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

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Part 3 – Descriptions of Tax Expenditures: 3 of 4

Non-capital loss carry-overs
  Values
Description Non-capital losses, including farm and fishing non-capital losses, may be carried back or forward and deducted against all sources of income. For losses incurred in or after 2006, the carry-back period is three years and the carry-forward period 20 years.
Tax Personal and corporate income tax
Beneficiaries Businesses
Type of measure Timing preference
Legal reference Income Tax Act, subsection 111(1)
Implementation and recent history
  • The ability to carry forward non-capital losses was introduced in 1942 and the ability to carry back non-capital losses was introduced in 1944.
  • Budget 2006 extended the carry-forward period to 20 years from 10 years for non-capital losses arising in and after 2006.
Objective – category To assess tax liability over a multi-year period
Objective This measure supports businesses and investors by reducing the risk associated with investment, and provides tax relief for cyclical businesses (Budget 1983; Budget 2004; Budget 2006).
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
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 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. Data on losses carried back to a previous year is not available. The estimates also do not include losses carried over by part-time farmers.

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 prior 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 cost for the last historical year is grown by the projected year-over-year growth in the level of losses carried over used to offset taxable income (based on the latest economic and fiscal projections).
Number of beneficiaries About 50,000 individuals and 425,000 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)
Farm and fishing non-capital losses                
  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 15 15 15 20 20 20 20 20
    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 10 10 20 15 20 20 20 20
    Applied to current year 50 45 50 45 40 45 45 45
    Total – corporate income tax 60 60 65 60 60 60 60 60
  Total – farm and fishing non-capital losses n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Other non-capital losses                
  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 70 65 70 75 70 70 75 75
    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 1,845 3,395 2,100 2,300 2,345 2,280 2,255 2,090
    Applied to current year 4,390 3,920 4,985 4,305 4,025 4,410 4,675 4,890
    Total – corporate income tax 6,235 7,315 7,085 6,610 6,370 6,690 6,930 6,980
  Total – other non-capital losses n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Total – non-capital losses                
  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 85 80 85 95 90 90 95 100
    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 1,855 3,410 2,115 2,320 2,360 2,295 2,270 2,105
    Applied to current year 4,435 3,965 5,035 4,350 4,065 4,455 4,720 4,935
    Total – corporate income tax 6,290 7,375 7,150 6,665 6,430 6,750 6,990 7,040
  Total – non-capital losses n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-deductibility of advertising expenses in foreign media
  Values
Description Expenses for advertising in non-Canadian newspapers and periodicals or on non-Canadian broadcast media cannot generally be deducted for income tax purposes if the advertising is directed primarily to a market in Canada. This treatment results in a negative tax expenditure, since the deductibility of expenses incurred to earn business income is considered to be part of the benchmark tax system.
Tax Personal and corporate income tax
Beneficiaries Businesses that advertise in foreign media
Type of measure Other
Legal reference Income Tax Act, sections 19 to 19.1
Implementation and recent history
  • Introduced in Budget 1965. Effective for expenses in respect of advertising in non-Canadian newspapers and periodicals made after December 31, 1965.
  • This measure was broadened to cover advertising on non-Canadian broadcast media, effective after September 21, 1976.
  • Following the 1999 Canada-U.S. Agreement on Magazines, expenses incurred to advertise in periodicals published after May 2000 are fully deductible if the periodicals contain at least 80% original editorial content. If the periodicals contain less than 80% original editorial content, then 50% of advertising expenses are deductible.
Objective – category To achieve an economic objective - other
Objective This measure is intended to ensure that control of periodicals and newspapers remains in the hands of Canadians and supports the continued existence of a viable and original Canadian magazine industry (House of Commons Debates, vol. 3, 1965; Department of Finance Canada news release, June 19, 1995).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure disallows the deduction of an expense that is incurred to earn business income.
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: No data is available on expenses incurred by unincorporated businesses to advertise in non-Canadian media. Corporate income tax: T2 Corporation Income Tax Return
Estimation method Personal income tax: No estimate is available. Corporate income tax: T2 micro-simulation model
Projection method Personal income tax: No projection is available. Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product.
Number of beneficiaries About 390 corporations reported non-deductible advertising expenses 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 S S S S S S S S
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of allowances for diplomats and other government employees posted abroad
  Values
Description Diplomats and other government employees posted abroad can claim an exemption for the allowances received to cover the additional costs associated with living outside Canada.
Tax Personal income tax
Beneficiaries Diplomats and other government employees posted abroad
Type of measure Exemption
Legal reference Income Tax Act, subparagraph 6(1)(b)(iii)
Implementation and recent history
  • Introduced in 1943.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure recognizes the additional costs incurred by diplomats and other government personnel employed outside Canada.
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 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 Global Affairs Canada and National Defence data
Estimation method The value of this tax expenditure is estimated by multiplying total exempt allowances by the estimated marginal tax rates of recipients.
Projection method The projection for 2017 is based on partial year data and historical growth. Projections for 2018 and 2019 are not provided as the value of this measure cannot be reliably forecast for these years.
Number of beneficiaries More than 4,000 individuals received non-taxable allowances in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 2017 (P) 2018 (P) 2019 (P)
Personal income tax 25 25 25 25 30 30 n.a. n.a.
Non-taxation of allowances for members of legislative assemblies and certain municipal officers
  Values
Description Elected members of provincial and territorial legislative assemblies and of incorporated municipalities, elected officers of municipal utilities boards, commissions, corporations, or similar bodies, and members of public or separate school boards may receive allowances for expenses incident to the discharge of their duties. Such allowances are not included in income so long as they do not exceed half of the salary or other remuneration received in that capacity in the year. This exemption was repealed as of the 2019 tax year.
Tax Personal income tax
Beneficiaries Members of provincial and territorial legislative assemblies and of incorporated municipalities; elected officers of municipal utilities boards, commissions, corporations, or similar bodies; and members of public or separate school boards
Type of measure Exemption
Legal reference Income Tax Act, subsections 81(2) and (3)
Implementation and recent history
  • The exemptions for members of provincial and territorial legislative assemblies and for other municipal officers were introduced in 1947 and 1949 respectively.
  • Budget 2017 announced the repeal of this measure, effective for the 2019 and subsequent taxation years.
Objective – category To recognize expenses incurred to earn employment income
Objective This measure recognizes the additional costs incurred by members of legislative assemblies and certain municipal officers in the course of their duties.
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 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 and T4 Statement of Remuneration Paid
Estimation method Allowances reported on T4 slips are matched against T1 returns and incremental tax is calculated on the basis of the individual's taxable income with and without the allowance.
Projection method The cost of this measure is projected to grow in line with allowances.
Number of beneficiaries About 25,000 individuals received non-taxable allowances in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 15 15 20 20 20 20 20
Non-taxation of benefits from private health and dental plans
  Values
Description Employer-paid benefits for private health and dental plans are deductible business expenses but are not a taxable employee benefit. In the case of self-employed individuals, they can claim a deduction in computing income from a business for amounts paid under a private health services plan for the benefit of the individual, the individual's spouse or common-law partner and members of the individual's household, subject to certain restrictions.
Tax Personal income tax
Beneficiaries Employees and self-employed individuals
Type of measure Exemption (for employer-paid benefits); deduction (for self-employed individuals)
Legal reference Income Tax Act,subparagraph 6(1)(a)(i), section 18 and section 20.01
Implementation and recent history
  • The exemption of employee health plans was introduced in 1948.
  • The deduction for self-employed individuals was introduced in Budget 1998, applicable to amounts paid or payable in a fiscal period beginning after 1997.
Objective – category To achieve a social objective
Objective This measure improves access to supplementary health and dental benefits (Budget 1998).
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. This measure provides tax recognition for an expense that is not incurred to earn income.
Subject Health
CCOFOG 2014 code 7072 - Health - Outpatient services
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 Canadian Life and Health Insurance Association Inc., Health Insurance Benefits in Canada and Premium & Retail Tax on Life & Health Insurance

Conference Board of Canada, Benefits Benchmarking
Estimation method The value of this tax expenditure is calculated as the tax revenue forgone from the non-taxation of employer-provided health related insurance premiums and benefits. These amounts are estimated using statistics provided by the Canadian Health and Life Insurance Association, in conjunction with survey information from the Conference Board of Canada. The estimated number of policy holders, along with the average value of benefits, is imputed into the T1 model using survey information from Statistics Canada to reflect estimated coverage by family type and income level. If these employer-paid amounts were taxable benefits, they would be eligible expenses under the Medical Expense Tax Credit; this interaction is taken into account in the estimation of the tax expenditure.
Projection method T1 micro-simulation model
Number of beneficiaries It is estimated that about 12.8 million individuals received employer-paid health or dental benefits in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2,420 2,520 2,585 2,580 2,480 2,585 2,715 2,840
Non-taxation of benefits in respect of home relocation loans
  Values
Description The benefit associated with a home relocation loan provided to an employee by an employer was required to be included in income for tax purposes, but an offsetting deduction from net income was provided. The amount of the deduction was the lesser of the amount of the taxable benefit and the deemed interest benefit on the first $25,000 of a five-year interest-free loan. This approach effectively exempted such benefits from taxation, while ensuring that they were taken into account in determining income-tested credits and benefits. This deduction was repealed as of the 2018 taxation year.
Tax Personal income tax
Beneficiaries Employees
Type of measure Exemption
Legal reference Income Tax Act, paragraph 110(1)(j)
Implementation and recent history
  • Introduced in Budget 1985. Effective for home relocation loans received after May 23, 1985.
  • Budget 2017 announced the repeal of this measure, effective for the 2018 and subsequent taxation years.
Objective – category To encourage employment To recognize expenses incurred to earn employment income
Objective This measure is intended to facilitate mobility by allowing employers to compensate relocated employees facing higher living costs at the new location (Budget 1985).
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. 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 1,100 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
Non-taxation of capital dividends
  Values
Description A private corporation may distribute the balance of its capital dividend account to its shareholders in the form of a capital dividend. Where the corporation elects to pay this dividend from its capital dividend account, the dividend is received tax-free by the corporation's shareholders who are resident in Canada. At any time, the capital dividend account balance generally includes the total of the excess of the non-taxable portion of capital gains over the non-deductible portion of capital losses, the non-taxable portion of gains resulting from the disposition of eligible capital property, the net proceeds of certain life insurance policies received by the corporation, and the aggregate of capital dividends received by the corporation, less the aggregate of capital dividends paid by the corporation.
Tax Personal and corporate income tax
Beneficiaries Individual and corporate investors
Type of measure Exemption
Legal reference Income Tax Act, subsections 83(2) and 89(1)
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
Objective – category To encourage or attract investment To encourage savings To support competitiveness
Objective This measure maintains the non-taxable treatment of certain amounts received by individuals through private corporations, similar to the treatment of those amounts received directly by the individuals.
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 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.
Non-taxation of capital gains on donations of cultural property
  Values
Description Certain objects certified by the Canadian Cultural Property Export Review Board as being of cultural importance to Canada are exempt from capital gains tax when disposed of by sale or donation within 24 month of certification to a cultural institution, such as a museum or art gallery, designated under the Cultural Property Export and Import Act. Recipient cultural institutions are required to hold the cultural property for at least 10 years. Such donations are also eligible for the Charitable Donation Tax Credit (for individuals) or deduction (for corporations).
Tax Personal and corporate income tax
Beneficiaries Individual and corporate donors
Type of measure Exemption
Legal reference Income Tax Act,subsections 118.1(1) and 110.1(1) and paragraph 39(1)(a)(i.1)
Implementation and recent history
  • Introduced in 1977.
  • Budget 1998 extended the holding period for certified cultural property from 5 to 10 years, effective February 23, 1998.
Objective – category To achieve a social objective
Objective This measure preserves Canada's artistic, historic and scientific heritage by encouraging the donation of cultural property determined to be of outstanding significance to Canada's national heritage to designated Canadian institutions, such as museums and art galleries (Budget 1998).
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 Arts and culture
CCOFOG 2014 code 70829 - Recreation, culture, and religion - Cultural 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. 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 Personal income tax: Data from the Canadian Cultural Property Export Review Board and T1 Income Tax and Benefit Return. Corporate income tax: No data is available.
Estimation method Personal income tax: The value of this measure is estimated by multiplying the exempt capital gains by the capital gains inclusion rate and an assumed marginal tax rate. Corporate income tax: No estimate is available.
Projection method Personal income tax: Future donations of Canadian cultural property are projected based on a historical average. Corporate income tax: No projection is available.
Number of beneficiaries The Canadian Cultural Property Export Review Board issued approximately 410 certificates to individuals in 2015-16. 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 5 5 10 10 10 5 5 5
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.

Donations of cultural property benefit from both the non-taxation of capital gains and the Charitable Donation Tax Credit in the case of an individual donor or the deductibility of charitable donations in the case of a corporate donor. The total tax assistance for donations of cultural property is as follows:

Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Charitable Donation Tax Credit 25 25 30 25 25 20 20 20
Deductibility of charitable donations 35 3 10 20 4 15 15 15
Non-taxation of capital gains – personal income tax 5 5 10 10 10 5 5 5
Non-taxation of capital gains – 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.
Non-taxation of capital gains on donations of ecologically sensitive land
  Values
Description A zero inclusion rate applies to capital gains arising from a donation of ecologically sensitive land (including a conservation easement, covenant or, in the province of Quebec, a personal servitude the rights to which the land is subject and which has a term of not less than 100 years, or a real servitude on such land) to a public conservation charity (other than a private foundation) or certain other qualified donees if the fair market value of the land is certified by the Minister of the Environment. These donations are also eligible for the Charitable Donation Tax Credit (for individuals) or deduction (for corporations).
Tax Personal and corporate income tax
Beneficiaries Individual and corporate donors
Type of measure Exemption
Legal reference Income Tax Act, subsections 110.1(1), 118.1(1) and 38(a.2), and section 207.31
Implementation and recent history
  • Budget 1995 eliminated the net income limit for donations of ecologically sensitive land eligible for the tax credit.
  • Budget 2000 reduced by half the normal inclusion rate applicable to capital gains arising in respect of gifts of ecologically sensitive land and related easements, covenants and servitudes.
  • Budget 2006 further reduced the inclusion rate to 0%.
  • Budget 2014 extended the carry-forward period for donations of ecologically sensitive land from 5 to 10 years.
  • Budget 2017 removed private foundations as eligible recipients of donations of ecologically sensitive land, and introduced a number of administrative measures designed to better protect such gifts and broaden slightly the types of gifts which qualify (i.e., certain personal servitudes in Quebec).
Objective – category To achieve a social objective
Objective This measure encourages Canadians to protect ecologically sensitive land, including areas containing habitats for species at risk, by donating such property to conservation charities and certain other qualified donees (Budget 2000; Budget 2006).
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 Environment
CCOFOG 2014 code 70549 - Environmental protection - Protection of biodiversity and landscape
Other relevant government programs Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various 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 from Environment and Climate Change Canada's Ecological Gifts Program Corporate income tax: T2 Corporation Income Tax Return
Estimation method Personal income tax: The value of this measure is estimated by multiplying the exempt capital gains by the capital gains inclusion rate and an assumed marginal tax rate. Corporate income tax: T2 micro-simulation model
Projection method Personal income tax: Future donations of ecologically sensitive land are projected based on historical growth. Corporate income tax: Projections are based on the average of the last three historical years. The tax expenditure is projected to grow in line with nominal gross domestic product.
Number of beneficiaries This measure provided tax relief to a small number of corporations (fewer than 20) in 2015. The number of individuals who obtained tax relief is unknown; however, fewer than 100 individuals made donations of ecologically sensitive land in that year.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 2 2 1 3 3 3 3
Corporate income tax 1 1 5 S S 2 1 1
Total 3 2 5 2 4 5 4 4

Donations of ecologically sensitive land benefit from both the non-taxation of capital gains and the Charitable Donation Tax Credit in the case of an individual donor or the deductibility of charitable donations in the case of a corporate donor. The total tax assistance for donations of ecologically sensitive land is as follows:

Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Charitable Donation Tax Credit 5 5 5 5 10 10 10 10
Deductibility of charitable donations 2 5 3 1 1 2 2 2
Non-taxation of capital gains – personal income tax 2 2 2 1 3 3 3 3
Non-taxation of capital gains – corporate income tax 1 1 5 S S 2 1 1
Total 10 15 15 5 15 15 15 15
Non-taxation of capital gains on donations of publicly listed securities
  Values
Description A zero inclusion rate applies to capital gains arising from a donation of publicly listed securities made to a qualified donee, which effectively exempts such gains from income tax. Donations of publicly listed securities are also eligible for the Charitable Donation Tax Credit (for individuals) or deduction (for corporations).
Tax Personal and corporate income tax
Beneficiaries Individual and corporate donors
Type of measure Exemption
Legal reference Income Tax Act, paragraphs 38(a.1) and (a.4), sections 38.3 and 38.4
Implementation and recent history
  • Budget 1997 introduced a temporary reduction of half the normal inclusion rate applicable to capital gains arising from a donation of publicly listed securities to a registered charity that is not a private foundation. This measure was made permanent in Budget 2001.
  • Budget 2006 reduced the inclusion rate to 0%.
  • Budget 2007 extended the zero inclusion rate to capital gains arising on donations of publicly listed securities to private foundations.
  • Budget 2008 extended the zero inclusion rate to donations of unlisted exchangeable securities if exchanged for publicly listed securities and donated within 30 days of the exchange.
Objective – category To achieve a social objective
Objective This measure was introduced to facilitate the transfer of certain publicly listed securities to charities to help them respond to the needs of Canadians (Budget 1997).
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 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 Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: T2 Corporation Income Tax Return
Estimation method Personal income tax: The value of this measure is estimated by multiplying the exempt capital gains on publicly listed shares by the capital gains inclusion rate and the top marginal tax rate. Corporate income tax: T2 micro-simulation model
Projection method Personal income tax: Projections for publicly listed securities are made based on historical donation levels and projected growth in capital gains. Corporate income tax: The tax expenditure is projected to grow in line with nominal gross domestic product.
Number of beneficiaries This measure provided tax relief to about 790 corporations in 2015. The number of individuals who obtained tax relief is unknown; however, about 5,200 individuals made donations of publicly listed shares in that year.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 40 45 70 60 65 70 70 75
Corporate income tax 55 70 100 60 75 85 90 95
Total 95 115 170 115 140 150 160 170

Donations of publicly listed securities benefit from both the non-taxation of capital gains and the Charitable Donation Tax Credit in the case of an individual donor or the deductibility of charitable donations in the case of a corporate donor. The total tax assistance for donations of publicly listed securities is as follows:

Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Charitable Donation Tax Credit 125 145 240 190 215 230 240 255
Deductibility of charitable donations n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of capital gains – personal income tax 40 45 70 60 65 70 70 75
Non-taxation of capital gains – corporate income tax 55 70 100 60 75 85 90 95
Total n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of capital gains on principal residences
  Values
Description This measure provides an exemption from tax in respect of all or a portion of a capital gain from the sale of a principal residence of an individual or personal trust. In general, certain property of an individual or personal trust may be designated as a principal residence for a taxation year where the property was ordinarily inhabited in the year by the taxpayer or a particular beneficiary of the trust or by the spouse or common-law partner, former spouse or common-law partner, or child of the taxpayer or the particular beneficiary of the trust. Properties that may be designated as a principal residence of an individual or personal trust are a housing unit, a leasehold interest in a housing unit, and in certain circumstances, shares of the capital stock of a cooperative housing corporation owned by the individual or personal trust. The exempt portion of the capital gain from the sale of a principal residence is generally determined in proportion to the fraction where one plus the number of years after 1971 that the property was owned by and designated as the principal residence of the individual or personal trust while resident in Canada is divided by the number of years after 1971 that the property was owned by the individual or personal trust.
Tax Personal income tax
Beneficiaries Individual homeowners
Type of measure Exemption
Legal reference Income Tax Act, paragraph 40(2)(b), definition of "principal residence", and section 54 Income Tax Regulations, section 2301
Implementation and recent history
  • Introduced as part of the 1972 Tax Reform.
  • Amended in Budget 1981 so that, for years after 1981, a family may only treat one property as its principal residence for a taxation year.
  • Amended on October 3, 2016 to require the reporting of dispositions (and introduce an indefinite reassessment period for unreported dispositions) and to limit the types of trusts that are eligible to designate a property as a principal residence for a taxation year beginning after 2016.
Objective – category To achieve a social objective To achieve an economic objective - other
Objective This measure recognizes that principal homes are generally purchased to provide basic shelter and not as an investment, and increases flexibility in the housing market by facilitating the movement of families from one principal residence to another in response to their changing circumstances (Summary of 1971 Tax Reform Legislation, 1971; Budget 1981).
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 Housing
CCOFOG 2014 code 70619 - Housing and community amenities - Housing development
Other relevant government programs Programs within the mandate of the Canada Mortgage and Housing Corporation are intended to promote the construction of new houses, the repair and modernization of existing houses and the improvement of housing and living conditions. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Data from the Multiple Listing Service and Statistics Canada
Estimation method The value of this tax expenditure is estimated by multiplying total net exempt capital gains by the marginal tax rate on capital gains. Total net exempt capital gains are estimated based on data and assumptions about the volume and average selling price of residential resales, the proportion of residential resales to which the measure applies, the purchase cost and length of tenure of residential resales, capital improvements made (e.g., additions and renovations), and expenses deductible in determining net capital gains (e.g., real estate commissions, legal fees).
Projection method Projections are based on forecasts of residential resales and average selling prices provided by the Canada Mortgage and Housing Corporation.
Number of beneficiaries No data is available.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 3,900 4,160 5,110 6,195 7,630 7,100 6,225 6,090
Non-taxation of certain importations
  Values
Description Goods imported into Canada are generally taxable. However, a number of goods do not attract GST upon importation, including:
  • goods, other than certain books and periodicals, valued at not more than $20 and sent from other countries by mail or courier to residents of Canada;
  • goods imported by foreign diplomats or by settlers to Canada;
  • Canadian goods re-entering Canada and on which GST has already been paid;
  • goods imported on a temporary basis, such as tourists' baggage and foreign-based conveyances (ships, airplanes, trains, trucks) used in the international transportation of people or goods.
Tax Goods and Services Tax
Beneficiaries Households, businesses, foreign diplomats, settlers
Type of measure Other
Legal reference Schedule VII to the Excise Tax Act Non-Taxable Imported Goods (GST/HST) Regulations
Implementation and recent history
  • This measure has been in effect since the inception of the GST in 1991.
  • The list of non-taxable importations has been periodically amended. Most recently:
  • Budget 2012 announced a measure to provide GST relief on foreign-based rental vehicles temporarily imported by Canadian residents, applicable after June 1, 2012; and
  • regulations codifying the treatment of Canadian goods re-entering Canada were released on April 8, 2014, generally applicable retroactively to the inception of the GST (Department of Finance Canada news release 2014-051).
Objective – category To reduce administration or compliance costs To prevent double taxation To achieve an economic objective - other
Objective This measure is intended to simplify administration, prevent double taxation, promote tourism and ensure compliance with international convention precedents.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system The non-taxation of goods that will be consumed in Canada is a deviation from a broadly defined value-added tax base.
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.
Non-taxation of certain non-monetary employment benefits
  Values
Description Fringe benefits provided to employees by their employers are not taxed when it is not administratively feasible to determine the value of the benefit. Examples include subsidized recreational facilities offered to all employees and scramble parking.
Tax Personal income tax
Beneficiaries Employees
Type of measure Exemption
Legal reference Administrative concession
Implementation and recent history
  • Administrative positions have evolved over time.
Objective – category To reduce administration or compliance costs
Objective This measure recognizes the significant administrative and compliance costs that would be incurred in taxing certain non-monetary employment benefits.
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 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 No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Non-taxation of certain veterans' benefits
  Values
Description A number of benefits paid to veterans and Canadian Armed Forces members are tax free. These include the War Veterans Allowance, Disability Pensions, the Canadian Forces Income Support Benefit, the Caregiver Recognition Benefit, and certain other amounts payable under the Pension Act (as well as pension payments from allied countries that grant similar relief), the Civilian War-related Benefits Act, the Gallantry Awards Order and section 9 of the Aeronautics Act.
Tax Personal income tax
Beneficiaries Veterans, members of the Canadian Armed Forces and their families
Type of measure Exemption
Legal reference Income Tax Act, paragraphs 81(1)(d), (d.1) and (e)
Implementation and recent history
  • Introduced in Budget 1942. Effective for pensions being administered on July 31, 1942.
  • Extended to the Canadian Forces Income Support Benefit in 2005, effective April 1, 2006.
  • Extended to the Family Caregiver Relief Benefit in 2015 (renamed the Caregiver Recognition Benefit in 2017), effective for the 2015 and subsequent taxation years.
Objective – category To provide income support or tax relief
Objective This measure recognizes that these benefits provide a basic level of support to veterans of Canada's military engagements and their families (Budget 1942; New Veterans Charter, 2006).
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 Income support
CCOFOG 2014 code 70219 - Defense - Military defense
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data Data from Veterans Affairs Canada
Estimation method The value of this tax expenditure is estimated by multiplying actual expenditures on exempt veterans' benefits by estimates of the marginal tax rates applicable to recipients.
Projection method Projections for this tax expenditure are based on forecasted expenditures on exempt veterans' benefits.
Number of beneficiaries More than 115,000 individuals did not include these amounts in income in 2016-17.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 265 255 240 230 215 210 200 195
Non-taxation of Guaranteed Income Supplement and Allowance benefits
  Values
Description The Guaranteed Income Supplement is an income-tested benefit payable to low-income seniors as part of the Old Age Security program. There is also an income-tested Allowance that is provided to an eligible spouse, common-law partner, widow or widower aged 60 to 64. The Guaranteed Income Supplement and Allowance benefits are effectively non-taxable. Although these benefits must be included in income, an offsetting deduction from net income is provided. This approach ensures that such payments are taken into account in determining other income-tested credits and benefits.
Tax Personal income tax
Beneficiaries Low-income seniors
Type of measure Exemption
Legal reference Income Tax Act, paragraph 110(1)(f)
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1971 and subsequent taxation years.
Objective – category To provide income support or tax relief
Objective This measure recognizes that these income-tested payments provide a basic level of support to elderly Canadians with little income other than the Old Age Security pension (Budget 1971).
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 Income support Retirement
CCOFOG 2014 code 71029 - Social protection - Old age
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support income security. 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 Of the approximately 2 million beneficiaries of the Guaranteed Income Supplement and Allowance benefits in 2015, it is estimated that about 600,000 individuals would have been in a taxable position in the absence of this measure.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 140 140 145 155 185 200 220 240
Non-taxation of income earned by military and police deployed to international operational missions
  Values
Description Income earned by members of the Canadian Armed Forces and police officers deployed on international operational missions must be included in income for tax purposes, but an offsetting deduction from net income is provided. This approach effectively exempts such income from taxation, while ensuring that it is taken into account in determining income-tested credits and benefits.
Tax Personal income tax
Beneficiaries Members of the Canadian Armed Forces and police officers deployed on international operational missions
Type of measure Exemption
Legal reference Income Tax Act, subparagraph 110(1)(f)(v) Income Tax Regulations, section 7500
Implementation and recent history
  • The deduction was introduced in Budget 2004 for high-risk operational missions. Effective for the 2004 and subsequent taxation years.
  • On April 14, 2004, the Government announced that the deduction would be extended to moderate-risk missions (National Defence news release NR-04.028, April 14, 2004).
  • On May 18, 2017, the Government announced that the deduction would be extended to all international operational missions, effective for the 2017 and subsequent taxation years (National Defence news release, May 18, 2017). The maximum deduction was increased to the pay level of a Lieutenant-Colonel (General Services Officer).
Objective – category To achieve a social objective
Objective This measure is intended to provide special recognition for Canadian Armed Forces personnel and police serving their country on international operational missions (Budget 2004; National Defence news release NR-04.028, April 14, 2004; National Defence news release, May 18, 2017).
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 Employment
CCOFOG 2014 code 70219 - Defense - Military defense 70319 - Public order and safety - Police services
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 Data from National Defence,the Royal Canadian Mounted Police, and the Canada Revenue Agency.
Estimation method The value of this measure is estimated by multiplying total exempt earnings by an estimate of the marginal tax rate of the individuals that benefit from this measure. The estimates and projection are calculated based on administrative data from the Canada Revenue Agency and National Defence.
Projection method Outer-year projections are not provided as the value of this measure cannot be reliably forecast for these years.
Number of beneficiaries Fewer than 3,000 individuals received tax-deductible income in respect of international high- or moderate-risk operational missions in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 2017 (P) 2018 (P) 2019 (P)
Personal income tax 15 15 5 10 10 30 n.a. n.a.
Non-taxation of income from the Office of the Governor General of Canada
  Values
Description An income tax exemption was available for the Governor General's salary. Budget 2012 repealed the exemption, effective 2013.
Tax Personal income tax
Beneficiaries Governor General of Canada
Type of measure Exemption
Legal reference Income Tax Act, paragraph 81(1)(n) (repealed)
Implementation and recent history
  • Introduced in 1917. Effective for the 1917 and subsequent taxation years.
  • Budget 2012 repealed the exemption, effective 2013.
Objective – category Other
Objective This measure ensured that the income received from the Office of the Governor General, who is a direct representative of the Crown, was not subject to tax.
Category Structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempted from tax income or gains that are included in a comprehensive income tax base.
Subject Other
CCOFOG 2014 code n/a
Other relevant government programs n/a
Source of data Public Accounts of Canada
Estimation method The value of this measure is estimated based on the Governor General's salary as reported in the Public Accounts.
Projection method n/a
Number of beneficiaries The Governor General of Canada was the sole beneficiary of this measure.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax S
Non-taxation of investment income on certain amounts received as damages in respect of personal injury or death
  Values
Description Amounts received in respect of damages for personal injury or death, as well as awards paid pursuant to the authority of criminal injury compensation laws, are not taxable. In addition, investment income earned on personal injury awards is excluded from income until the end of the year in which the person reaches the age of 21. While the benchmark definition of income excludes amounts received as damages for personal injury or death (since they compensate taxpayers for a personal loss), it includes investment income earned on these amounts as part of this benchmark tax base. Thus, the non-taxation of investment income earned on these awards for those under age 22 is considered to be a tax expenditure.
Tax Personal income tax
Beneficiaries Individuals
Type of measure Exemption
Legal reference Income Tax Act, paragraphs 81(1)(g.1) and (g.2)
Implementation and recent history
  • Introduced in Budget 1972. Effective for the 1972 and subsequent taxation years.
Objective – category To provide income support or tax relief
Objective This measure provides assistance to young persons receiving personal injury awards.
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 Income support
CCOFOG 2014 code 71099 - Social protection - Social protection not elsewhere classified
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support 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.
Non-taxation of life insurance companies' foreign income
  Values
Description The income earned by a life insurer resident in Canada from an insurance business carried on in a country other than Canada is not subject to federal income tax in Canada.
Tax Corporate income tax
Beneficiaries Life insurance corporations
Type of measure Exemption
Legal reference Income Tax Act, subsection 138(2) Income Tax Regulations, sections 2400 to 2412
Implementation and recent history
  • Introduced in 1954.
  • Amended in 2001, effective for taxation years ending after 1999, to clarify that only the gross investment revenue derived by the insurer from "designated insurance property" is included in the exempt income.
Objective – category To provide relief for special circumstances To prevent double taxation
Objective In recognition that other jurisdictions do not necessarily tax life insurance companies on the same basis as Canadian tax rules, this measure helps ensure that Canadian multinational life insurance companies are not adversely affected in foreign insurance markets by exempting their foreign income from tax in Canada (Budget 1977).
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 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.
Non-taxation of lottery and gambling winnings
  Values
Description Lottery and gambling winnings are generally not subject to income tax unless, in the case of gambling winnings, the amounts are earned by the taxpayer through carrying on a business.
Tax Personal income tax
Beneficiaries Individuals with lottery or gambling winnings
Type of measure Exemption
Legal reference Income Tax Act, section 3, paragraph 40(2)(f) and subsection 52(4)
Implementation and recent history
  • Canadian courts have generally held that lottery and gambling winnings are not considered to be a "source" of income for tax purposes, unless in the case of gambling winnings they were earned through the carrying on of a business. They have therefore generally not been taxed under the Canadian income tax system.
  • Paragraph 40(2)(f) and subsection 52(4) were introduced in 1972 as part of the 1971 Tax Reform and confirm the non-taxation of lottery and gambling winnings.
Objective – category To implement intergovernmental tax arrangements
Objective This measure reflects the agreement by the federal government to not tax this revenue in favour of the provinces.
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 Intergovernmental tax arrangements
CCOFOG 2014 code n/a
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.
Non-taxation of non-profit organizations
  Values
Description A non-profit organization that is a club, society or association that is not a charity and that is organized and operated exclusively for social welfare, civic improvement, pleasure or for any other purpose except profit, qualifies for an exemption from income tax if it meets certain conditions. To be eligible, it is generally required that no part of the income of the organization be payable to, or otherwise available for the personal benefit of, any proprietor, member or shareholder of the organization. The exemption applies to both incorporated and unincorporated organizations. A tax expenditure results to the extent that the organization has income that would otherwise be taxable, such as investment income or profits from commercial activities.
Tax Personal and corporate income tax
Beneficiaries Non-profit organizations
Type of measure Exemption
Legal reference Income Tax Act, paragraph 149(1)(l)
Implementation and recent history
  • Non-profit organizations have been exempt from federal income tax since the inception of the federal income tax in 1917.
Objective – category To achieve a social objective
Objective This measure provides tax relief for non-profit organizations in recognition of the important role they play in Canadian society.
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax certain taxpayers.
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 T1044 Non-Profit Organization (NPO) Information Return T2 Corporation Income Tax Return
Estimation method Net income of non-profit organizations is estimated based on a presumed market rate of return on the organization's net assets. It is assumed that that income, in the absence of the tax exemption, would be subject to the same average effective tax rates as those of typical taxable corporations. This represents a lower bound estimate.
Projection method The cost of this measure is projected based on the estimated growth of nominal gross domestic product and the average yield on 10-year benchmark bonds.
Number of beneficiaries About 24,000 non-profit organizations with positive net assets filed a T1044 return in 2014.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Total – personal and corporate income tax 75 100 105 65 55 85 120 145
Non-taxation of personal property of status Indians and Indian bands situated on reserve
  Values
Description Section 87 of the Indian Act exempts the personal property of status Indians and Indian bands from direct taxation if that property is situated on a reserve. Courts have held that the term "personal property" includes income. Determining whether income is situated on a reserve requires an examination of the factors that connect it to a reserve. Such connecting factors include the location (on or off a reserve) of the residence of the status Indian, the location at which the employment duties were performed and the location of other income-earning activities. In respect of the GST, the exemption applies if a status Indian makes a purchase of a good or service on a reserve, or if goods are purchased off-reserve by a status Indian and are delivered to a reserve by the vendor or vendor's agent.
Tax Personal income tax Goods and Services Tax
Beneficiaries Status Indians and Indian bands on reserve
Type of measure Exemption
Legal reference Indian Act, section 87 Income Tax Act, paragraph 81(1)(a)
Implementation and recent history
  • The first tax exemption available to status Indians was enacted in 1850, later being replaced by the Indian Act in 1876.
  • The current wording of section 87 of the Indian Act was added in 1951 and has not changed materially since then.
  • Court decisions continue to have an important role in defining the scope of the exemption under section 87.
Objective – category Other
Objective This measure reflects provisions under section 87 of the Indian Act.
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax certain taxpayers.
Subject Other
CCOFOG 2014 code n/a
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.
Non-taxation of provincial assistance for venture investments in small businesses
  Values
Description As a general rule, a taxpayer receiving government assistance (such as a provincial tax credit) for the purchase of an asset would need to either: (i) reduce the adjusted cost base of the asset such that when the asset is disposed of at a profit, taxes are payable on the portion of the gain that originates from the government assistance; or (ii) include the amount of the provincial assistance in income. This measure, however, ensures that a taxpayer who receives assistance from a provincial government to purchase the shares of a prescribed venture capital corporation is not subject to either of these income inclusion provisions.
Tax Personal and corporate income tax
Beneficiaries Individual and corporate investors
Type of measure Exemption
Legal reference Income Tax Act, paragraph 12(1)(x) Income Tax Regulations, sections 6700, 6702 and 7300
Implementation and recent history
  • Introduced in 1986. Effective for shares acquired on or after May 23, 1985.
Objective – category To encourage or attract investment
Objective This measure supports investments in prescribed venture capital corporations that provide small businesses with capital and professional management support.
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 Business - small businesses
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 No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Non-taxation of RCMP pensions and other compensation in respect of injury, disability or death
  Values
Description Pension payments or compensation received in respect of an injury, disability or death associated with the service of a member in the Royal Canadian Mounted Police (RCMP) are exempt from tax.
Tax Personal income tax
Beneficiaries RCMP members and their families
Type of measure Exemption
Legal reference Income Tax Act, paragraph 81(1)(i)
Implementation and recent history
  • Introduced in 1958. Effective for the 1958 and subsequent taxation years.
Objective – category To provide income support or tax relief
Objective This measure recognizes that these benefits represent, to a large extent, compensation to members of Canada's national police force and their families for a loss suffered by members in the course of their duties.
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 Income support Employment
CCOFOG 2014 code 71011 - Social protection - Sickness and disability - Sickness 71012 - Social protection - Sickness and disability - Disability 71039 - Social protection - Survivors
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support income security. 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 Public Accounts of Canada
Estimation method The value of this measure is estimated based on amounts paid to compensate members of the RCMP for injuries received in the performance of duty, as reported in the Public Accounts.
Projection method The projection is based on the historical trend in the value of payments.
Number of beneficiaries More than 13,000 individuals did not include these amounts in income in 2016-17.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 20 20 25 25 30 30 35 35
Non-taxation of registered charities
  Values
Description Registered charities, both incorporated and unincorporated, are exempt from income tax. Registered charities include charitable organizations, public foundations and private foundations. A tax expenditure results to the extent that the charity has income that would otherwise be taxable, such as investment income or profits from certain commercial activities.
Tax Personal and corporate income tax
Beneficiaries Registered charities
Type of measure Exemption
Legal reference Income Tax Act, paragraph 149(1)(f)
Implementation and recent history
  • Charities have been exempt from federal income tax since the inception of the federal income tax in 1917.
Objective – category To achieve a social objective
Objective This measure provides tax relief for registered charities in recognition of the important role they play in Canadian society (The Tax Treatment of Charities, Discussion Paper, June 23, 1975).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure exempts from tax certain taxpayers.
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 No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Non-taxation of social assistance benefits
  Values
Description Social assistance payments generally must be included in income for tax purposes, but an offsetting deduction from net income is provided. This approach effectively exempts such benefits from taxation, while ensuring that they are taken into account in determining income-tested credits and benefits. Some other forms of benefits (e.g., payments to foster parents, benefits in kind) are not included in income, and are therefore exempt from taxation. If an individual lived with a spouse or common-law partner when the payments were received, the person with the higher net income must report all of the payments.
Tax Personal income tax
Beneficiaries Low-income individuals
Type of measure Exemption
Legal reference Income Tax Act, paragraph 110(1)(f)
Implementation and recent history
  • To be consistent with the treatment of payments made under the Guaranteed Income Supplement, Budget 1981 made social assistance payments includable in income and deductible in computing taxable income, effective for the 1982 and subsequent taxation years.
Objective – category To provide income support or tax relief
Objective This measure recognizes the nature of social assistance as a payment of last resort (Budget 1981).
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 Income support
CCOFOG 2014 code 71099 - Social protection - Social protection not elsewhere classified
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support 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. The estimates do not include the non-taxation of social assistance benefits that are not included in income.
Projection method T1 micro-simulation model
Number of beneficiaries About 1.6 million individuals reported having received social assistance payments in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 170 190 205 250 240 250 265 280
Non-taxation of strike pay
  Values
Description Most payments of the type commonly referred to as strike pay that are received from a member's union are not taxable.
Tax Personal income tax
Beneficiaries Union members
Type of measure Exemption
Legal reference Strike pay is not a source of income under the Income Tax Act.
Implementation and recent history
  • The Supreme Court confirmed a longstanding administrative position that strike pay is non-taxable in a 1990 court case (Wally Fries v. The Queen, [1990] 2 CTC 439, 90 DTC 6662).
Objective – category To implement a judicial decision
Objective Strike pay is non-taxable by virtue of the Supreme Court of Canada's determination that it is not income from a source.
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 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 No data is available.
Estimation method No estimate is available.
Projection method No projection is available.
Number of beneficiaries No data is available.
Non-taxation of up to $10,000 of death benefits
  Values
Description Up to $10,000 of the total death benefit paid by a deceased person's employer or former employer in respect of the deceased person's employment service is exempt from tax in the hands of recipient individuals. The excess must be included in the recipients' income.
Tax Personal income tax
Beneficiaries Individuals receiving death benefits
Type of measure Exemption
Legal reference Income Tax Act, subparagraph 56(1)(a)(iii) and subsection 248(1), definition of "death benefit"
Implementation and recent history
  • The exemption of up to $10,000 of a death benefit was introduced in Budget 1959, applicable to amounts received on or after the death of an employee that occurred after April 9, 1959.
Objective – category To achieve a social objective To provide income support or tax relief
Objective This measure alleviates the hardship faced by dependants upon the death of a supporting individual (Budget 1959).
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 Families and households Income support
CCOFOG 2014 code 71039 - Social protection - Survivors
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 Employment and Social Development Canada and Veterans Affairs Canada also support income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3.
Source of data T4A Statement of Pension, Retirement, Annuity, and Other Income
Estimation method An estimate of forgone tax revenue is calculated by multiplying the exempt portion of death benefits paid in a year by the average marginal tax rate of individuals receiving such amounts.
Projection method The projection assumes no growth in exempt death benefit amounts.
Number of beneficiaries About 7,000 death benefits were paid in 2015. The number of individuals who benefited from the non-taxation of a portion of the death benefit in that year is unknown.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 5 5 5 5 5 5 5 5
Non-taxation of veterans' Disability Awards and Critical Injury Benefits
  Values
Description The Disability Award provides injured Canadian Armed Forces members or veterans with an award for an injury or illness resulting from military service. The Critical Injury Benefit is a lump-sum award that addresses the immediate impacts of the most severe and traumatic service-related injuries or diseases sustained by Canadian Armed Forces members. These awards are exempt from income tax, as they are analogous to amounts received in respect of damages for personal injury. The benchmark definition of income excludes amounts received as damages since they compensate taxpayers for a personal loss.
Tax Personal income tax
Beneficiaries Veterans, members of the Canadian Armed Forces and their families
Type of measure Exemption
Legal reference Income Tax Act, paragraph 118(1)(d.1)
Implementation and recent history
  • The Disability Award was made tax-free when it was introduced in 2005 as part of the New Veterans Charter.
  • The Critical Injury Benefit was made tax-free when it was introduced in 2015 (Veterans Affairs Canada news release, March 30, 2015).
Objective – category Other
Objective This measure recognizes that these benefits provide a basic level of support to veterans of Canada's military engagements and their families (New Veterans Charter, 2005).
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 71012 - Social protection - Sickness and disability - Disability 70219 - Defense - Military defense
Other relevant government programs n/a
Source of data Data from Veterans Affairs Canada
Estimation method The value of this tax expenditure is estimated by multiplying actual expenditures on veterans' Disability Awards and Critical Injury Benefits by estimates of the marginal tax rates applicable to recipients.
Projection method Projections for this tax expenditure are based on forecasted expenditures on veterans' Disability Awards and Critical Injury Benefits.
Number of beneficiaries There were about 64,000 active Disability Award beneficiaries in 2016-17, although these were not necessarily in receipt of an Award payment in the particular year. Only a small number of individuals received Critical Injury Benefits.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 105 115 115 155 170 320 265 240
Non-taxation of workers' compensation benefits
  Values
Description Compensation received under the employees' or workers' compensation law of Canada or a province in respect of an injury, disability or death must generally be included in income, but an offsetting deduction for the purposes of the calculation of taxable income is provided. This approach effectively exempts such benefits from taxation, while ensuring that they are taken into account in determining income-tested credits and benefits.
Tax Personal income tax
Beneficiaries Employees
Type of measure Exemption
Legal reference Income Tax Act, subparagraph 110(1)(f)(ii)
Implementation and recent history
  • The first Workers' Compensation Boards were established in 1915, and workers' compensation benefits have been non-taxable since the inception of the income tax in 1917.
  • Prior to 1982, workers' compensation payments were excluded from income. From 1982 onward, workers' compensation benefits have been included in total income and deductible in computing taxable income.
Objective – category To provide income support or tax relief
Objective This measure provides assistance to workers suffering on-the-job injuries.
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 Income support Employment
CCOFOG 2014 code 71012 - Social protection - Sickness and disability - Disability 71099 - Social protection - Social protection not elsewhere classified
Other relevant government programs Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support income security. 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 575,000 individuals reported having received workers' compensation benefits in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 630 620 645 630 645 650 655 665
Northern Residents Deductions
  Values
Description Individuals residing in prescribed areas in Canada for a specified period may claim the Northern Residents Deductions. Two different deductions can be claimed: a residency deduction of up to $22 a day, and a deduction for two employer-provided vacation trips per year and unlimited employer-provided medical travel. Residents of the Northern Zone are eligible for the full deductions, while residents of the Intermediate Zone are eligible for half of the deductions.
Tax Personal income tax
Beneficiaries Individuals residing in prescribed areas in the North
Type of measure Deduction
Legal reference Income Tax Act, section 110.7 Income Tax Regulations, sections 7303.1 and 7304
Implementation and recent history
  • Introduced in Budget 1986. Effective for the 1987 and subsequent taxation years.
  • The current design of the Northern Residents Deductions was introduced in 1990 (Department of Finance Canada news release, December 7, 1990).
  • Budget 2008 increased the maximum daily residency deduction by 10%, from $15.00 to $16.50.
  • Budget 2016 increased the maximum daily residency deduction by 33%, from $16.50 to $22.00.
Objective – category To encourage employment
Objective This measure assists in drawing skilled labour to northern and isolated communities (Budget 1986; Budget 2008).
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.
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 260,000 individuals claimed these deductions in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 180 175 180 180 220 225 240 250
Overseas Employment Tax Credit
  Values
Description An employee who was a resident of Canada and was employed outside Canada for more than six consecutive months by a person resident in Canada (or a foreign affiliate of such a person) in connection with the exploration for, or exploitation of, certain natural resources, with construction, installation, engineering or agricultural activities or with activities performed under a contract with the United Nations was able to claim a non-refundable tax credit equal to the federal income tax otherwise payable on 20% (for 2015) of his or her foreign employment income (80% before 2013), up to a maximum foreign employment income of $100,000. Budget 2012 announced the phase-out of this measure by 2016 (see details below).
Tax Personal income tax
Beneficiaries Employees working abroad
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 122.3 Income Tax Regulations, sections 3400 and 6000
Implementation and recent history
  • Introduced in Budget 1979 as a 50% deduction of foreign employment income, up to a maximum deduction of $50,000. Effective for the 1980 and subsequent taxation years.
  • Budget 1983 replaced the deduction with a non-refundable credit equal to the federal income tax otherwise payable on 80% of foreign employment income, effective as of 1984.
  • Budget 2012 announced the phase-out of this credit over the 2013-2015 period. The share of qualifying foreign employment income on which the credit is calculated was reduced from 80% to 60% for 2013, to 40% for 2014 and to 20% for 2015. The credit was fully eliminated in 2016.
Objective – category To support competitiveness
Objective This measure promoted the competitiveness of Canadian firms in certain sectors in bidding for overseas contracts by offering tax treatment comparable to that provided by other countries (Budget 1979; Budget 1983; Budget 2012).
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 Employment International
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 3,900 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 70 55 40 25
Partial deduction of and partial input tax credits for meals and entertainment
  Values
Description The deductibility of meals and entertainment expenses in computing business income for income tax purposes is limited to 50% of the expenses incurred. This limit is increased to 80% in the case of meal expenses incurred by long-haul truck drivers. Similarly, 50% of the GST paid by businesses on meals and entertainment, increased to 80% in the case of meals consumed by long-haul truck drivers, can be claimed as input tax credits by GST registrants.
Tax Personal and corporate income tax Goods and Services Tax
Beneficiaries Businesses
Type of measure Deduction; input tax credit
Legal reference Income Tax Act, section 67.1 Excise Tax Act, section 236
Implementation and recent history
  • The 1987 Tax Reform limited the deductibility of meals and entertainment expenses to 80% of the expenses incurred.
  • Budget 1994 reduced the deductibility limit from 80% to 50%.
  • Budget 2007 increased the deductibility limit to 80% for expenses incurred by long-haul truck drivers.
  • The rule limiting input tax credits for these expenses has been in place since the inception of the GST. The allowable amount is periodically amended, concurrently with the income tax rules.
Objective – category n/a
Objective n/a
Category Structural tax measure
Reason why this measure is not part of benchmark tax system Meals and entertainment expenses that are incurred by businesses for the purpose of earning business income may be viewed as also having an element of personal consumption. A tax expenditure would arise to the extent that a deduction is granted for the personal consumption portion of meals and entertainment expenses, or that an input tax credit is granted for the GST paid in respect of that portion. However, the personal consumption portion of meals and entertainment expenses cannot be determined, therefore it is not known the extent to which the partial deduction and input tax credits for meals and entertainment expenses depart from the benchmark tax system.
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 T1 Income Tax and Benefit Return T2 Corporation Income Tax Return
Estimation method The estimates are based on actual expenses incurred by individuals and businesses. The estimates are an upper bound, as they assume that all meal and entertainment expenses are incurred for personal consumption.
Projection method The personal income tax component of this measure is projected using the T1 micro-simulation model; the corporate income tax component is projected to grow in line with corporate profits. The GST component is projected based on the income tax projections.
Number of beneficiaries This measure provided tax relief to about 809,000 individuals and 775,000 corporations in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 195 200 200 215 210 215 215 220
Corporate income tax 280 270 290 295 310 335 350 360
Goods and Services Tax 160 160 165 170 170 180 185 190
Total 635 630 660 675 695 730 750 775
Partial inclusion of capital gains
  Values
Description Only half of net realized capital gains are included in income.
Tax Personal and corporate income tax
Beneficiaries Individuals and corporations
Type of measure Exemption
Legal reference Income Tax Act, section 38
Implementation and recent history
  • Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
  • The 1987 Tax Reform increased the capital gains inclusion for the 1988 and subsequent taxation years. In general terms, the inclusion rate increased to two-thirds from one-half for 1988 and 1989, and to three-quarters from two-thirds for the 1990 and subsequent taxation years.
  • The capital gains inclusion rate was reduced to two-thirds from three-quarters effective February 28, 2000 (Budget 2000), and reduced again to one-half from two-thirds, effective October 18, 2000 (2000 Economic Statement and Budget Update).
Objective – category To encourage or attract investment To encourage savings To support competitiveness
Objective This measure provides incentives to Canadians to save and invest, and ensures that Canada's treatment of capital gains is broadly comparable to that of other countries (Proposals for Tax Reform, 1969; The White Paper: Tax Reform 1987; Budget 2000; 2000 Economic Statement and Budget Update).
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 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 Corporate income tax: T2 micro-simulation model
Projection method Personal income tax: T1 micro-simulation model Corporate income tax: Projections are based on the Department of Finance Canada's forecast for the growth of taxable capital gains.
Number of beneficiaries About 2.7 million individuals and 205,000 corporations reported capital gains in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 3,330 4,135 5,610 5,735 5,955 6,920 7,070 7,080
Corporate income tax 3,990 4,510 5,365 6,125 6,505 7,300 7,840 8,255
Total 7,320 8,650 10,970 11,860 12,455 14,220 14,910 15,335
Partial inclusion of U.S. Social Security benefits
  Values
Description Individuals who are resident in Canada and receiving U.S. Social Security benefits since before 1996 (and their surviving spouses and common-law partners who are eligible to receive survivor benefits) can deduct 50% of those benefits in computing income. Other recipients of U.S. Social Security benefits can deduct 15% of the benefits received.
Tax Personal income tax
Beneficiaries Seniors
Type of measure Exemption
Legal reference Income Tax Act, section 110(1)(h) Canada-United States Tax Convention, article XVIII, paragraph 5(a)
Implementation and recent history
  • From 1984 to 1996, under the Canada-United States Tax Convention, Canada had the sole right to tax U.S. Social Security benefits of Canadian residents. However, the Convention also required that half of these benefits be tax-exempt in Canada. This exemption was introduced to take into account how the benefits would have been taxed in the U.S. if paid to U.S. residents. Before 1996, the U.S. exempted up to 50% of U.S. Social Security benefits.
  • The 1995 Protocol to the Canada-United States Tax Convention granted the United States the exclusive right to tax the benefits of Canadian residents, effective for 1996 and 1997.
  • Under the 1997 Protocol, Canada regained exclusive taxing jurisdiction over U.S. Social Security benefits of Canadian residents, generally effective retroactively to January 1, 1996. Concurrently, 15% of those benefits became tax-exempt because the U.S. was exempting up to 15% of U.S. Social Security benefits since 1996.
  • Budget 2010 reinstated the 50% exemption for all Canadians and their spouses and common-law partners who have been in receipt of benefits since before January 1, 1996, effective for benefits received on or after January 1, 2010.
Objective – category To provide income support or tax relief
Objective This measure increases from 15% to 50% the percentage of U.S. Social Security payments that Canadian residents who have received such benefits since before January 1, 1996 can exclude from their taxable income in order to exempt the same proportion of U.S. Social Security benefits that the U.S. exempted before 1996.
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 Retirement
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 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.
Patronage dividend deduction
  Values
Description Cooperatives, as well as ordinary corporations, can deduct payments made to customers and suppliers in proportion to their volume of business. These payments, called "patronage dividends," are unlike regular dividends, which are paid to investors in proportion to equity shareholdings and are not deductible for income tax purposes. Patronage dividends may not be deducted if paid to non-arm's length persons, except when the payer is a co-operative or a credit union. Patronage dividends, other than those in respect of consumer goods or services, are included in the recipient's income in the year received.
Tax Corporate income tax
Beneficiaries Corporations
Type of measure Deduction
Legal reference Income Tax Act, section 135
Implementation and recent history
  • Introduced in 1928.
  • Amended in Budget 2004 to prevent persons, other than co-operatives and credit unions, from deducting patronage dividends to non-arm's length persons.
Objective – category To recognize expenses incurred to earn business or property income To prevent double taxation
Objective This measure reflects the view that patronage dividends are a form of customer rebate or a type of supplier incentive, and as such should be deductible as other business expenses.
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
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 T2 Corporation Income Tax Return
Estimation method T2 micro-simulation model. The value of this measure is an upper bound estimate as it does not take into account any income inclusion made by the recipient of the patronage dividend.
Projection method The value of this measure is projected to grow in line with corporate profits.
Number of beneficiaries About 820 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 240 220 220 170 165 180 195 205
Patronage dividends paid as shares by agricultural cooperatives
  Values
Description While patronage dividends not in respect of consumer goods and services are generally taxable when received, members of an agricultural cooperative are permitted to defer paying tax on a patronage dividend paid by the cooperative in the form of an eligible share until the disposition (or deemed disposition) of the share. In addition, when an eligible agricultural cooperative pays a patronage dividend to a member in the form of an eligible share, the withholding obligation in respect of the patronage dividend is deferred until the share is redeemed. In general terms, in order to issue eligible shares, agricultural cooperatives must be established in Canada and have as their principal business activity farming or the provision of goods or services required for farming in Canada. In order to be an eligible share, the share must be issued after 2005 and before 2021, and generally must not be redeemable or retractable within five years of its issue.
Tax Personal and corporate income tax
Beneficiaries Members of agricultural cooperatives
Type of measure Timing preference
Legal reference Income Tax Act, section 135.1
Implementation and recent history
  • Introduced in Budget 2005. Effective in respect of eligible shares issued after 2005 and before 2016.
  • Budget 2015 extended this measure to apply in respect of eligible shares issued before 2021.
Objective – category To encourage or attract investment
Objective The objective of this measure is to aid the capitalization of agricultural cooperatives (Budget 2005).
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 T2 Corporation Income Tax Return
Estimation method This tax expenditure is calculated by multiplying the reported amount of patronage dividends paid as shares by agricultural cooperatives by the average marginal personal income tax rate for farmers.
Projection method The cost of this tax expenditure is fairly stable; as such no growth is assumed over the projection period.
Number of beneficiaries This measure provided tax relief to about 30 corporations in 2015. No data is available for unincorporated agricultural cooperatives.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 2 1 1 S 2 1 1 1
Corporate income tax 4 3 3 S 5 3 3 3
Total 5 4 4 S 5 4 4 4
Pension Income Credit
  Values
Description The Pension Income Credit is a non-refundable credit that provides tax relief to taxpayers receiving eligible pension income. The value of the credit is calculated by applying the lowest personal income tax rate to the first $2,000 of eligible pension income. Any unused portion of the credit may be transferred to a spouse or common-law partner. Eligible pension income is generally limited to certain types of income from registered plans, such as a lifetime pension from a Registered Pension Plan and, for individuals who are age 65 or over, income from a Pooled Registered Pension Plan, a Registered Retirement Savings Plan annuity, a Registered Retirement Income Fund or a Life Income Fund. Variable benefits payments from a defined contribution Registered Pension Plan are also eligible for individuals who are age 65 or over. 
Tax Personal income tax
Beneficiaries Seniors and pensioners receiving eligible pension income
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsections 118(3) and (7)
Implementation and recent history
  • Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous pension deduction.
  • The maximum amount of income eligible for the Pension Income Credit was doubled from $1,000 to $2,000 in Budget 2006.
Objective – category To provide income support or tax relief To achieve a social objective
Objective This measure was introduced to provide additional protection against inflation for the retirement income of elderly Canadians (Budget November 1974).
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 Retirement
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 T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 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 1,060 1,100 1,135 1,170 1,185 1,225 1,270 1,310
Pension income splitting
  Values
Description Canadian residents receiving income that qualifies for the Pension Income Credit can allocate up to one-half of that income to their resident spouse or common-law partner for income tax purposes. Income that is eligible for the Pension Income Credit and pension income splitting is generally limited to certain types of income from registered plans, such as a lifetime pension from a Registered Pension Plan and, for individuals who are age 65 or over, income from a Pooled Registered Pension Plan, a Registered Retirement Savings Plan annuity, a Registered Retirement Income Fund or a Life Income Fund. Variable benefits payments from a defined contribution Registered Pension Plan are also eligible only for individuals who are age 65 or over. Income from a Retirement Compensation Arrangement (which is not eligible for the Pension Income Credit) also qualifies for pension income splitting for individuals who are age 65 or over, subject to specified conditions.
Tax Personal income tax
Beneficiaries Seniors and pensioners receiving eligible pension income
Type of measure Other
Legal reference Income Tax Act, section 60.03
Implementation and recent history
  • Introduced as part of the 2006 Tax Fairness Plan. Effective for the 2007 and subsequent taxation years.
  • Income from a Retirement Compensation Arrangement became eligible for pension income splitting, subject to specified conditions, as of the 2013 taxation year. 
Objective – category To provide income support or tax relief To extend or modify the unit of taxation
Objective This measure recognizes the special challenges of planning and managing retirement income, and provides targeted assistance to pensioners (Tax Fairness Plan, 2006).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system This measure extends the unit of taxation.
Subject Retirement
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 T1 Income Tax and Benefit Return
Estimation method T1 micro-simulation model
Projection method T1 micro-simulation model
Number of beneficiaries About 1.3 million couples split pension income in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 1,035 1,065 1,145 1,165 1,115 1,225 1,320 1,415
Political Contribution Tax Credit
  Values
Description Individuals who make monetary contributions to a registered party, a registered association or a candidate as defined in the Canada Elections Act can claim the Political Contribution Tax Credit in respect of their contributions. This non-refundable credit is calculated as 75% of the first $400 contributed, 50% of the next $350 contributed, and 33⅓% of the next $525 contributed. The maximum credit available is $650.
Tax Personal income tax
Beneficiaries Individuals
Type of measure Credit, non-refundable
Legal reference Income Tax Act, subsection 127(3)
Implementation and recent history
  • Introduced as part of the Election Expenses Act of 1974.
  • In 2003, the amount to which the 75% credit applies was extended to $400, effective January 1, 2004.
  • Corporations were prohibited from making political contributions in 2007, following the adoption of the Federal Accountability Act
Objective – category To achieve a social objective
Objective This measure encourages broad citizen participation in the electoral process.
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 Social
CCOFOG 2014 code 70111 - General public services - Executive and legislative organs, financial and fiscal affairs, external affairs - Executive and legislative organs
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 Data from Elections Canada
Estimation method T1 micro-simulation model
Projection method Projections for this measure are derived using Elections Canada data and a T1 micro-simulation model. These projections take into account observed trends in political donations around federal election years.  
Number of beneficiaries About 267,000 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 25 25 30 55 30 30 30 45
Pooled Registered Pension Plans
  Values
Description A Pooled Registered Pension Plan (PRPP) is a type of pension plan that is similar to a defined contribution registered pension plan. A deferral of tax is provided on savings in a PRPP in order to encourage and assist Canadians to save for retirement. Contributions to a PRPP are deductible from income, the investment income is not taxed as it accrues in the plan, and withdrawals and benefit payments are included in income for tax purposes. Contributions to PRPPs must be made within a PRPP member's available Registered Retirement Savings Plan contribution limit.
Tax Personal income tax
Beneficiaries Individuals with available RRSP contribution room
Type of measure Timing preference
Legal reference Income Tax Act, section 147.5
Implementation and recent history
  • The income tax rules for PRPPs came into force on December 14, 2012 (Department of Finance Canada news release 2012-165, December 14, 2012).
Objective – category To encourage savings
Objective Consistent with tax assistance provided on savings in Registered Pension Plans and Registered Retirement Savings Plans, this measure encourages and assists Canadians to arrange for their financial security in later years.
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 n/a
Estimation method n/a
Projection method n/a
Number of beneficiaries No data is available.
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.

Note: The tax expenditure associated with this measure is combined with the tax expenditure associated with Registered Retirement Savings Plans (see measure "Registered Retirement Savings Plans").

Preferential tax rate for small businesses
  Values
Description The first $500,000 of annual income earned by a Canadian-controlled private corporation (CCPC) from an active business carried on in Canada is taxed at a preferential federal corporate income tax rate of 10%. The $500,000 annual small business limit must be shared by a CCPC with other CCPCs with which it is associated. In order to target the preferential tax rate to small businesses, the annual small business limit is gradually reduced when the taxable capital of the CCPCs that are part of the same associated group is between $10 million and $15 million, and is zero if the taxable capital of the associated group is $15 million or greater.
Tax Corporate income tax
Beneficiaries Small Canadian-controlled private corporations
Type of measure Preferential tax rate
Legal reference Income Tax Act, section 125
Implementation and recent history
  • A lower federal corporate tax rate was introduced in Budget 1949 to assist smaller corporations. In general terms, a low 10% rate applied to business income up to $10,000 while additional income was taxed at a 33% rate. All corporations were eligible for this lower rate, regardless of size; however, only one corporation in a controlled corporate group could claim that lower rate.
  • Eligibility rules to this lower rate were modified as part of the 1972 Tax Reform to limit access to CCPCs and provide for the sharing of the small business limit among associated corporations.
  • Budget 1994 introduced rules to phase out the preferential tax rate for CCPCs with taxable capital of at least $10 million.
  • The annual business limit was increased in stages from $200,000 in 2002 to $300,000 in 2005. It was increased to $400,000 effective 2007.
  • The 2007 Economic Statement reduced the preferential tax rate from 12% to 11% effective 2008 (compared to the general corporate income tax rate of 19.5% in 2008). The federal corporate surtax (equivalent to 1.12 percentage points of tax) was also eliminated for all corporations as of 2008.
  • Budget 2009 increased the annual income limit to $500,000 (from $400,000), effective 2009.
  • Budget 2015 announced a series of reductions to the preferential tax rate, including a reduction from 11% to 10.5% in 2016.
  • On October 16, 2017 the Government announced a further reduction in the preferential tax rate to 10% as of January 1, 2018, and to 9% as of January 1, 2019.
Objective – category To encourage or attract investment To support business activity
Objective This measure allows small businesses to retain more of their earnings to reinvest and create jobs (Budget 2015).
Category Non-structural tax measure
Reason why this measure is not part of benchmark tax system The applicable tax rate departs from the benchmark tax rate.
Subject Business - small businesses
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 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 profits. A rate of 10.5% is used for projection years.
Number of beneficiaries This measure provided tax relief to about 744,000 corporations in 2015.
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Corporate income tax 3,160 2,945 3,115 3,255 3,760 4,195 5,550 6,325
Public Transit Tax Credit
  Values
Description A non-refundable tax credit was available at the lowest personal income tax rate for the cost of monthly public transit passes or passes of longer duration. The credit could be claimed by the individual or the individual's spouse or common-law partner in respect of eligible transit costs of the individual, the individual's spouse or common-law partner, and the individual's children who were under 19 years of age. This credit was eliminated, effective for transit use after June 30, 2017.
Tax Personal income tax
Beneficiaries Individuals
Type of measure Credit, non-refundable
Legal reference Income Tax Act, section 118.02
Implementation and recent history
  • Introduced in Budget 2006. Effective July 1, 2006 and subsequent taxation years.
  • Budget 2007 extended the credit to innovative fare products like electronic fare cards and weekly passes when used on an ongoing basis.
  • Budget 2017 announced the elimination of this measure, effective for transit use occurring after June 30, 2017.
Objective – category To achieve a social objective
Objective This measure is intended to encourage public transit use, as increasing public transit use will ease traffic congestion in urban areas and improve the environment (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 is transferable between spouses or common-law partners.
Subject Environment Social
CCOFOG 2014 code 70456 - Economic affairs - Transport - Public Transit 70539 - Environmental protection - Pollution abatement
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 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 1.8 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 165 175 180 190 190 100
Quebec Abatement
  Values
Description The federal government provides an abatement of personal income tax to taxpayers residing in Quebec equal to 16.5% of Basic Federal Tax payable. The abatement represents compensation to the Province of Quebec for opting out of certain federal transfer programs established in the 1960s.
Tax Personal income tax
Beneficiaries n/a
Type of measure Other
Legal reference Federal-Provincial Fiscal Arrangements Act, Part VI Federal Provincial Fiscal Revision Act, 1964
Implementation and recent history
  • During the 1960s, the federal government offered provinces opting-out arrangements for certain federal-provincial programs, such as hospital care and social welfare. Under the arrangements—which only Quebec opted to use—the federal government abated personal income tax by 13.5 percentage points while Quebec increased its personal income taxes by an equivalent amount. In order to ensure that Quebec would not receive federal transfer payments for health and social programs and (unlike other provinces) also the tax abatement, this abatement was originally deducted from transfer payments to Quebec. The abatement was rolled into the Canada Health and Social Transfer in 1995, and then into the Canada Health Transfer and Canada Social Transfer in 2004. In 2012, the Federal-Provincial Fiscal Arrangements Act was revised to clarify that the recovery is no longer linked to the Canada Health and Social Transfer or its successor programs (the Canada Health Transfer and Canada Social Transfer).
  • In 1964, the federal government introduced the Youth Allowances Program. Quebec had a similar program at the time and, wishing to continue it, obtained an abatement of three personal income tax points. The Youth Allowances Program was dismantled in 1974; however, in order to minimize disruption to Quebec's tax structure, an arrangement was made to maintain the three-point abatement. The value of the corresponding reduction is currently recovered through bi-annual payments made by the Province of Quebec to the Receiver General for Canada.
Objective – category To implement intergovernmental tax arrangements
Objective This measure reflects the election by the Province of Quebec to receive part of the federal program contribution in the form of a tax abatement.
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 Intergovernmental tax arrangements
CCOFOG 2014 code n/a
Other relevant government programs n/a
Source of data Canada Revenue Agency, Tax Sharing Statements
Estimation method The value of the Quebec Abatement is calculated by multiplying Basic Federal Tax for Quebec residents by 0.165.
Projection method Projections for this measure are based on forecasted growth of Basic Federal Tax.
Number of beneficiaries n/a
Cost Information:
Millions of dollars 2012 2013 2014 2015 2016 (P) 2017 (P) 2018 (P) 2019 (P)
Personal income tax 4,040 4,130 4,270 4,440 4,525 4,795 5,005 5,180

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