common-law partners.
Subject Donations, gifts, charities and non-profit organizations
CCOFOG 2014 code 705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes
Other relevant government programs Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.
Source of data T1 Income Tax and Benefit Return
Canadian Cultural Property Export Review Board
Environment and Climate Change Canada
Estimation method The value of this measure in respect of donations other than cultural property and ecologically sensitive land is estimated using the T1 micro-simulation model. The value of this measure in respect of donations of cultural property is calculated by multiplying an estimate of donations made in the year by the 29% credit rate. The value of this measure in respect of donations of ecologically sensitive land is estimated by multiplying total donations by the 29% credit rate.
Projection method Projections are obtained using the T1 micro-simulation model in the case of donations other than cultural property and ecologically sensitive land. Projections in respect of donations of cultural property and ecologically sensitive land are made based on the historical trend in the number and value of donations; in particular, projections in respect of cultural property are made based on an average of past donations.
Number of beneficiaries About 5.6 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
By type of donations
  Publicly listed securities 125 145 240 190 215 230 240 255
  Ecologically sensitive land 5 5 5 5 10 10 10 10
  Cultural property 25 25 30 25 25 20 20 20
  Other 2,210 2,365 2,310 2,425 2,350 2,485 2,545 2,605
Total – personal income tax 2,365 2,545 2,585 2,650 2,605 2,745 2,815 2,885
Child care expense deduction
  Value
Description Child care expenses incurred for the purpose of earning business or employment income, taking an occupational training course, pursuing education or carrying on research for which a grant is received are deductible from income, up to a limit. The deduction may not exceed the lesser of (i) the total of the maximum dollar limits for all children ($8,000 per child under age 7, $5,000 per child between 7 and 16 years of age and infirm dependent children over age 16, and $11,000 for a child eligible for the Disability Tax Credit, regardless of their age), (ii) two-thirds of earned income for the year (not applicable to single-parent students), and (iii) the actual amount of child care expenses incurred. The spouse with the lower income must generally claim the deduction. However, the higher-income parent may claim a deduction if the lower-income parent is infirm, confined to a bed or a wheelchair, in prison or a similar situation for at least two weeks, attending a designated educational institution, or living apart due to a breakdown in the relationship for a period of at least 90 days during the year.
Tax Personal income tax
Beneficiaries Families with children
Type of measure Deduction
Legal reference Income Tax Act, section 63
Implementation and recent history
  • Announced in Budget 1971. Legislation introduced in 1972 and effective for the 1972 and subsequent taxation years.
  • Budget 1988 eliminated the overall maximum limit of $8,000 per taxpayer for child care expenses.
  • Budget 1996 increased the age limit for children from 14 to 16 years.
  • Maximum dollar amounts increased by $1,000, effective for the 2015 taxation year (Prime Minister of Canada news release, October 30, 2014).
Objective – category To recognize expenses incurred to earn employment income
To recognize education costs
Objective This provision recognizes the child care costs incurred by single parents and two-earner families in the course of earning employment income, pursuing education or performing research (Budget 1992; Budget 1998).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income. Expenses incurred to earn business income are generally deductible under the benchmark tax system; however, child care expenses may also have an element of personal consumption, hence the classification of this measure as a tax expenditure.
Subject Employment
Education
Families and households
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
70989 - Education - Education not elsewhere classified
71049 - Social protection - Family and children
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 1.4 million individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 990 965 1,090 1,355 1,265 1,295 1,340 1,385
Child Tax Credit
  Value
Description The Child Tax Credit was a non-refundable credit that provided tax relief of up to $338 per child in 2014. The value of the credit was calculated by applying the lowest personal income tax rate to an amount ($2,255 in 2014) for each child under the age of 18 at the end of the taxation year. This amount was indexed to inflation. Only one parent could claim the credit in a year in respect of a child, but any unused portion of the credit was transferable to a spouse or common-law partner. This credit was repealed as of the 2015 taxation year.
Tax Personal income tax
Beneficiaries Families with minor children
Type of measure Credit, non-refundable
Legal reference Income Tax Act, formerly under paragraph 118(1)(b.1)
Implementation and recent history
  • Introduced in Budget 2007. Effective for the 2007 to 2014 taxation years.
  • Repealed as of the 2015 taxation year, and replaced by the enhancement to the Universal Child Care Benefit (Prime Minister of Canada news release, October 30, 2014).
Objective – category To recognize non-discretionary expenses (ability to pay)
To achieve a social objective
Objective This measure was intended to reduce the tax burden on families with children (Budget 2007).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
The tax benefit from this measure is transferable between spouses or common-law partners.
Subject Families and households
CCOFOG 2014 code 71049 - Social protection - Family and children
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 3.8 million individuals claimed this credit in 2014.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 1,550 1,590 1,645
Children’s Arts Tax Credit
  Value
Description Parents could claim a non-refundable tax credit at the lowest personal income tax rate on eligible fees for the enrolment of a child under the age of 16 in an eligible program of artistic, cultural, recreational or developmental activity. The credit could be claimed by either parent. If a child qualified for the Disability Tax Credit, the age limit was raised to under 18 years of age and an additional $500 amount could be claimed, subject to the parents spending a minimum of $100 on registration or membership fees for an eligible program of artistic, cultural, recreational or developmental activity. As well, the requirements for an eligible activity were relaxed to cover a broader range of programs more suited to the challenges experienced by these children. Budget 2016 announced the phase-out of this measure by 2017 (see details below).
Tax Personal income tax
Beneficiaries Families with minor children
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 118.031
Income Tax Regulations
, section 9401
Implementation and recent history
  • Introduced in Budget 2011. Effective for the 2011 and subsequent taxation years ($500 maximum amount per child for eligible fees).
  • Budget 2016 reduced the maximum amount of eligible fees to $250, effective for the 2016 taxation year, and eliminated the credit effective for the 2017 taxation year.
Objective – category To achieve a social objective
Objective This measure better recognized the costs associated with children’s artistic, cultural, recreational and developmental activities (Budget 2011).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
The tax benefit from this measure was transferable between spouses or common-law partners.
Subject Arts and culture
CCOFOG 2014 code 70869 - Recreation, culture, and religion - Recreation, culture, and religion not elsewhere classified
Other relevant government programs Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 655,000 individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 35 40 40 45 30
Children’s Fitness Tax Credit
  Value
Description Parents could claim a refundable tax credit at the lowest personal income tax rate on eligible fees for the enrolment of a child under the age of 16 years in an eligible program of physical activity. The credit could be claimed by either parent. If a child qualified for the Disability Tax Credit, the age limit was raised to under 18 years of age and an additional $500 amount could be claimed, subject to the parents spending a minimum of $100 on registration or membership fees for an eligible program of physical activity. As well, the requirements for an eligible activity were relaxed to cover a broader range of programs more suited to the challenges experienced by these children. Budget 2016 announced the phase-out of this measure by 2017 (see details below).
Tax Personal income tax
Beneficiaries Families with minor children
Type of measure Credit, refundable
Legal reference Income Tax Act, section 122.8
Income Tax Regulations, section 9400
Implementation and recent history
  • Introduced in Budget 2006 as a non-refundable tax credit. Effective for the 2007 and subsequent taxation years ($500 maximum amount per child for eligible fees).
  • Guidelines were released in 2006 on the credit and enhancement of the credit for children with disabilities (Department of Finance Canada news release 2006-084, December 19, 2006).
  • The maximum amount of the credit was doubled to $1,000, effective for the 2014 taxation year, and the credit was made refundable, effective for the 2015 taxation year (Prime Minister of Canada news release, October 9, 2014).
  • Budget 2016 reduced the maximum amount of eligible fees to $500, effective for the 2016 taxation year, and eliminated the credit effective for the 2017 taxation year.
Objective – category To achieve a social objective
Objective This measure promoted physical fitness among children (Budget 2006).
Category Non-structural tax measure and refundable tax credit
Reason why this measure is not part of benchmark tax system This measure was classified as a transfer payment for government accounting purposes, and therefore was not considered to be a tax expenditure.
Subject Health
CCOFOG 2014 code 70761 - Health - Health not elsewhere classified - Health prevention programs (collective)
Other relevant government programs Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 1.7 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Pre-2015 (non-refundable) 115 115 180
Post-2014 (refundable) 210 140
Total – personal income tax 115 115 180 210 140
Corporate Mineral Exploration and Development Tax Credit
  Value
Description A 10% non-refundable credit was available to corporations in respect of expenditures incurred in Canada for grassroots exploration and pre-production mine development in relation to the mining of diamonds, base and precious metals as well as industrial minerals that become base or precious metals through refining. Budget 2012 announced the phase-out of this credit to make the tax system more neutral between mining and other industries and, as a result, this credit does not apply after 2015. However, unused credits can be pooled and carried forward, and the use of previously earned credits will continue beyond 2015.
Tax Corporate income tax
Beneficiaries Corporations in the mining industry
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 127(9), paragraph (a.3) of definition of “investment tax credit”
Implementation and recent history
  • Introduced in Budget 2003. The credit applied at a rate of 5% in 2003, 7% in 2004 and 10% as of 2005.
  • Budget 2012 announced the phase-out of this credit. In the case of exploration expenditures, the credit rate was reduced to 5% for expenses incurred in 2013 and is not available for expenses incurred after 2013. In the case of pre-production development expenditures, the credit rate was reduced to 7% for expenses incurred in 2014, 4% for expenses incurred in 2015, and is not available for expenses incurred after 2015.
Objective – category To encourage or attract investment
Objective This measure was introduced to improve the international competitiveness of the resource sector and promote the efficient development of Canada’s natural resource base (Improving the Income Taxation of the Resource Sector in Canada, March 3, 2003).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
Subject Business - natural resources
CCOFOG 2014 code 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels
Other relevant government programs Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T2 Corporation Income Tax Return
Estimation method The cost of this measure in a year is calculated using data on actual credits claimed in the year. The cost in the initial year is partially offset in the following year as the corporation’s cumulative Canadian Exploration Expense account is then reduced by the credit claimed the year before.
Projection method Projections are based on current market conditions.
Number of beneficiaries About 35 corporations claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Corporate income tax 20 10 30 15 15 15 15 15
Credit for the Basic Personal Amount
  Value
Description Individual taxpayers can claim a non-refundable credit in respect of the Basic Personal Amount. The value of the credit is calculated by applying the lowest personal income tax rate (15% in 2017) to the Basic Personal Amount ($11,635 in 2017). The credit amount is indexed to inflation.
Tax Personal income tax
Beneficiaries Individuals
Type of measure Credit, non-refundable
Legal reference Income Tax Act, paragraph 118(1)(c)
Implementation and recent history
  • Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous basic personal exemption.
  • Between 1998 and 2009, the Basic Personal Amount was periodically increased. 
Objective – category To promote the fairness of the tax system
Objective This measure contributes to tax fairness by ensuring that no tax is paid on a basic amount of income (Report of the Royal Commission on Taxation, vol. 3, 1966; Budget 1998).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.
Subject Other
CCOFOG 2014 code n/a
Other relevant government programs n/a
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 27.1 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 30,385 31,535 32,530 33,915 34,380 35,495 36,560 37,615
Deductibility of certain costs incurred by musicians
  Value
Description Employed musicians can deduct amounts from their employment income for the expenses they incur for the maintenance, rental and insurance of musical instruments they are required to provide as a term of their employment. The measure also provides for the deduction of capital cost allowance in respect of these instruments.
Tax Personal income tax
Beneficiaries Employed musicians
Type of measure Deduction
Legal reference Income Tax Act, paragraph 8(1)(p)
Implementation and recent history
  • Introduced in 1987 as part of the 1987 Tax Reform. Effective for the 1988 and subsequent taxation years.
Objective – category To recognize expenses incurred to earn employment income
Objective The deductibility of certain expenses incurred by artists and musicians recognizes that these expenses are necessary to carry on employment in those fields (Musical Instruments: Income Tax Reform, 1987).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
Arts and culture
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
70829 - Recreation, culture, and religion - Cultural services
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T777 Statement of Employment Expenses
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 3,500 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 1 2 2 1 2 2 2 2
Deductibility of charitable donations
  Value
Description Donations made by corporations to registered charities are deductible in computing taxable income within certain limits. In general, a deduction may be claimed on donations totalling up to 75% of a corporation’s taxable income. The limit is increased by 25% of the amount of taxable capital gains arising from donations of appreciated capital property and 25% of any capital cost allowance recapture arising from donations of depreciable capital property. The net income restriction does not apply to certain gifts of cultural property or ecologically sensitive land.
Donations in excess of the particular limit applied may be carried forward up to 5 years with the exception of gifts of ecologically sensitive land, which may be carried forward up to 10 years.
Tax Corporate income tax
Beneficiaries Corporate donors
Type of measure Deduction
Legal reference Income Tax Act,section 110.1
Implementation and recent history
  • Budget 1930 introduced the deductibility of donations to any church, university, college, school or hospital in Canada amounting to no greater than 10% of a taxpayer’s net income. By 1933, the deduction applied to donations made to charities.
  • Budget 1997 increased the deduction limit to 75% of a corporation’s net income, reduced to 25% the portion of taxable capital gains arising from the donations of appreciated capital property that can be added to the deduction limit, and added to the deduction limit 25% of recaptured capital cost allowance amounts.
Objective – category To achieve a social objective
Objective This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is not incurred to earn income.
The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.
Subject Donations, gifts, charities and non-profit organizations
CCOFOG 2014 code 705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes
Other relevant government programs Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.
Source of data T2 Corporation Income Tax Return
Estimation method T2 micro-simulation model
Projection method The cost of this measure is projected to grow in line with corporate taxable income.
Number of beneficiaries This measure provided tax relief to about 91,650 corporations in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
By type of donations
  Ecologically sensitive land 2 5 3 1 1 2 2 2
  Cultural property 35 3 10 20 4 15 15 15
  Gifts to the Crown S S S S S S S S
  Other 385 310 485 430 410 460 445 470
Total – corporate income tax 425 315 500 450 415 475 465 490
Deductibility of contributions to a qualifying environmental trust
  Value
Description Contributions to a qualifying environmental trust are deductible in computing the contributor’s income in the years the contributions are made, provided that the contributor is a beneficiary under the trust. Amounts withdrawn from the trust to fund reclamation costs are included in the recipient’s income when withdrawn; however, there is typically no net tax cost at the time of withdrawal since the recipient will be able to deduct the reclamation costs incurred against the above income inclusion.
This measure is intended to improve the cash flow of taxpayers at the time the contributions to a qualifying environmental trust are made. It also ensures that companies, such as single-mine companies, which might not have had sufficient taxable income against which to deduct actual reclamation expenses when these expenses were incurred (for the most part at the end of the life of a mine or after its closure), obtain some tax relief for these expenses. Additional details on this measure can be found in the Annex to Part 1 of this report.
Tax Personal and corporate income tax
Beneficiaries Businesses contributing to a qualifying environmental trust
Type of measure Timing preference
Legal reference Income Tax Act, paragraph 20(1)(ss)
Implementation and recent history
  • Introduced in Budget 1994. Effective for contributions to eligible mine reclamation trusts for taxation years ending after of February 22, 1994.
  • Budget 1997 extended this measure to similar trusts established for waste disposal sites and quarries for the extraction of aggregate and similar substances, effective for taxation years ending after February 18, 1997.
  • Budget 2011 further extended this measure to include trusts established for pipeline reclamation, effective for taxation years ending after 2012.
Objective – category To provide relief for special circumstances
Objective This measure assists firms that are required to make contributions to a qualifying environmental trust set up for the purpose of funding reclamation costs (Budget 1997).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax.
Subject Environment
CCOFOG 2014 code 70549 - Environmental protection - Protection of biodiversity and landscape
Other relevant government programs Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: Data on contributions to qualifying environmental trusts by unincorporated businesses is not available.
Corporate income tax: T2 Corporation Income Tax Return
Estimation method Personal income tax: No estimate is available.
Corporate income tax: The cost of this measure is based on net contributions (total contributions minus funds withdrawn) to qualifying environmental trusts. 
Projection method Personal income tax: No projection is available.
Corporate income tax: Projections are based on current market conditions and the anticipated impact that National Energy Board pipeline regulations will have on the use of qualifying environmental  trusts. 
Number of beneficiaries A small number of corporations/partnerships (fewer than 50) claimed this deduction in 2015. No data is available for unincorporated businesses.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Corporate income tax -2 S -1 55 55 55 55 55
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deductibility of costs of capital assets and eligibility for investment tax credits before asset is put in use
  Value
Description Corporations may claim capital cost allowance and investment tax credits on depreciable assets at the earlier of the time that is the end of the taxation year in which the asset is available for use or the second taxation year following its year of acquisition.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Timing preference
Legal reference Income Tax Act, subsections 13(27) and 127(11.2)
Implementation and recent history
  • Introduced in 1990, applicable to property acquired after 1989.
Objective – category To reduce administration or compliance costs
Objective This measure facilitates the application and administration of the capital cost allowances regime and investment tax credits by limiting the period between the acquisition of a capital asset and the time the cost of the asset is recognized for tax purposes.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure may permit the depreciation of a capital asset faster than its useful life.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deductibility of countervailing and anti-dumping duties when paid
  Value
Description In accordance with rules established by the World Trade Organization, countries may impose countervailing and anti-dumping duties to offset the injurious effects of imports that are subsidized or dumped. Countervailing and anti-dumping duties paid by Canadian businesses in order to export their products are deductible in computing income subject to tax in the year that the duties are paid, even if the payment is based on a preliminary finding. By contrast, under general income tax rules, since the amount payable may be subsequently adjusted under the trade remedy process, the liability would be considered contingent and no deduction would be allowed until the final determination of the amount of the liability. Under the measure, any refunds or additional amounts (e.g., interest) received as a result of the final determination of the liability must be included in income when received.
Tax Personal and corporate income tax
Beneficiaries Businesses that pay a countervailing or anti-dumping duty
Type of measure Timing preference
Legal reference Income Tax Act, paragraph 20(1)(vv)
Implementation and recent history
  • Introduced in Budget 1998. Effective for duties that became payable and are paid after February 23, 1998.
Objective – category To provide relief for special circumstances
Objective This measure recognizes that businesses that pay countervailing and anti-dumping duties are required to pay amounts that are not under their control and that, although these amounts may be subsequently refunded in whole or in part, this process can take several years (Budget 1998).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax.
Subject International
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs n/a
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deductibility of earthquake reserves
  Value
Description Federally regulated property and casualty insurance companies can deduct, for income tax purposes, earthquake premium reserves which are set aside pursuant to guidelines established by the Office of the Superintendent of Financial Institutions. These reserves represent a surplus appropriation, and would not otherwise be deductible under the benchmark system.
Tax Corporate income tax
Beneficiaries Property and casualty insurers
Type of measure Timing preference
Legal reference Income Tax Act, paragraph 20(7)(c)
Income Tax Regulations, the description of L in subsection 1400(3)
Implementation and recent history
  • Introduced in Budget 1998. Effective for the 1998 and subsequent taxation years.
Objective – category To provide relief for special circumstances
Objective This measure helps ensure that federally regulated property and casualty insurance companies have sufficient financial capacity to pay insured earthquake losses when they occur (Budget 1998).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Data on earthquake premium reserves is provided by the Office of the Superintendent of Financial Institutions.
Estimation method This tax expenditure is estimated by taking the annual net change in total earthquake premium reserves and multiplying that change by the statutory corporate income tax rate for the year. The net change, and not the amount of the reserve, is of importance because the deduction is effectively applied on a net basis (the taxpayer includes in income the reserve from the previous year, and deducts from income the reserve for the current year).
Projection method Earthquake premium reserves are projected to grow at the compound annual growth rate observed over the last eight years.
Number of beneficiaries About 20 corporations claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Corporate income tax 1 S S S S 1 1 1
Deductibility of expenses by employed artists
  Value
Description Employed artists are allowed to deduct amounts paid in the year to earn income from their artistic activities up to the lesser of $1,000 or 20% of their income derived from employment in the arts. An amount deductible in a year under this measure is reduced by motor vehicle expenses and musical instrument costs that are also deducted against the taxpayer’s income from the same artistic activity for the year.
Tax Personal income tax
Beneficiaries Employed artists
Type of measure Deduction
Legal reference Income Tax Act,paragraph 8(1)(q)
Implementation and recent history
  • Introduced on May 16, 1990 (Government response to the Report of the Standing Committee on Communications and Culture Respecting the Status of the Artist). Effective for amounts paid after 1990.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure provides greater certainty to employed artists with respect to the tax treatment of their professional expenses (Government response to the Report of the Standing Committee on Communications and Culture Respecting the Status of the Artist, 1990).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
Arts and culture
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
70829 - Recreation, culture, and religion - Cultural services
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T777 Statement of Employment Expenses
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 600 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax S S S S S S S S
Deduction for certain contributions by individuals who have taken vows of perpetual poverty
  Value
Description Individuals who have taken a vow of perpetual poverty as a member of a religious order may claim a deduction in a year in which they are a member of that religious order for the amount of earned income and pension benefits assigned and paid in the year to the order.
Tax Personal income tax
Beneficiaries Individuals who have taken vows of perpetual poverty as members of a religious order
Type of measure Exemption
Legal reference Income Tax Act, subsection 110(2)
Implementation and recent history
  • Introduced in 1949. Effective for the 1949 and subsequent taxation years.
Objective – category To achieve a social objective
To provide relief for special circumstances
Objective This measure recognizes the special situations of members of religious orders who make vows of poverty and assign all of their income to the religious order.
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax income or gains that are included in a comprehensive income tax base.
Subject Donations, gifts, charities and non-profit organizations
CCOFOG 2014 code 70849 - Recreation, culture, and religion - Religious and other community services
Other relevant government programs Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.
Source of data No reliable data is available for this measure. As such, estimates and projections are no longer presented.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deduction for clergy residence
  Value
Description A member of the clergy who is supplied living accommodation by their employer, or receives a housing allowance, may claim an offsetting deduction to the extent that this benefit is included in their income for the year. When no allowance is received nor living accommodation provided, a calculated deduction for rent and utilities is provided. The taxpayer must be in charge of or administer a diocese, parish or congregation, or be engaged exclusively in full-time administrative service by appointment of a religious order or denomination. The amount deducted cannot exceed the taxpayer’s income from the office or employment, and is equal to the total amount included in the taxpayer’s income as a taxable benefit because of the housing accommodation or allowance. In general, if the taxpayer owns or rents the accommodation, the amount that may be deducted is restricted to the lesser of two amounts: (1) the greater of $1,000 multiplied by the number of months (up to 10 months) in the year during which the taxpayer qualified as a member of the clergy and one-third of the taxpayer’s remuneration from the office or employment; and (2) the amount, if any, by which rent paid (or the fair market value of the accommodation) exceeds the total deducted by the taxpayer in connection with the residence from income earned from the office or employment or a business.
Tax Personal income tax
Beneficiaries Members of the clergy or of a religious order, regular ministers of a religious denomination
Type of measure Deduction
Legal reference Income Tax Act, paragraph 8(1)(c)
Implementation and recent history
  • Introduced in Budget 1949. Effective for the 1948 and subsequent taxation years.
  • In 2001, the amount of the deduction when the living accommodation is rented or owned by the clergy was limited to the least of three amounts: the clergy person’s total remuneration from employment for the year; one-third of that remuneration or $10,000, whichever is greater; and the fair rental value of the residence (reduced by other amounts deducted in connection with the same residence). 
Objective – category To achieve a social objective
Objective This measure recognizes the special nature of the contributions and circumstances of members of the clergy (Budget, March 1949).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax income or gains that are included in a comprehensive income tax base.
Subject Social
CCOFOG 2014 code 70849 - Recreation, culture, and religion - Religious and other community services
Other relevant government programs Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 27,000 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 90 85 90 90 90 95 95 95
Deduction for self-employed artists
  Value
Description Artists who are self-employed and who create paintings, prints, etchings, drawings, sculptures or similar works of art (but not including those in the business of reproducing works of art) may elect to value their inventory at nil, effectively allowing them to deduct the costs of creating a work of art in the year the costs are incurred rather than in the year the work of art is sold.
Tax Personal income tax
Beneficiaries Self-employed artists
Type of measure Timing preference
Legal reference Income Tax Act,subsection 10(6)
Implementation and recent history
  • Introduced in Budget 1985. Effective for the 1985 and subsequent taxation years.
Objective – category To provide relief for special circumstances
Objective The special treatment of costs incurred by artists recognizes artists’ problems in valuing their works of art on hand, attributing costs to particular works and carrying inventories over long periods of time (Budget 1985).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Arts and culture
CCOFOG 2014 code 70829 - Recreation, culture, and religion - Cultural services
Other relevant government programs Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deduction for tradespeople’s tool expenses
  Value
Description A tradesperson can claim a deduction of up to $500 of the total cost of eligible new tools acquired in a taxation year as a condition of employment that exceeds the amount of the Canada Employment Credit ($1,178 in 2017). The total cost of eligible new tools cannot exceed the total of the employment income earned as a tradesperson and apprenticeship grants received to acquire the tools, which are required to be included in income.
Tax Personal income tax
Beneficiaries Tradespeople
Type of measure Deduction
Legal reference Income Tax Act, paragraph 8(1)(s)
Implementation and recent history
  • Introduced in Budget 2006. Effective in respect of eligible new tools acquired on or after May 2, 2006.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure provides tax recognition for the extraordinary cost of tools that tradespeople must provide as a condition of employment (Budget 2006).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T777 Statement of Employment Expenses
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 21,000 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 2 2 2 2 2 2 2
Deduction for tuition assistance for adult basic education
  Value
Description A student can claim a deduction for the amount of tuition assistance received for adult basic education when the tuition assistance has been included in the student’s income and the student does not qualify for the Tuition Tax Credit. In order to be eligible, the tuition assistance must be received under a program established under Part II of the Employment Insurance Act, a program established under the authority of the Department of Employment and Social Development Act, a similar program (in certain circumstances) or a prescribed program.
Tax Personal income tax
Beneficiaries Students
Type of measure Deduction
Legal reference Income Tax Act, paragraph 110(1)(g)
Implementation and recent history
  • Introduced in Budget 2001. Effective retroactively to the 1997 and subsequent taxation years.
Objective – category To recognize education costs
Objective This measure provides assistance to adults undertaking basic education courses as part of a government training program (Budget 2001).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Education
CCOFOG 2014 code 70959 - Education - Education not definable by level
Other relevant government programs Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T4E Statement of Employment Insurance and Other Benefits
Estimation method The value of this measure is calculated by multiplying total non-taxable tuition assistance by an assumed marginal tax rate.
Projection method The value of this measure is projected based on historical growth.
Number of beneficiaries About 6,000 individuals claimed this deduction in 2016.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 3 3 2 1 2 2 2 3
Deduction of allowable business investment losses
  Value
Description Capital losses arising from the disposition of shares and debt instruments are generally deductible only against capital gains. However, one-half of the capital loss from a deemed disposition of bad debts or shares of a bankrupt small business corporation or from a disposition to an arm’s length person of shares or debts of a small business corporation (known as an “allowable business investment loss”) may be used to offset other income. Unused allowable business investment losses may be carried back three years and forward 10 years. After 10 years, the loss reverts to an ordinary capital loss and may be carried forward indefinitely.
Allowable business investment losses are reduced if the Lifetime Capital Gains Exemption has been claimed in prior years (to the extent that allowable business investment losses have not already been reduced by those exemptions). The amount of the reduction depends on the inclusion rate of capital gains. The amount by which a taxpayer’s allowable business investment loss is reduced under this provision is treated as a capital loss for the year in which it arose, and may be carried back three years and forward indefinitely to offset capital gains of other years.
Tax Personal and corporate income tax
Beneficiaries Individual and corporate investors
Type of measure Deduction
Legal reference Income Tax Act, subsection 38(c) and paragraph 39(1)(c)
Implementation and recent history
  • Introduced in Budget 1978 (November 16, 1978). Effective for the 1978 and subsequent taxation years.
Objective – category To encourage or attract investment
Objective This measure recognizes that small businesses often have difficulty obtaining adequate financing, and provides special assistance for risky investments in such businesses (Budget 1985; Budget 2004).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deduction of capital losses otherwise than against capital gains.
Subject Business - small businesses
Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return
Estimation method The value of this tax expenditure corresponds to the tax relief provided by permitting allowable business investment losses to be deducted from other income in the year they arise. The tax expenditure is overstated since it is assumed that the losses would not have been otherwise deducted against capital gains.
Personal income tax: T1 micro-simulation model
Corporate income tax: T2 micro-simulation model
Projection method Personal income tax: T1 micro-simulation model
Corporate income tax: Projections are based on the average cost of the previous three years, projected to grow in line with nominal gross domestic product.
Number of beneficiaries About 8,900 individuals and 1,950 corporations claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 40 30 40 35 25 25 25 25
Corporate income tax 10 10 10 15 10 15 15 15
Total 45 35 50 50 40 40 40 40
Deduction of carrying charges incurred to earn income
  Value
Description Interest and other carrying charges incurred to earn business or investment income are deductible under certain conditions. Carrying charges generally include fees, other than commissions, paid for advice sought by a taxpayer on buying or selling specific securities, or for the administration or the management of securities of the taxpayer. The management of securities includes the custody of securities, the maintenance of accounting records, and the collection and remittance of income. Carrying charges also include certain legal fees incurred in relation to the establishment or collection of support payments from a current or former spouse or common-law partner, or from the natural parent of the taxpayer’s child.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Deduction
Legal reference Income Tax Act, paragraphs 20(1)(c) and (bb)
Implementation and recent history
  • Interest on borrowed funds used to earn income was made deductible in 1923, and investment counselling fees in 1951. Interest incurred by corporations to buy shares of other corporations was made deductible in 1972.
  • Budget 1996 introduced amendments to ensure that fees to establish child support amounts remained deductible.
  • Budget 2013 removed the deduction in respect of safety deposit box charges for taxation years that began on or after March 21, 2013.
Objective – category To recognize expenses incurred to earn business or property income
Objective This measure recognizes that carrying charges are incurred for the purpose of earning income.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.
Subject Business - other
Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: No data is available.
Estimation method Personal income tax: T1 micro-simulation model
Corporate income tax: No estimate is available.
Projection method Personal income tax: T1 micro-simulation model
Corporate income tax: No projection is available.
Number of beneficiaries About 1.9 million individuals claimed this deduction in 2015. No data is available for corporations.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 1,085 1,190 1,295 1,385 1,400 1,485 1,580 1,655
Corporate income tax n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deduction of other employment expenses
  Value
Description Under certain conditions, an employee can deduct a number of specific employment expenses in computing income, such as automobile expenses, the cost of meals and lodging for certain transport employees, and legal expenses paid to collect salary.
Tax Personal income tax
Beneficiaries Employees
Type of measure Deduction
Legal reference Income Tax Act, section 8
Implementation and recent history
  • Expenses of railway employees, sales expenses and transport employees’ expenses were made deductible in Budget 1948, effective for the 1949 and subsequent taxation years.
  • Travel expenses, motor vehicle travel expenses, and dues and other expenses of performing duties were made deductible in Budget 1951, effective for the 1951 and subsequent taxation years.
  • Teachers’ exchange fund contributions were made deductible in Budget 1957, effective for the 1956 and subsequent taxation years.
  • Legal expenses of employees were made deductible in Budget 1961, effective for the 1961 and subsequent taxation years.
  • Aircraft costs were made deductible in Budget 1979, effective for the 1980 and subsequent taxation years.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure provides tax recognition for certain expenses incurred for the purpose of earning employment income.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 780,000 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 970 955 920 930 915 960 1,005 1,040
Deduction of union and professional dues
  Value
Description A deduction is available in respect of annual union, professional or like dues paid in the year by an employee (or paid by the employer and included in the employee’s income) in the course of employment. The deduction does not apply to the extent the employee is, or is entitled to be, reimbursed by the employer.
Tax Personal income tax
Beneficiaries Employees
Type of measure Deduction
Legal reference Income Tax Act, subparagraphs 8(1)(i)(i) and (iv)-(vii)
Implementation and recent history
  • Introduced in Budget 1951. Effective for the 1951 and subsequent taxation years.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure provides tax recognition for mandatory employment-related expenses.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income.
Subject Employment
CCOFOG 2014 code 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 5.7 million individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 860 890 915 970 945 985 1,035 1,070
Deferral for asset transfers to a corporation and corporate reorganizations
  Value
Description Transfers of assets to a taxable Canadian corporation for consideration that includes at least one share of the corporation may be made on a tax-deferred basis. The tax deferral, which is on an elective basis, includes accrued capital gains and recapture of excess capital cost allowance deductions that would otherwise be realized on a taxable transfer. In general, the deferral results in the transferor having an accrued gain in respect of the share(s) acquired from the corporation and the corporation having deferred tax consequences in respect of the acquired property. Shareholders of a taxable Canadian corporation as well as the corporation are also permitted tax deferrals under certain corporate reorganization rules in which corporate assets are transferred. These reorganization rules include amalgamations, windings-up and so-called “corporate butterflies”.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Timing preference
Legal reference Income Tax Act, sections 55, 85, 87 and 88 and subsection 84(2)
Implementation and recent history
  • These measures were introduced at various times (1948 for rules related to the recapture of excess capital cost allowance, 1958 for amalgamations, 1972 for capital gains on a transfer of an asset to a corporation and for a corporate winding-up, and 1980 for corporate butterflies). The winding-up rule in subsection 84(2) dates back to the 1920s.
Objective – category To extend or modify the unit of taxation
To support business activity
Objective These measures facilitate tax-deferred transfers of assets used in business to a corporation and the reorganization of the corporation itself. 
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure extends the unit of taxation.
This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral of capital gains through intergenerational rollovers of family farms or fishing businesses
  Value
Description Sales or gifts of assets to children, grandchildren or great-grandchildren typically give rise to taxable capital gains to the extent that the fair market value exceeds the adjusted cost base of the property. However, capital gains realized by an individual on intergenerational transfers of certain types of farm or fishing property (i.e., land and depreciable property including buildings) and shares in a family farm or fishing corporation or interests in a family farm or fishing partnership, may be deferred in certain circumstances until the property is disposed of in an arm's length transaction, if the farm or fishing property continues to be used principally in a farming or fishing business.
Tax Personal income tax
Beneficiaries Farming and fishing businesses
Type of measure Timing preference
Legal reference Income Tax Act, subsections 70(9) to (9.31) and 73(3) to (4.1)
Implementation and recent history
  • Implemented in Budget 1973. Effective for the 1972 and subsequent taxation years.
  • Budget 2001 ensured that the existing intergenerational tax-deferred rollover for farm property is available for transfers of commercial woodlots after December 10, 2001, where they are operated in accordance with a prescribed forest management plan.
  • Budget 2006 extended this measure to include qualified fishing property effective May 2, 2006.
  • Budget 2014 extended the measure to generally treat a taxpayer’s combined farming and fishing business the same as separate farming and fishing businesses conducted by the same taxpayer, applicable to dispositions and transfers that occur in the 2014 and subsequent taxation years.
Objective – category To achieve an economic objective - other
Objective This measure allows for continuity in the management of family farms or family fishing businesses in Canada by permitting property used principally in a family farming or fishing business to pass from generation to generation on a tax-deferred basis (Budget 1973; Budget 2006).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
This measure extends the unit of taxation.
Subject Business - farming and fishing
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral of capital gains through transfers to a spouse, spousal trust or alter ego trust
  Value
Description When a property is transferred to another person, capital gains are generally considered to be realized at the time of the transfer on the basis of the fair market value of the property at that time. However, if an individual transfers capital property to a spouse, spousal trust or alter ego trust (i.e., a trust for the benefit of the transferor), the capital property is deemed to have been disposed of by the individual at its adjusted cost base (or at the undepreciated capital cost in the case of depreciable property), and to have been acquired by the spouse or trust for an amount equal to those deemed amounts. This treatment effectively provides a deferral of the taxable capital gain until the disposition of the property by the spouse or trust, or until the transferee or relevant trust beneficiary dies.
Tax Personal income tax
Beneficiaries Individuals, their spouses and common-law partners
Type of measure Timing preference
Legal reference Income Tax Act, subsection 70(6) and section 73
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
  • Extended in 2001 to transfers to alter ego trusts (Department of Finance Canada news release 1999-112, December 17, 1999).
Objective – category To extend or modify the unit of taxation
Objective This measure recognizes that it is not always appropriate to treat a transfer of assets between spouses (or to a trust for one’s own benefit or for the benefit of a spouse) as a disposition for income tax purposes, and therefore allows families flexibility in structuring their total assets (Budget 1971).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
This measure extends the unit of taxation.
Subject Families and households
CCOFOG 2014 code 71049 - Social protection - Family and children
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral of income from destruction of livestock
  Value
Description A taxpayer may defer to the following taxation year, in part or in full, the income received in compensation for the forced destruction of livestock under statutory authority.
Tax Personal and corporate income tax
Beneficiaries Farming businesses
Type of measure Timing preference
Legal reference Income Tax Act, section 80.3
Implementation and recent history
  • Introduced in Budget 1976. Effective for the 1976 and subsequent taxation years.
Objective – category To provide relief for special circumstances
Objective This measure was introduced to allow farmers adequate time to replace their herds, destroyed under statutory authority, without imposing a tax burden in the year of livestock destruction (Budget 1976).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - farming and fishing
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Statistics Canada, CANSIM table 002-0076
Estimation method Personal income tax (unincorporated farms): The value of this measure is calculated as the total deferred income in a given year minus the total amount deferred from the year before, multiplied by the share of farm income accruing to unincorporated farms and the average marginal tax rate applicable to farm income.
Corporate income tax (incorporated farms): A similar methodology is used except that the average tax rate used is the estimated average tax rate applicable to meals and entertainment expenses.
Projection method Projections for 2017 through 2019 are not provided as the value of this measure cannot be reliably forecast for these years.
Number of beneficiaries No data is available.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 2017 (P) 2018 (P) 2019 (P)
Personal income tax S S S 1 -1 n.a. n.a. n.a.
Corporate income tax S S S 1 S n.a. n.a. n.a.
Total S S S 1 -1 n.a. n.a. n.a.
Deferral of income from grain sold through cash purchase tickets
  Value
Description Farmers may make deliveries of grain to a grain elevator and receive payment in the form of a cash purchase ticket. If a cash purchase ticket is issued upon the delivery to an elevator of certain listed grains and the holder of the cash purchase ticket is entitled to payment after the end of the taxation year in which the grain is delivered, then the taxpayer may exclude the amount stated on the cash purchase ticket from income for the taxation year in which the grain was delivered, and instead include it in income for the immediately following taxation year.
Tax Personal and corporate income tax
Beneficiaries Farming businesses
Type of measure Timing preference
Legal reference Income Tax Act, subsections 76(4) and (5)
Implementation and recent history
  • Introduced in Budget 1974. Effective for the 1973 and subsequent taxation years.
  • Consequential amendments to this measure due to the elimination of the Canadian Wheat Board were made in 2012 (first Budget 2012 implementation bill). These amendments removed the previous geographical restriction for the measure and extended it to farmers of the listed grains anywhere in Canada.
  • Budget 2017 launched a consultation on the ongoing utility of this measure. On November 6, 2017, the Government announced that the income deferral provided under this measure would be maintained.
Objective – category To achieve an economic objective - other
Objective By permitting the deferred reporting of income on grain sales, this measure facilitates the orderly delivery of grain to elevators, which helps meet Canada’s grain export commitments (Budget May 1974).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - farming and fishing
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Statistics Canada, CANSIM table 002-0001
Estimation method Personal income tax (unincorporated farms): The value of this measure is calculated as the total deferred income from cash purchase tickets in a given year minus the total income from exchanging cash purchase tickets for their cash value, multiplied by the share of farm income accruing to unincorporated farms and the average marginal tax rate applicable to farm income.
Corporate income tax (incorporated farms): A similar methodology is used except that the average tax rate used is the estimated average tax rate applicable to meals and entertainment expenses.
Projection method The projection for 2017 uses data available for the first three quarters of the calendar year. Projections for 2018 and 2019 are not provided as the value of this measure cannot be reliably forecast for these years.
Number of beneficiaries No data is available.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 2017 (P) 2018 (P) 2019 (P)
Personal income tax 20 -10 -20 15 10 5 n.a. n.a.
Corporate income tax 20 -10 -25 20 10 1 n.a. n.a.
Total 40 -15 -50 35 20 10 n.a. n.a.
Deferral of income from sale of livestock in a region of drought, flood or excessive moisture
  Value
Description Farmers may defer recognition of a portion of the income received on the sale of breeding livestock (breeding animals and breeding bees) in prescribed regions affected by drought, flood or excessive moisture. Such deferred income must be recognized in the first taxation year beginning after the region ceases to be a prescribed region.
Tax Personal and corporate income tax
Beneficiaries Farming businesses
Type of measure Timing preference
Legal reference Income Tax Act, section 80.3
Income Tax Regulations, sections 7305 and 7305.02
Implementation and recent history
  • Introduced in 1988 in respect of farmers forced to sell breeding livestock due to drought conditions (Department of Finance Canada news release 88-155, December 12, 1988). Effective for the 1988 and subsequent taxation years.
  • Expanded in March 2009 to apply to farmers carrying on business in a region of flood or excessive moisture (Department of Finance Canada news release 2009-024, March 5, 2009). Effective for the 2008 and subsequent taxation years.
  • Budget 2014 extended the measure to bees, and to all types of horses that are over 12 months of age, that are kept for breeding. Effective for the 2014 and subsequent taxation years.
Objective – category To provide relief for special circumstances
Objective This measure allows farmers to use the proceeds from the forced sale of livestock due to drought, flood or excessive moisture conditions to fund the acquisition of replacement livestock (Department of Finance Canada news release 88-155, December 12, 1988; Department of Finance Canada news release 2009-024, March 5, 2009; Budget 2014).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - farming and fishing
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral through 10-year capital gain reserve
  Value
Description If the proceeds derived from the sale of a farm or fishing property or small business shares to a child, grandchild or great-grandchild are not all receivable in the year of sale, recognition of a portion of the capital gain realized may be deferred until the year in which the proceeds become receivable. However, a minimum of 10% of the gain must be brought into income per year, creating a maximum 10-year reserve period. This contrasts with the treatment of capital property generally, where the maximum reserve period is five years (see measure “Deferral through five-year capital gain reserve”).
Tax Personal income tax
Beneficiaries Farming and fishing businesses, individual investors
Type of measure Timing preference
Legal reference Income Tax Act, subsection 40(1.1)
Implementation and recent history
  • Budget 1981 proposed the elimination of capital gain reserves; however, this original proposal was later modified to allow a five-year reserve generally and to introduce the 10-year capital gain reserve for a transfer to a child (Department of Finance Canada news release 81-126). Effective for dispositions of property occurring after November 12, 1981.
  • Budget 2006 extended the scope of the measure to include fishing property.
  • Budget 2014 introduced simplifying rules for farmers carrying on farming and fishing businesses in combination.
Objective – category To achieve an economic objective - other
Objective This measure eases the intergenerational transfer of farm or fishing property sold to a child (Explanatory Notes for Act to Amend the Income Tax Act, December 1982; Budget 2006).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - farming and fishing
Business - small businesses
CCOFOG 2014 code 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture
70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting
70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model. The value of this tax expenditure corresponds to the difference between the amount of tax that would have been payable if capital gain reserves were fully included in income in the year of disposition of the asset and the amount of tax that is payable as reserve amounts are included in income over time.
Projection method T1 micro-simulation model
Number of beneficiaries About 10,000 individuals claimed a 10-year capital gain reserve in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
By type of property
  Farm and fishing property n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
  Small business shares n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Total – personal income tax 30 25 35 25 35 40 40 40
Deferral through five-year capital gain reserve
  Value
Description In some cases, a taxpayer may receive portions of the payment from the sale of a capital property over a number of years. Under those circumstances, realization of a portion of the capital gain may be deferred until the year in which the proceeds are received. A minimum of 20% of the gain must be brought into income per year, creating a maximum five-year deferral period.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Timing preference
Legal reference Income Tax Act,subsection 40(1)
Implementation and recent history
  • Budget 1981 proposed the elimination of capital gain reserves; however, this original proposal was later modified with the introduction of the five-year capital gain reserve (Department of Finance Canada news release 81-126). Effective for dispositions of property occurring after November 12, 1981.
Objective – category To assess tax liability over a multi-year period
Objective This measure, while limiting tax deferral opportunities, recognizes that where capital gain proceeds are receivable over time, fully taxing gains in the year of sale could result in significant liquidity problems for taxpayers (Explanatory Notes for Act to Amend the Income Tax Act, December 1982).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - other
Savings and investment
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: No data is available.
Estimation method The value of this tax expenditure corresponds to the difference between the amount of tax that would have been payable if capital gain reserves were fully included in income in the year of disposition of the asset and the amount of tax that is payable as reserve amounts are included in income over time.
Personal income tax: T1 micro-simulation model
Corporate income tax: No estimate is available.
Projection method Personal income tax: T1 micro-simulation model
Corporate income tax: No projection is available.
Number of beneficiaries About 8,300 individuals claimed a five-year capital gain reserve in 2015. No data is available for corporations.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 10 10 10 10 15 15 20 20
Corporate income tax n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deferral through rollover of capital gains and capital cost allowance recapture in respect of dispositions of land and buildings
  Value
Description Capital gains and capital cost allowance recapture resulting from the voluntary disposition of land and buildings by businesses may be deferred if replacement properties are purchased within a specified time period (e.g., a business changing location). The rollover is generally not available for properties used to generate rental income.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Timing preference
Legal reference Income Tax Act, subsections 13(4) and 44(1)
Implementation and recent history
  • The deferral of capital cost allowance recapture was introduced in 1955. Effective for the 1954 and subsequent taxation years.
  • The capital gains deferral was introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
Objective – category To support business activity
Objective This measure supports businesses by permitting the deferral of capital gains and capital cost allowance recapture that are incidental to an active business.
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral through rollover of capital gains and capital cost allowance recapture in respect of involuntary dispositions
  Value
Description Capital gains and capital cost allowance recapture resulting from an involuntary disposition (e.g., insurance proceeds received for an asset destroyed in a fire) may be deferred if the funds are reinvested in a replacement asset within a specified period. The capital gain and capital cost allowance recapture are taxable upon disposition of the replacement property.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Timing preference
Legal reference Income Tax Act, subsections 13(4) and 44(1)
Implementation and recent history
  • The deferral of capital cost allowance recapture was introduced in 1955. Effective for the 1954 and subsequent taxation years.
  • The deferral of capital gains was introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
Objective – category To provide relief for special circumstances
Objective Rollover provisions are provided in some situations in which it would be unfair to collect capital gains tax even though the taxpayer has sold or otherwise disposed of an asset at a profit (Proposals for Tax Reform, 1969).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferral through use of billed-basis accounting by professionals and professional corporations
  Value
Description In computing income for tax purposes, individuals and corporations carrying on the practice of certain professions (i.e., accounting, legal, medical doctor, dental, chiropractic or veterinary professional practice) could either use an accrual accounting method by default, or elect to use a billed-basis accounting method. Under the default accrual method, expenses were required to be be matched with their associated revenues. Under the elective billed-basis method, the expenses relating to work in progress could be deducted as incurred even though the associated revenues were not brought into income until either the revenues were billed and became receivable or were paid. This treatment gave rise to a deferral of tax. Budget 2017 announced the phase-out of this measure.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations carrying on certain professional practices
Type of measure Timing preference
Legal reference Income Tax Act, section 34
Implementation and recent history
  • Introduced in Budget 1971. Effective for fiscal years ending after December 31, 1971.
  • Budget 2017 proposed the elimination of the ability for designated professionals to elect to use billed-basis accounting, effective for taxation years that begin on or after March 22, 2017. A five-year transitional period to phase in the inclusion of work in progress into income was subsequently proposed on September 8, 2017.
Objective – category To reduce administration or compliance costs
Objective This measure recognizes the inherent difficulty in valuing unbilled time and work in progress (Summary of 1971 Tax Reform Legislation, 1971).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Business - other
CCOFOG 2014 code 70499 - Economic affairs - Economic affairs not elsewhere classified
Other relevant government programs Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Deferred Profit-Sharing Plans
  Value
Description A Deferred Profit-Sharing Plan (DPSP) is an arrangement under which an employer contributes profits from their business to a trust for the benefit of a designated group of employees. Employers may make tax-deductible contributions to a DPSP on behalf of their employees. The contributions are not immediately taxed in the hands of the employee, and the investment income is not taxed as it is earned. Withdrawals are included in the income of the employee for tax purposes. Employer contributions are limited to 18% of an employee’s earnings up to one-half of the defined contribution Registered Pension Plan (RPP) dollar limit for the year ($13,115 for 2017). Total contributions to a DPSP and a defined contribution RPP are limited to 18% of an employee’s earnings up to a specified dollar amount ($26,230 for 2017).
Tax Personal income tax
Beneficiaries Employees with a Deferred Profit-Sharing Plan
Type of measure Timing preference
Legal reference Income Tax Act, section 147
Implementation and recent history
  • In 1961, amendments were introduced to provide that an employee would not be subject to income tax on amounts contributed to a profit-sharing plan on their behalf by their employer until actually received as proceeds from the plan.
  • In 1989, a number of amendments to the DPSP tax rules were introduced that, among other changes, increased the limit on deductible employer contributions and prohibited employee contributions (Saving for Retirement: A Guide to the Tax Legislation and Regulations, Department of Finance Canada, 1989).  
Objective – category To encourage savings
To achieve an economic objective - other
Objective The tax treatment of these plans encourages additional retirement savings, and fosters co-operation between employers and their workers by encouraging employees to participate in their employer’s business (Budget 1960).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure permits the deferral of the recognition of income or gains for income tax purposes.
Subject Retirement
Savings and investment
CCOFOG 2014 code 71029 - Social protection - Old age
Other relevant government programs Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Disability supports deduction
  Value
Description Attendant care as well as certain other disability supports expenses incurred to carry on a business or for education or employment purposes are deductible from income unless they have been reimbursed by a non-taxable payment (e.g., insurance payment). Generally, the deduction is limited to the lesser of the amounts paid for eligible expenses and the taxpayer’s earned income. Students are additionally entitled to claim the deduction against up to $15,000 of non-earned income, subject to the length of their educational program. Individuals do not have to be eligible for the Disability Tax Credit in order to claim the deduction, although other criteria may apply for eligibility of certain types of disability supports. Expenses claimed under the disability supports deduction cannot be claimed under the Medical Expense Tax Credit.
Tax Personal income tax
Beneficiaries Individuals with disabilities
Type of measure Deduction
Legal reference Income Tax Act, section 64
Implementation and recent history
  • Introduced in Budget 2004, effective for the 2004 and subsequent taxation years, replacing the previous attendant care deduction.
Objective – category To recognize non-discretionary expenses (ability to pay)
Objective This measure recognizes the costs incurred by taxpayers with disabilities for disability supports required to enable them to earn business or employment income or to attend school (Budget 1989; Budget 2000; Budget 2004).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure provides tax recognition for an expense that is incurred to earn employment income. This measure provides tax recognition for an expense that is incurred for education purposes.
Subject Health
Employment
Education
CCOFOG 2014 code 71012 - Social protection - Sickness and disability - Disability
70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs
70989 - Education - Education not elsewhere classified
Other relevant government programs Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 2,000 individuals claimed this deduction in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 1 3 3 3 3 3 3
Disability Tax Credit
  Value
Description The Disability Tax Credit provides tax relief for non-itemizable disability-related costs in respect of an eligible individual that has been certified by a qualified medical practitioner as having a severe and prolonged disability. The value of the non-refundable credit is calculated by applying the lowest personal income tax rate to the disability credit amount ($8,113 in 2017). The credit amount is indexed to inflation and can be transferred to a supporting spouse, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, nephew or niece of the individual. Families caring for eligible children with severe and prolonged impairments may claim an additional amount as a supplement to the credit. The value of the supplement is calculated by applying the lowest personal income tax rate to the supplement amount ($4,733 in 2017) and is reduced dollar-for-dollar by the amount of child care or attendant care expenses in excess of $2,772 that is claimed under the child care expense deduction, the disability supports deduction, or the Medical Expense Tax Credit. Both the expense threshold and the supplement amount are indexed to inflation.
Tax Personal income tax
Beneficiaries Individuals with disabilities
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 118.3(1)
Implementation and recent history
  • Introduced in 1944 as a $480 deduction for blind persons.
  • Expanded in 1985 to individuals with severe disabilities.
  • Replaced by a non-refundable tax credit as part of the 1987 Tax Reform.
  • Introduction in 2000 of the supplement for children.
  • Budget 2005 extended eligibility to individuals who face multiple restrictions that together have a substantial impact on their everyday lives and to more individuals requiring extensive life-sustaining therapy on an ongoing basis.
  • Budget 2017 expanded the list of medical practitioners that can certify eligibility for the Disability Tax Credit to include nurse practitioners, effective for certifications made on or after March 22, 2017.
Objective – category To recognize non-discretionary expenses (ability to pay)
Objective This measure improves tax fairness by recognizing the effect of a severe and prolonged disability on an individual’s ability to pay tax (Budget 1997; Budget 2005).
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Tax credits are treated as deviations from the benchmark tax system.
This measure extends the unit of taxation.
Subject Health
CCOFOG 2014 code 71012 - Social protection - Sickness and disability - Disability
Other relevant government programs Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries In total, 1.2 million individuals claimed an amount for the Disability Tax Credit for 2015. This includes about 815,000 eligible persons who claimed all or some portion of the credit for themselves, 160,000 individuals who claimed all or some portion of the credit on behalf of an eligible spouse or common-law partner, and 275,000  individuals who claimed all or some portion of the credit transferred from an eligible person (such as a parent for a minor child). Because multiple individuals can share the amount of the credit in respect of an eligible person, the total number of individuals claiming the credit exceeds the total number of eligible persons who were able to use or transfer the amount in 2015. These numbers reflect the 2015 tax year assessments or reassessments up to June 30, 2017.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 760 815 890 995 1,015 1,045 1,090 1,125
Dividend gross-up and tax credit
  Value
Description Income earned by corporations is subject to corporate income tax and, on distribution as dividends to individuals, personal income tax. The result is that dividends received by Canadian taxpayers are taxed at both the corporate and the personal levels. The Dividend Tax Credit (DTC), provided within the personal income tax system, is intended to compensate a taxable individual for corporate income taxes that are presumed to have been paid. The DTC is generally meant to ensure that income earned by a corporation and paid out to an individual as a dividend will be subject to the same amount of tax as income earned directly by the individual.
The DTC mechanism calculates a proxy for pre-tax corporate profits and then provides a tax credit to individuals in recognition of corporate-level tax. Under this approach, an individual is first required to include the grossed-up amount of taxable dividends (i.e., the proxy for pre-tax profits) in income. Using the grossed-up amount, the tax system in effect treats the individual as having directly earned the amount that the corporation is presumed to have earned in order to pay the dividend. The DTC then compensates the individual for the amount of corporate-level tax presumed to have been paid on the grossed-up amount.
The tax system has two DTC rates and gross-up factors to recognize the two different corporate income tax rates that generally apply to corporations. The enhanced DTC (15.0198% in 2017) and gross-up (38% in 2017) are applied to dividends distributed to an individual from corporate income taxed at the general corporate tax rate (eligible dividends). The ordinary DTC (10.5217% in 2017) and gross-up (17% in 2017) are applied to dividends distributed to an individual from corporate income not taxed at the general corporate tax rate (ineligible dividends).
Tax Personal income tax
Beneficiaries Individual investors
Type of measure Other; credit, non-refundable
Legal reference Income Tax Act, sections 82 and 121
Implementation and recent history
  • Introduction of a DTC in 1949, followed by an increase of the tax credit in 1953.
  • The 1971 Tax Reform introduced the gross-up factor and adjustments to the DTC effective for the 1972 and subsequent taxation years.
  • Budgets 1977 and 1986 as well as the 1987 Tax Reform announced changes to the gross-up and DTC.
  • Budget 2006 established, for dividends paid after 2005, a new gross-up factor and an enhanced DTC rate for eligible dividends.
  • Budget 2008 adjusted the enhanced DTC and gross-up factor to reflect the scheduled federal general corporate income tax rate reductions that were announced in the 2007 Economic Statement.
  • Budget 2013 adjusted the gross-up factor and DTC rate applicable to non-eligible dividends to ensure the appropriate tax treatment of such dividends.
  • Budget 2015 adjusted the gross-up factor and DTC rate applicable to non-eligible dividends in conjunction with reductions in the preferential income tax rate for small businesses.
  • Budget 2016 announced that the gross-up factor and DTC rate applicable to non-eligible dividends would remain at 17% and 10.5% respectively after 2016.
  • The 2017 Fall Economic Statement adjusted the gross-up factor and DTC rate applicable to non-eligible dividends in conjunction with reductions in the preferential income tax rate for small businesses.
Objective – category To prevent double taxation
Objective These measures contribute to the integration of the corporate and personal income tax systems.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.
Subject Savings and investment
CCOFOG 2014 code n/a
Other relevant government programs n/a
Source of data T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 3.8 million individuals claimed this credit in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 4,450 5,055 4,655 5,780 4,430 5,085 5,280 5,250

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Part 3 – Descriptions of Tax Expenditures: 1 of 4