Archived - Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2017: part 4
$200 capital gains exemption on foreign exchange transactions
Value | |
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Description | The first $200 of net capital gains of an individual on foreign exchange transactions is exempt from tax. |
Tax | Personal income tax |
Beneficiaries | Individuals |
Type of measure | Exemption |
Legal reference | Income Tax Act, subsections 39(1.1) and (2) |
Implementation and recent history |
|
Objective – category | To reduce administration or compliance costs |
Objective | This measure was introduced to minimize record keeping and simplify administration with respect to modest foreign exchange transactions. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure exempts from tax income or gains that are included in a comprehensive income tax base. |
Subject | Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | n/a |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated capital cost allowance for clean energy generation equipment
Value | |
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Description | Specified clean energy generation equipment that generates electricity and/or heat from renewable energy sources (e.g., wind, solar, small hydro) and from waste (e.g., wood waste, landfill gas) or by making efficient use of fossil fuels (e.g., high efficiency cogeneration) and that is acquired by a taxpayer after February 21, 1994 can be depreciated on a declining-balance basis at an accelerated capital cost allowance (CCA) rate of 30% (Class 43.1). If acquired after February 22, 2005 and before 2020, such equipment can be depreciated on a declining-balance basis at an accelerated CCA rate of 50% (Class 43.2). The eligibility criteria for these two classes are generally the same, except that cogeneration systems that use fossil fuels must meet a higher efficiency standard for Class 43.2 than for Class 43.1, electric vehicle charging stations must meet a higher power threshold and electrical energy storage equipment must be connected to an electricity generation system that is eligible for Class 43.2. Without Class 43.1 and Class 43.2, depending on their nature or use, many of these assets would be depreciated at lower rates of 4%, 8% or 20%. A related measure addresses specified intangible start-up costs of clean energy projects (see the measure “Accelerated deductibility of Canadian Renewable and Conservation Expenses”). |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses using clean or efficient energy generation equipment |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, Classes 43.1 and Class 43.2 of Schedule II |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure encourages businesses to invest in specified clean energy generation and energy efficiency equipment (Technical Guide to Class 43.1 and 43.2, Natural Ressources Canada, 2013). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Environment Business - other |
CCOFOG 2014 code | 70435 - Economic affairs - Fuel and energy - Electricity 70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified |
Other relevant government programs | Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on acquisitions by unincorporated businesses of specified clean energy generation equipment is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated capital cost allowance for computer equipment
Value | |
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Description | Eligible computers and software acquired after January 27, 2009 and before February 2011 could be depreciated at a 100% capital cost allowance (CCA) rate. The half-year rule, which generally allows one half of the CCA write-off otherwise available in the year the asset is first available for use, did not apply to these acquisitions. As a result, a business was able to fully deduct the cost of an eligible computer and software in the first year that CCA deductions were available. If not for this measure, these assets would have been depreciated at a 55% CCA rate on a declining-balance basis, subject to the half-year rule. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, subparagraph 1100(1)(a)(xxxiii) and Class 52 of Schedule II |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This temporary measure provided stimulus by assisting businesses to increase or accelerate investment in computers (Budget 2009). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permitted the depreciation of a capital asset faster than its useful life. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on computer purchases by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated capital cost allowance for liquefied natural gas facilities
Value | |
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Description | An accelerated capital cost allowance (CCA) is available for certain property acquired for use in facilities in Canada that liquefy natural gas. The accelerated CCA takes the form of an additional 22% allowance that, combined with the regular CCA rate of 8%, brings the CCA rate up to 30% for liquefaction equipment used in Canada in connection with natural gas liquefaction. A second additional allowance equivalent to 4% brings the CCA rate up to 10% from 6% for non-residential buildings that are part of facilities that are used to liquefy natural gas. These additional allowances may only be claimed against income of the taxpayer that is attributable to the liquefaction of natural gas at the facility. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses in the natural gas liquefaction industry |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, paragraph 1100(1)(yb), subsection 1101(4i) and paragraph (b) of Class 47 of Schedule II |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure is intended to encourage investment in facilities that liquefy natural gas to supply emerging international and domestic markets (Prime Minister of Canada news release, February 19, 2015). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - natural resources |
CCOFOG 2014 code | 70455 - Economic affairs - Transport - Pipeline and other transport |
Other relevant government programs | Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on investment in liquefied natural gas facilities by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated capital cost allowance for manufacturing or processing machinery and equipment
Value | |
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Description | Machinery and equipment acquired by a taxpayer after March 18, 2007 and before 2016 and that is primarily for use in Canada for the manufacturing or processing of goods for sale or lease can be depreciated on a straight-line basis at an accelerated capital cost allowance (CCA) rate of 50% (Class 29 of Schedule II to the Income Tax Regulations). Machinery and equipment acquired after 2015 but before 2026 is depreciable on a declining-balance basis at an accelerated CCA rate of 50% (Class 53). Machinery and equipment acquired outside of these periods is included in Class 43 and qualifies for a CCA rate of 30% calculated on a declining-balance basis. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses in the manufacturing and processing industry |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, subparagraphs 1100(1)(t) and (ta), subsection 1102(16.1), and Classes 29 and 53 of Schedule II |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This temporary measure provides an incentive for manufacturing and processing businesses to accelerate or increase capital investment (Budget 2008). Providing this incentive for an extended period of time helps to provide businesses with planning certainty for larger projects where the investment may not be completed until several years after the investment decision is made and for longer-term investments with multiple phases (Budget 2015). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on acquisitions by unincorporated businesses of manufacturing or processing machinery and equipment is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | About 13,800 corporations made additions to the relevant CCA class in 2014. No data is available for unincorporated businesses. |
Accelerated capital cost allowance for mining and oil sands assets
Value | |
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Description | In addition to the regular capital cost allowance (CCA) deduction of 25% per year (Class 41), for assets used in mining, an accelerated CCA has been provided for assets acquired for use in new mines, including oil sands mines, and major mine expansions (i.e., expansions that increase the capacity of a mine by at least 25%). The additional allowance allows the taxpayer to deduct up to 100% of the remaining cost of the eligible assets in computing income for a taxation year, not exceeding the taxpayer’s income for the year from the mine (calculated after deducting the regular CCA). This measure is being phased out and will no longer be available after 2020. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses in the mining and oil and gas industry |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, subsection 1100(1) and Classes 41, 41.1 and 41.2 of Schedule II |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure was introduced to maintain an incentive for mining investment while eliminating the three-year exemption for corporate profits that was previously provided for new mines, which was considered in many circumstances to be too generous (Proposals for Tax Reform, 1969). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - natural resources |
CCOFOG 2014 code | 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels 7043 - Economic affairs - Fuel and energy |
Other relevant government programs | Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on Class 41 expenditures by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated capital cost allowance for vessels
Value | |
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Description | New vessels (including furniture, fittings, radio communication equipment and other equipment) that are constructed and registered in Canada and that were not used for any purpose whatsoever before acquisition by their owners can be depreciated at a maximum capital cost allowance (CCA) rate of 33⅓% on a straight-line basis. Vessels that do not qualify for this treatment are depreciable at a CCA rate of 15% on a declining-balance basis. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Regulations, paragraph 1100(1)(v) |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure encourages investment in new vessels built and registered in Canada. |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on acquisitions of vessels by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated deductibility of Canadian Renewable and Conservation Expenses
Value | |
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Description | Canadian Renewable and Conservation Expenses (CRCE) can be deducted in full in the year incurred even though some of these expenses are capital in nature. CRCE generally includes intangible start-up costs of renewable energy and energy efficiency projects for which at least 50% of the cost of depreciable assets can reasonably be expected to be property that is eligible for accelerated capital cost allowance (CCA) under CCA Class 43.1 or Class 43.2. CRCE also include expenses such as the cost of engineering and feasibility studies, which may be considered analogous to exploration expenses incurred by firms in the non-renewable resource sector. As a type of Canadian Exploration Expense, CRCE can be carried forward indefinitely or transferred to flow-through share investors. For more information, see the related measures “Accelerated capital cost allowance for clean energy generation equipment” and “Flow-through share deductions”. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses using clean or efficient energy generation equipment |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsection 66.1(6) Income Tax Regulations, section 1219 |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure encourages investments in clean energy generation and energy conservation projects and makes the tax treatment of the renewable and non-renewable energy sectors more similar (Budget 1996; Technical Guide to Canadian Renewable and Conservation Expenses, Natural Resources Canada, 2012). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Environment Business - other |
CCOFOG 2014 code | 70435 - Economic affairs - Fuel and energy - Electricity 70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified |
Other relevant government programs | Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on CRCE incurred by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Accelerated deductibility of some Canadian Exploration Expenses
Value | |
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Description | Canadian Exploration Expenses (CEE) are deductible at a rate of 100% in the year incurred. CEE includes certain intangible costs incurred to determine the existence, location, extent or quality of a crude oil or natural gas reservoir or of a mineral resource not previously known to exist. For the mining sector (including oil sands mines), CEE have also included intangible pre-production development expenses—costs incurred for the purpose of bringing a new mine into production in reasonable commercial quantities. However, the eligibility of these latter expenses will be phased out by 2018. Exploration expenses are undertaken to create an asset (the reserves discovered), and as with generally accepted accounting tax principles, the benchmark tax treatment would be to capitalize and amortize the expenses of successful exploration over the life of the asset. Unsuccessful efforts that do not result in an exploitable asset could be expensed. On the other hand, some unsuccessful exploration could be considered part of a more general project and may provide valuable information that can assist future exploration efforts, which may imply amortization. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses in the mining and oil and gas industry |
Type of measure | Timing preference |
Legal reference | Income Tax Act, section 66.1 |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure recognizes the challenges facing mining and oil and gas companies—a low probability of success, large capital requirements and long timeframes before reporting positive cash flow—as they explore for resources (Budget 2015). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - natural resources |
CCOFOG 2014 code | 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels 70432 - Economic affairs - Fuel and energy - Petroleum and natural gas |
Other relevant government programs | Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on CEE incurred by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Additional deduction for gifts of medicine
Value | |
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Description | Corporations that donate medicines from their inventory to an eligible charity can claim an additional deduction equal to the lesser of:
|
Tax | Corporate income tax |
Beneficiaries | Corporate donors |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 110.1(1)(a.1) |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure provides an incentive for corporations to donate medicines for use in international programs for the distribution of medicines (Budget 2007). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is not incurred to earn income. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues. |
Subject | Donations, gifts, charities and non-profit organizations |
CCOFOG 2014 code | 70711 - Health - Medical products, appliances, and equipment - Pharmaceutical products |
Other relevant government programs | Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs. |
Source of data | T2 Corporation Income Tax Return |
Estimation method | T2 micro-simulation model |
Projection method | The tax expenditure is projected to grow in line with nominal gross domestic product. |
Number of beneficiaries | A small number of corporations (fewer than 20) claim this deduction each year. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Corporate income tax | S | S | S | S | S | S | S | S |
Adoption Expense Tax Credit
Value | |
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Description | Adoptive parents can claim the Adoption Expense Tax Credit in respect of the cost of adopting a child under the age of 18. The non-refundable credit is calculated by applying the lowest personal income tax rate to eligible adoption expenses, which are capped at $15,453 per child (2016, indexed to inflation). Eligible adoption expenses cover a range of expenses, including adoption agency fees, legal expenses, and travel and living expenses for themselves and the child, but do not include any expenses for which the adoptive parent has been or is entitled to be reimbursed. Eligible adoption expenses may be incurred for domestic adoptions or for a child adopted from outside of Canada. They must also have been incurred during the “adoption period”, as defined in the legislation. Parents are able to claim the credit in the taxation year in which the adoption is finalized. The two adoptive parents can split the amount if the total combined claim for eligible expenses for each child is not more than the amount before the split. |
Tax | Personal income tax |
Beneficiaries | Adoptive parents |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, section 118.01 |
Implementation and recent history |
|
Objective – category | To recognize non-discretionary expenses (ability to pay) |
Objective | This measure provides tax recognition to parents for costs that are unique to the decision to adopt a child (Budget 2005). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. |
Subject | Families and households |
CCOFOG 2014 code | 71049 - Social protection - Family and children |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 2,100 individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 3 | 3 | 2 | 2 | 2 | 2 | 2 | 2 |
Age Credit
Value | |
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Description | The Age Credit is provided to individuals aged 65 and over. The value of the credit is calculated by applying the lowest personal income tax rate to the annually indexed credit amount ($7,125 for 2016). The credit is income-tested—the credit amount is reduced by 15% of net income in excess of an annually indexed threshold amount ($35,927 for 2016). The credit is completely phased out at an income level of $83,427 in 2016. Any unused portion of the credit may be transferred to a spouse or common-law partner. |
Tax | Personal income tax |
Beneficiaries | Seniors |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, subsection 118(2) |
Implementation and recent history |
|
Objective – category | To provide income support or tax relief To achieve a social objective |
Objective | This measure was introduced to reduce the tax burden borne by elderly Canadians (Budget 1972; Budget 2009). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure is transferable between spouses or common-law partners. |
Subject | Social Retirement |
CCOFOG 2014 code | 71029 - Social protection - Old age |
Other relevant government programs | Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 5.4 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 2,530 | 2,720 | 2,885 | 3,025 | 3,145 | 3,330 | 3,465 | 3,620 |
Apprentice vehicle mechanics’ tools deduction
Value | |
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Description | Registered apprentice vehicle mechanics may deduct, in computing their employment income subject to income tax, the extraordinary portion of the cost of new tools they purchase in the taxation year or in the last three months of the previous taxation year if the apprentice is in his or her first year. The extraordinary tool costs are those that exceed either the combined value of the deduction for tradespeople’s tool expenses ($500) and the Canada Employment Credit ($1,161 in 2016) or 5% of the taxpayer’s income, whichever is greater. |
Tax | Personal income tax |
Beneficiaries | Apprentice vehicle mechanics |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 8(1)(r) and subsection 8(6) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure recognizes that apprentice vehicle mechanics have reduced ability to pay tax relative to other taxpayers with the same income due to the extraordinary portion of the cost of new tools they have to provide as a condition of their employment (Budget 2001; Budget 2007). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment Education |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70959 - Education - Education not definable by level |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T777 Statement of Employment Expenses |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 3,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 4 | 4 | 4 | 3 | 3 | 3 | 4 | 4 |
Apprenticeship Job Creation Tax Credit
Value | |
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Description | Employers can claim a 10% non-refundable tax credit in respect of wages paid to qualifying apprentices in the first two years of their contract, to a maximum of $2,000 per apprentice per year. A qualifying apprentice is defined as someone working in a prescribed trade in the first two years of their apprenticeship contract. This contract must be registered with the federal government or a provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. Prescribed trades include the trades currently listed as Red Seal Trades. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, section 127 |
Implementation and recent history |
|
Objective – category | To encourage employment |
Objective | This measure encourages employers to hire new apprentices and to support apprentices in their training (Budget 2006). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues. |
Subject | Employment |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | The estimates are based on actual amounts earned and claimed by employers. |
Projection method | Personal income tax: The tax expenditure is projected based on historical growth. Corporate income tax: The tax expenditure is projected to grow in line with total employment. |
Number of beneficiaries | About 1,000 individuals and 12,400 corporations claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
Corporate income tax | ||||||||
Earned and claimed in current year | 50 | 60 | 70 | 70 | 70 | 75 | 75 | 75 |
Claimed in current year but earned in prior years | 15 | 20 | 20 | 20 | 20 | 20 | 20 | 20 |
Earned in current year but carried back to prior years | 5 | 4 | 4 | 5 | 4 | 4 | 5 | 5 |
Total – corporate income tax | 70 | 85 | 95 | 95 | 95 | 100 | 100 | 100 |
Total | 70 | 85 | 95 | 100 | 100 | 100 | 100 | 100 |
Atlantic Investment Tax Credit
Value | |
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Description | A 10% credit is available for qualifying acquisitions of new buildings, machinery and equipment and prescribed energy and conservation property used primarily in qualified activities in the Atlantic provinces, the Gaspé Peninsula and their associated offshore regions. Qualified activities include farming, fishing, logging, manufacturing and processing, the storing of grain, the harvesting of peat, and the production or processing of electrical energy or steam. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years. Where the credit exceeds the amount of tax payable in a year, 40% of the credit is refundable for small Canadian-controlled private corporations and individuals. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses in the Atlantic provinces and the Gaspé region |
Type of measure | Credit, refundable and non-refundable |
Legal reference | Income Tax Act, section 127 |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure promotes economic development of the Atlantic provinces and the Gaspé region (Budget 1977). |
Category | Non-structural tax measure and refundable tax credit |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues. The portion of this measure that is refundable is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | The estimates are based on actual amounts earned and claimed by businesses. |
Projection method | Personal income tax: The cost of this measure is projected based on historical growth. Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product. |
Number of beneficiaries | About 4,700 individuals and 5,500 corporations claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 10 | 10 | 10 | 10 | 10 | 10 | 10 | 10 |
Corporate income tax | ||||||||
Non-refundable portion | ||||||||
Earned and claimed in current year | 60 | 85 | 85 | 65 | 60 | 55 | 55 | 55 |
Claimed in current year but earned in prior years | 40 | 65 | 150 | 110 | 105 | 110 | 110 | 110 |
Earned in current year but carried back to prior years | 20 | 145 | 130 | 10 | 60 | 20 | 10 | 4 |
Total – non-refundable portion | 120 | 290 | 365 | 190 | 230 | 185 | 175 | 170 |
Refundable portion | 15 | 15 | 15 | 15 | 20 | 20 | 20 | 20 |
Total – corporate income tax | 135 | 310 | 380 | 205 | 250 | 205 | 195 | 190 |
Total | 140 | 315 | 390 | 210 | 255 | 210 | 205 | 195 |
Canada Child Benefit
Value | |
---|---|
Description | The Canada Child Benefit provides a maximum benefit of $6,400 per child under the age of 6 and $5,400 per child aged 6 through 17. The Canada Child Benefit is income-tested based on adjusted family net income with the benefit phase-out rate depending on the number of children. On the portion of adjusted family net income between $30,000 and $65,000, the benefit is phased out at a rate of 7% for a one-child family, 13.5% for a two-child family, 19% for a three-child family and 23% for larger families. Where adjusted family net income exceeds $65,000, remaining benefits are phased out at rates of 3.2% for a one-child family, 5.7% for a two-child family, 8% for a three-child family and 9.5% for larger families, on the portion of income above $65,000. Indexation to inflation of the maximum benefit amounts and phase-out thresholds is to begin for the 2020-21 benefit year. The Child Disability Benefit is an additional amount provided to families caring for a child eligible for the Disability Tax Credit. The Child Disability Benefit provides up to $2,730 in benefits per eligible child. The phase-out of this additional amount generally aligns with the Canada Child Benefit. It is phased out at a rate of 3.2% for families with one eligible child and 5.7% for families with more than one eligible child, on adjusted family net income in excess of $65,000. This additional amount is included in Canada Child Benefit payments made to eligible families. Canada Child Benefit payments are made monthly and are non-taxable. The payment cycle runs from July to June. |
Tax | Personal income tax |
Beneficiaries | Families with minor children |
Type of measure | Credit, refundable |
Legal reference | Income Tax Act, section 122.6 |
Implementation and recent history |
|
Objective – category | To recognize non-discretionary expenses (ability to pay) To achieve a social objective |
Objective | This measure gives families more money to help with the high cost of raising their children. |
Category | Refundable tax credit |
Reason why this measure is not part of benchmark tax system | This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure. |
Subject | Families and households |
CCOFOG 2014 code | 71049 - Social protection - Family and children |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Public Accounts of Canada T1 Income Tax and Benefit Return |
Estimation method | This measure is presented on a fiscal year basis as reported in the Public Accounts of Canada (e.g., the amount for 2010 corresponds to the expenditure reported for the 2010–11 fiscal year). |
Projection method | Projections of the value of this measure are calculated based on projected inflation and growth in family income and population. |
Number of beneficiaries | About 2.9 million families received this benefit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 10,050 | 10,265 | 10,400 | 10,370 | 10,510 | 19,900 | 22,900 | 22,600 |
Canada Employment Credit
Value | |
---|---|
Description | Taxpayers with employment income may qualify for the Canada Employment Credit. The value of the credit is calculated by applying the lowest personal income tax rate to the lesser of $1,161 (in 2016) and the individual’s employment income for the year. The maximum amount is indexed to inflation. |
Tax | Personal income tax |
Beneficiaries | Employees |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, subsection 118(10) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure provides general tax recognition of work-related expenses (Budget 2006). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. |
Subject | Employment |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 17.6 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 1,995 | 2,040 | 2,110 | 2,185 | 2,240 | 2,260 | 2,325 | 2,380 |
Canadian Film or Video Production Tax Credit
Value | |
---|---|
Description | Qualified corporations can claim a 25% refundable tax credit in respect of salaries and wages of an eligible Canadian film or video production. The maximum amount of Canadian labour cost qualifying for the credit is 60% of the total cost of a film or video production. The Canadian Audio-Visual Certification Office of the Department of Canadian Heritage is responsible for certifying productions that are eligible for the credit. |
Tax | Corporate income tax |
Beneficiaries | Corporations in the film and video production industry |
Type of measure | Credit, refundable |
Legal reference | Income Tax Act, section 125.4 |
Implementation and recent history |
|
Objective – category | To achieve a social objective To support business activity |
Objective | This measure encourages Canadian programming and the development of an active domestic independent production sector (Canadian Heritage news release, December 12, 1995). |
Category | Refundable tax credit |
Reason why this measure is not part of benchmark tax system | This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure. |
Subject | Arts and culture |
CCOFOG 2014 code | 70829 - Recreation, culture, and religion - Cultural services |
Other relevant government programs | Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T2 Corporation Income Tax Return |
Estimation method | The estimates are based on actual amounts earned and claimed by businesses. |
Projection method | The cost of this measure is projected to grow in line with nominal gross domestic product. |
Number of beneficiaries | About 1,500 corporations received this benefit in 2013. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Corporate income tax | 225 | 265 | 255 | 255 | 265 | 275 | 300 | 310 |
Capital gains exemption on personal-use property
Value | |
---|---|
Description | Personal-use property is held primarily for the use and enjoyment of the owner rather than as an investment. In calculating the capital gain on personal-use property, both the proceeds of disposition and the adjusted cost base of the property are deemed to be no less than the greater of $1,000 and the actual proceeds of disposition or adjusted cost base, as appropriate. Consequently, no capital gain is recognized if the proceeds of disposition are $1,000 or less. If the proceeds exceed $1,000, the owner of the property could realize a capital gain if the proceeds exceed the cost of the property; however, the capital gain is reduced in situations where the adjusted cost base of the property, as it would be determined in the absence of this measure, is actually less than $1,000. Personal-use property of a corporation is property owned mainly for the personal use or enjoyment of an individual who is related to the corporation. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations |
Type of measure | Exemption |
Legal reference | Income Tax Act, section 46 |
Implementation and recent history |
|
Objective – category | To reduce administration or compliance costs |
Objective | This measure was introduced to minimize record keeping and simplify administration with respect to the purchase and disposal of personal-use items (Summary of 1971 Tax Reform Legislation, 1971). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure exempts from tax income or gains that are included in a comprehensive income tax base. |
Subject | Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | n/a |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Capital loss carry-overs
Value | |
---|---|
Description | Net capital losses may be carried back three years and forward indefinitely to offset capital gains of other years. Notwithstanding these rules, net capital losses realized in the year in which a taxpayer dies may be deductible against all forms of income for that taxation year and the immediately preceding year. Unused net capital losses from prior years carried forward to the year of death may also be deductible against all forms of income for that taxation year and the immediately preceding year. |
Tax | Personal and corporate income tax |
Beneficiaries | Individual and corporate investors |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 111(1) and 111(2) |
Implementation and recent history |
|
Objective – category | To assess tax liability over a multi-year period |
Objective | This measure supports investors by reducing the risk associated with investment (Budget 1983). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure. |
Subject | Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | n/a |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | Personal income tax: T1 micro-simulation model. The estimate for a given year represents the tax relief associated with the carry-forward to that year of losses incurred in prior years and the deductibility of losses in the year of death of a taxpayer. Data on losses carried back to a previous year is not available. Corporate income tax: The estimate for a given year represents the tax relief associated with both the carry-forward to that year of losses incurred in prior years and the carry-back to previous years of losses incurred in that year. The estimate is equal to the amount of losses carried over multiplied by the tax rate applicable in the year in which the losses are applied. |
Projection method | Personal income tax: T1 micro-simulation model Corporate income tax: The value of this measure is projected to grow in line with corporate capital gains. |
Number of beneficiaries | About 628,000 individuals and 58,700 corporations made use of this measure in 2014 (not counting individuals that carried back losses only). |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | ||||||||
Carried back | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Applied to current year | 345 | 300 | 415 | 530 | 420 | 480 | 590 | 640 |
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 | 100 | 120 | 120 | 100 | 340 | 140 | 135 | 130 |
Applied to current year | 465 | 415 | 440 | 710 | 525 | 485 | 520 | 540 |
Total – corporate income tax | 565 | 535 | 560 | 810 | 870 | 625 | 650 | 670 |
Total | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Caregiver Credit
Value | |
---|---|
Description | The Caregiver Credit provides tax relief to individuals providing in-home care to a parent or grandparent 65 years of age or over or an infirm adult dependent relative, including a child or grandchild, a brother, a sister, an aunt, an uncle, a niece or a nephew. The value of the non-refundable credit is calculated by applying the lowest personal income tax rate to the credit amount per eligible dependant ($4,668 in 2016). The credit is reduced when the dependant’s net income exceeds $15,940 and is fully phased out when the dependant’s income reaches $20,608. Both the credit amount and the income threshold at which the credit starts to be reduced are indexed to inflation. |
Tax | Personal income tax |
Beneficiaries | Caregivers |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, paragraph 118(1)(c.1) |
Implementation and recent history |
|
Objective – category | To recognize non-discretionary expenses (ability to pay) |
Objective | This measure recognizes that individuals providing in-home care for elderly or infirm family members have reduced ability to pay tax compared to other taxpayers with similar income (Budget 1998). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. |
Subject | Families and households Health |
CCOFOG 2014 code | 71049 - Social protection - Family and children 71011 - Social protection - Sickness and disability - Sickness 71012 - Social protection - Sickness and disability - Disability |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 243,000 individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 110 | 120 | 130 | 140 | 145 | 145 | 150 | 155 |
Cash basis accounting
Value | |
---|---|
Description | Under the benchmark tax system, income is taxable when it accrues, and expenses are deductible in the period when the related revenue is reported. Individuals and corporations engaged in farming and fishing activities may elect to include revenues when received, rather than when earned, and deduct expenses when paid rather than when the related revenue is reported. This measure allows farmers and fishers to better match cash receipts with cash expenses, and may enable them to defer paying tax on income realized but not yet received. |
Tax | Personal and corporate income tax |
Beneficiaries | Farming and fishing businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsection 28(1) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances To reduce administration or compliance costs |
Objective | This measure recognizes that requiring all farmers and fishers to adopt the accrual method of income reporting could result in accounting and liquidity problems (Report of the Royal Commission on Taxation, vol. 4, 1966; Proposals for Tax Reform, 1969). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure 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 70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Charitable Donation Tax Credit
Value | |
---|---|
Description | The Charitable Donation Tax Credit is a non-refundable tax credit on donations to registered charities, registered Canadian amateur athletic associations and other qualified donees. In 2016, the formula for determining the credit for individuals is linked to the lowest, second-highest and highest federal tax rates. The credit rate is 15% on the first $200 of total annual gifts and 29% on total annual gifts over $200, with the exception of donors with taxable income exceeding $200,000, who may claim a 33% tax credit on the portion of total annual donations over $200 made from taxable income greater than $200,000. In general, the credit may be claimed on donations totalling up to 75% of an individual’s net income (up to 100% of net income for donations of ecologically sensitive land and cultural property or in certain other circumstances) and may be carried forward for up to 5 years (up to 10 years for donations of ecologically sensitive land). |
Tax | Personal income tax |
Beneficiaries | Individual donors |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, section 118.1 and subsections 248(30) to (41) |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966; 1987 Tax Reform). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues. The tax benefit from this measure is transferable between spouses or common-law partners. |
Subject | Donations, gifts, charities and non-profit organizations |
CCOFOG 2014 code | 705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes |
Other relevant government programs | Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs. |
Source of data | T1 Income Tax and Benefit Return Canadian Cultural Property Export Review Board Environment and Climate Change Canada |
Estimation method | The value of this measure in respect of donations other than cultural property and ecologically sensitive land is estimated using the T1 micro-simulation model. The value of this measure in respect of donations of cultural property is calculated by multiplying an estimate of donations made in the year by the 29% credit rate. The value of this measure in respect of donations of ecologically sensitive land is estimated by multiplying total donations by the 29% credit rate. |
Projection method | Projections are obtained using the T1 micro-simulation model in the case of donations other than cultural property and ecologically sensitive land. Projections in respect of donations of cultural property and ecologically sensitive land are made based on the historical trend in the number and value of donations; in particular, projections in respect of cultural property are made based on an average of past donations. |
Number of beneficiaries | About 5.5 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
By type of donations | ||||||||
Publicly listed securities | 140 | 125 | 145 | 240 | 195 | 235 | 250 | 260 |
Ecologically sensitive land | 5 | 5 | 5 | 5 | 5 | 5 | 5 | 5 |
Cultural property | 25 | 25 | 25 | 30 | 25 | 20 | 25 | 30 |
Other | 2,200 | 2,195 | 2,350 | 2,295 | 2,475 | 2,590 | 2,695 | 2,785 |
Total – personal income tax | 2,370 | 2,350 | 2,525 | 2,570 | 2,700 | 2,850 | 2,980 | 3,080 |
Child care expense deduction
Value | |
---|---|
Description | Child care expenses incurred for the purpose of earning business or employment income, taking an occupational training course, pursuing education or carrying on research for which a grant is received are deductible from income, up to a limit. The deduction may not exceed the lesser of (i) the total of the maximum dollar limits for all children ($8,000 per child under age 7, $5,000 per child between 7 and 16 years of age and infirm dependent children over age 16, and $11,000 for a child eligible for the Disability Tax Credit, regardless of their age), (ii) two-thirds of earned income for the year (not applicable to single-parent students), and (iii) the actual amount of child care expenses incurred. The spouse with the lower income must generally claim the deduction. However, the higher-income parent may claim a deduction if the lower-income parent is infirm, confined to a bed or a wheelchair, in prison or a similar situation for at least two weeks, attending a designated educational institution, or living apart due to a breakdown in the relationship for a period of at least 90 days during the year. |
Tax | Personal income tax |
Beneficiaries | Families with children |
Type of measure | Deduction |
Legal reference | Income Tax Act, section 63 |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income To recognize education costs |
Objective | This provision recognizes the child care costs incurred by single parents and two-earner families in the course of earning employment income, pursuing education or performing research (Budget 1992; Budget 1998). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. Expenses incurred to earn business income are generally deductible under the benchmark tax system; however, child care expenses may also have an element of personal consumption, hence the classification of this measure as a tax expenditure. |
Subject | Employment Education Families and households |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70989 - Education - Education not elsewhere classified 71049 - Social protection - Family and children |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 1.3 million individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 925 | 990 | 965 | 1,100 | 1,360 | 1,290 | 1,300 | 1,335 |
Child Tax Credit
Value | |
---|---|
Description | The Child Tax Credit was a non-refundable credit that provided tax relief of up to $338 per child in 2014. The value of the credit was calculated by applying the lowest personal income tax rate to an amount ($2,255 in 2014) for each child under the age of 18 at the end of the taxation year. This amount was indexed to inflation. Only one parent could claim the credit in a year in respect of a child, but any unused portion of the credit was transferable to a spouse or common-law partner. This credit was repealed as of the 2015 taxation year. |
Tax | Personal income tax |
Beneficiaries | Families with minor children |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, formerly under paragraph 118(1)(b.1) |
Implementation and recent history |
|
Objective – category | To recognize non-discretionary expenses (ability to pay) To achieve a social objective |
Objective | This measure was intended to reduce the tax burden on families with children (Budget 2007). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure is transferable between spouses or common-law partners. |
Subject | Families and households |
CCOFOG 2014 code | 71049 - Social protection - Family and children |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 3.8 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 1,500 | 1,545 | 1,585 | 1,645 | – | – | – | – |
Children’s Arts Tax Credit
Value | |
---|---|
Description | Parents could claim a non-refundable tax credit at the lowest personal income tax rate on up to $250 (in 2016) in eligible fees for the enrolment of a child under the age of 16 in an eligible program of artistic, cultural, recreational or developmental activity. The credit could be claimed by either parent. If a child qualified for the Disability Tax Credit, the age limit was raised to under 18 years of age and an additional $500 amount could be claimed, subject to the parents spending a minimum of $100 on registration or membership fees for an eligible program of artistic, cultural, recreational or developmental activity. As well, the requirements for an eligible activity were relaxed to cover a broader range of programs more suited to the challenges experienced by these children. Budget 2016 announced the phase-out of this measure by 2017 (see details below). |
Tax | Personal income tax |
Beneficiaries | Families with minor children |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, section 118.031 Income Tax Regulations, section 9401 |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure better recognized the costs associated with children’s artistic, cultural, recreational and developmental activities (Budget 2011). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. The tax benefit from this measure was transferable between spouses or common-law partners. |
Subject | Arts and culture |
CCOFOG 2014 code | 70869 - Recreation, culture, and religion - Recreation, culture, and religion not elsewhere classified |
Other relevant government programs | Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 615,000 individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 30 | 35 | 40 | 40 | 45 | 30 | – | – |
Children’s Fitness Tax Credit
Value | |
---|---|
Description | Parents could claim a refundable tax credit at the lowest personal income tax rate on up to $500 (in 2016) in eligible fees for the enrolment of a child under the age of 16 years in an eligible program of physical activity. The credit could be claimed by either parent. If a child qualified for the Disability Tax Credit, the age limit was raised to under 18 years of age and an additional $500 amount could be claimed, subject to the parents spending a minimum of $100 on registration or membership fees for an eligible program of physical activity. As well, the requirements for an eligible activity were relaxed to cover a broader range of programs more suited to the challenges experienced by these children. Budget 2016 announced the phase-out of this measure by 2017 (see details below). |
Tax | Personal income tax |
Beneficiaries | Families with minor children |
Type of measure | Credit, refundable |
Legal reference | Income Tax Act, section 122.8 Income Tax Regulations, section 9400 |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure promoted physical fitness among children (Budget 2006). |
Category | Non-structural tax measure and refundable tax credit |
Reason why this measure is not part of benchmark tax system | This measure was classified as a transfer payment for government accounting purposes, and therefore was not considered to be a tax expenditure. |
Subject | Health |
CCOFOG 2014 code | 70761 - Health - Health not elsewhere classified - Health prevention programs (collective) |
Other relevant government programs | Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 1.7 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Pre-2015 (non-refundable) | 110 | 115 | 115 | 180 | – | – | – | – |
Post-2014 (refundable) | – | – | – | – | 210 | 145 | – | – |
Total – personal income tax | 110 | 115 | 115 | 180 | 210 | 145 | – | – |
Corporate Mineral Exploration and Development Tax Credit
Value | |
---|---|
Description | A 10% non-refundable credit was available to corporations in respect of expenditures incurred in Canada for grassroots exploration and pre-production mine development in relation to the mining of diamonds, base and precious metals as well as industrial minerals that become base or precious metals through refining. Budget 2012 announced the phase-out of this credit to make the tax system more neutral between mining and other industries and, as a result, this credit does not apply after 2015. However, unused credits can be pooled and carried forward, and the use of previously earned credits will continue beyond 2015. |
Tax | Corporate income tax |
Beneficiaries | Corporations in the mining industry |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, subsection 127(9), paragraph (a.3) of definition of “investment tax credit” |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure was introduced to improve the international competitiveness of the resource sector and promote the efficient development of Canada’s natural resource base (Improving the Income Taxation of the Resource Sector in Canada, March 3, 2003). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. |
Subject | Business - natural resources |
CCOFOG 2014 code | 70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels |
Other relevant government programs | Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T2 Corporation Income Tax Return |
Estimation method | The cost of this measure in a year is calculated using data on actual credits claimed in the year. The cost in the initial year is partially offset in the following year as the corporation’s cumulative Canadian Exploration Expense account is then reduced by the credit claimed the year before. |
Projection method | Projections are based on current market conditions. |
Number of beneficiaries | About 50 corporations claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Corporate income tax | 70 | 35 | 15 | 30 | 5 | 10 | 10 | 10 |
Credit for the Basic Personal Amount
Value | |
---|---|
Description | Individual taxpayers can claim a non-refundable credit in respect of the Basic Personal Amount. The value of the credit is calculated by applying the lowest personal income tax rate (15% in 2016) to the Basic Personal Amount ($11,474 in 2016). The credit amount is indexed to inflation. |
Tax | Personal income tax |
Beneficiaries | Individuals |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, paragraph 118(1)(c) |
Implementation and recent history |
|
Objective – category | To promote the fairness of the tax system |
Objective | This measure contributes to tax fairness by ensuring that no tax is paid on a basic amount of income (Report of the Royal Commission on Taxation, vol. 3, 1966; Budget 1998). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure. |
Subject | Other |
CCOFOG 2014 code | n/a |
Other relevant government programs | n/a |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 26.8 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 28,915 | 30,275 | 31,495 | 32,505 | 33,950 | 34,690 | 35,745 | 36,705 |
Deductibility of certain costs incurred by musicians
Value | |
---|---|
Description | Employed musicians can deduct amounts from their employment income for the expenses they incur for the maintenance, rental and insurance of musical instruments they are required to provide as a term of their employment. The measure also provides for the deduction of capital cost allowance in respect of these instruments. |
Tax | Personal income tax |
Beneficiaries | Employed musicians |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 8(1)(p) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | The deductibility of certain expenses incurred by artists and musicians recognizes that these expenses are necessary to carry on employment in those fields (Musical Instruments: Income Tax Reform, 1987). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment Arts and culture |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70829 - Recreation, culture, and religion - Cultural services |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T777 Statement of Employment Expenses |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 3,750 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 |
Deductibility of charitable donations
Value | |
---|---|
Description | Donations made by corporations to registered charities are deductible in computing taxable income within certain limits. In general, a deduction may be claimed on donations totalling up to 75% of a corporation’s taxable income. The limit is increased by 25% of the amount of taxable capital gains arising from donations of appreciated capital property and 25% of any capital cost allowance recapture arising from donations of depreciable capital property. The net income restriction does not apply to certain gifts of cultural property or ecologically sensitive land. Donations in excess of the particular limit applied may be carried forward up to 5 years with the exception of gifts of ecologically sensitive land, which may be carried forward up to 10 years. |
Tax | Corporate income tax |
Beneficiaries | Corporate donors |
Type of measure | Deduction |
Legal reference | Income Tax Act,section 110.1 |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is not incurred to earn income. The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues. |
Subject | Donations, gifts, charities and non-profit organizations |
CCOFOG 2014 code | 705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes |
Other relevant government programs | Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs. |
Source of data | T2 Corporation Income Tax Return |
Estimation method | T2 micro-simulation model |
Projection method | The cost of this measure is projected to grow in line with corporate taxable income. |
Number of beneficiaries | This measure provided tax relief to about 89,600 corporations in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
By type of donations | ||||||||
Ecologically sensitive land | 5 | 2 | 5 | 3 | 1 | 3 | 3 | 4 |
Cultural property | 5 | 35 | 3 | 10 | 20 | 15 | 15 | 15 |
Gifts to the Crown | S | S | S | S | S | S | S | S |
Other | 395 | 385 | 310 | 480 | 430 | 475 | 475 | 475 |
Total – corporate income tax | 410 | 420 | 315 | 495 | 450 | 495 | 490 | 495 |
Deductibility of contributions to a qualifying environmental trust
Value | |
---|---|
Description | Contributions to a qualifying environmental trust are deductible in computing the contributor’s income in the years the contributions are made, provided that the contributor is a beneficiary under the trust. Amounts withdrawn from the trust to fund reclamation costs are included in the recipient’s income when withdrawn; however, there is typically no net tax cost at the time of withdrawal since the recipient will be able to deduct the reclamation costs incurred against the above income inclusion. This measure is intended to improve the cash flow of taxpayers at the time the contributions to a qualifying environmental trust are made. It also ensures that companies, such as single-mine companies, which might not have had sufficient taxable income against which to deduct actual reclamation expenses when these expenses were incurred (for the most part at the end of the life of a mine or after its closure), obtain some tax relief for these expenses. Additional details on this measure can be found in the Annex to Part 1 of this report. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses contributing to a qualifying environmental trust |
Type of measure | Timing preference |
Legal reference | Income Tax Act, paragraph 20(1)(ss) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | This measure assists firms that are required to make contributions to a qualifying environmental trust set up for the purpose of funding reclamation costs (Budget 1997). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax. |
Subject | Environment |
CCOFOG 2014 code | 70549 - Environmental protection - Protection of biodiversity and landscape |
Other relevant government programs | Programs within the mandates of Environment and Climate Change Canada, the Canadian Environmental Assessment Agency, Parks Canada and Natural Resources Canada also support environment-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: Data on contributions to qualifying environmental trusts by unincorporated businesses is not available. Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | Personal income tax: No estimate is available. Corporate income tax: The cost of this measure is based on net contributions (total contributions minus funds withdrawn) to qualifying environmental trusts. |
Projection method | Personal income tax: No projection is available. Corporate income tax: Projections are based on current market conditions and the anticipated impact that National Energy Board pipeline regulations will have on the use of qualifying environmental trusts. |
Number of beneficiaries | A small number of corporations (fewer than 20) claimed this deduction in 2014. No data is available for unincorporated businesses. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Corporate income tax | 5 | -2 | S | -3 | 55 | 55 | 55 | 55 |
Total | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Deductibility of costs of capital assets and eligibility for investment tax credits before asset is put in use
Value | |
---|---|
Description | Corporations may claim capital cost allowance and investment tax credits on depreciable assets at the earlier of the time that is the end of the taxation year in which the asset is available for use or the second taxation year following its year of acquisition. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 13(27) and 127(11.2) |
Implementation and recent history |
|
Objective – category | To reduce administration or compliance costs |
Objective | This measure facilitates the application and administration of the capital cost allowances regime and investment tax credits by limiting the period between the acquisition of a capital asset and the time the cost of the asset is recognized for tax purposes. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure may permit the depreciation of a capital asset faster than its useful life. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deductibility of countervailing and anti-dumping duties when paid
Value | |
---|---|
Description | In accordance with rules established by the World Trade Organization, countries may impose countervailing and anti-dumping duties to offset the injurious effects of imports that are subsidized or dumped. Countervailing and anti-dumping duties paid by Canadian businesses in order to export their products are deductible in computing income subject to tax in the year that the duties are paid, even if the payment is based on a preliminary finding. By contrast, under general income tax rules, since the amount payable may be subsequently adjusted under the trade remedy process, the liability would be considered contingent and no deduction would be allowed until the final determination of the amount of the liability. Under the measure, any refunds or additional amounts (e.g., interest) received as a result of the final determination of the liability must be included in income when received. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses that pay a countervailing or anti-dumping duty |
Type of measure | Timing preference |
Legal reference | Income Tax Act, paragraph 20(1)(vv) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | This measure recognizes that businesses that pay countervailing and anti-dumping duties are required to pay amounts that are not under their control and that, although these amounts may be subsequently refunded in whole or in part, this process can take several years (Budget 1998). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax. |
Subject | International |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | n/a |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deductibility of earthquake reserves
Value | |
---|---|
Description | Federally regulated property and casualty insurance companies can deduct, for income tax purposes, earthquake premium reserves which are set aside pursuant to guidelines established by the Office of the Superintendent of Financial Institutions. These reserves represent a surplus appropriation, and would not otherwise be deductible under the benchmark system. |
Tax | Corporate income tax |
Beneficiaries | Property and casualty insurers |
Type of measure | Timing preference |
Legal reference | Income Tax Act, paragraph 20(7)(c) Income Tax Regulations, the description of L in subsection 1400(3) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | This measure helps ensure that federally regulated property and casualty insurance companies have sufficient financial capacity to pay insured earthquake losses when they occur (Budget 1998). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition in respect of a contingent expense, resulting in a deferral of tax. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Data on earthquake premium reserves is provided by the Office of the Superintendent of Financial Institutions. |
Estimation method | This tax expenditure is estimated by taking the annual net change in total earthquake premium reserves and multiplying that change by the statutory corporate income tax rate for the year. The net change, and not the amount of the reserve, is of importance because the deduction is effectively applied on a net basis (the taxpayer includes in income the reserve from the previous year, and deducts from income the reserve for the current year). |
Projection method | Earthquake premium reserves are projected to grow at the compound annual growth rate observed over the last eight years. |
Number of beneficiaries | About 20 corporations claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Corporate income tax | 1 | 1 | S | S | S | 1 | 1 | 1 |
Deductibility of expenses by employed artists
Value | |
---|---|
Description | Employed artists are allowed to deduct amounts paid in the year to earn income from their artistic activities up to the lesser of $1,000 or 20% of their income derived from employment in the arts. An amount deductible in a year under this measure is reduced by motor vehicle expenses and musical instrument costs that are also deducted against the taxpayer’s income from the same artistic activity for the year. |
Tax | Personal income tax |
Beneficiaries | Employed artists |
Type of measure | Deduction |
Legal reference | Income Tax Act,paragraph 8(1)(q) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure provides greater certainty to employed artists with respect to the tax treatment of their professional expenses (Government response to the Report of the Standing Committee on Communications and Culture Respecting the Status of the Artist, 1990). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment Arts and culture |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70829 - Recreation, culture, and religion - Cultural services |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T777 Statement of Employment Expenses |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 500 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | S | S | S | S | S | S | S | S |
Deduction for certain contributions by individuals who have taken vows of perpetual poverty
Value | |
---|---|
Description | Individuals who have taken a vow of perpetual poverty as a member of a religious order may claim a deduction in a year in which they are a member of that religious order for the amount of earned income and pension benefits assigned and paid in the year to the order. |
Tax | Personal income tax |
Beneficiaries | Individuals who have taken vows of perpetual poverty as members of a religious order |
Type of measure | Exemption |
Legal reference | Income Tax Act, subsection 110(2) |
Implementation and recent history |
|
Objective – category | To achieve a social objective To provide relief for special circumstances |
Objective | This measure recognizes the special situations of members of religious orders who make vows of poverty and assign all of their income to the religious order. |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure exempts from tax income or gains that are included in a comprehensive income tax base. |
Subject | Donations, gifts, charities and non-profit organizations |
CCOFOG 2014 code | 70849 - Recreation, culture, and religion - Religious and other community services |
Other relevant government programs | Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs. |
Source of data | No reliable data is available for this measure. As such, estimates and projections are no longer presented. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deduction for clergy residence
Value | |
---|---|
Description | A member of the clergy who is supplied living accommodation by their employer, or receives a housing allowance, may claim an offsetting deduction to the extent that this benefit is included in their income for the year. When no allowance is received nor living accommodation provided, a calculated deduction for rent and utilities is provided. The taxpayer must be in charge of or administer a diocese, parish or congregation, or be engaged exclusively in full-time administrative service by appointment of a religious order or denomination. The amount deducted cannot exceed the taxpayer’s income from the office or employment, and is equal to the total amount included in the taxpayer’s income as a taxable benefit because of the housing accommodation or allowance. In general, if the taxpayer owns or rents the accommodation, the amount that may be deducted is restricted to the lesser of two amounts: (1) the greater of $1,000 multiplied by the number of months (up to 10 months) in the year during which the taxpayer qualified as a member of the clergy and one-third of the taxpayer’s remuneration from the office or employment; and (2) the amount, if any, by which rent paid (or the fair market value of the accommodation) exceeds the total deducted by the taxpayer in connection with the residence from income earned from the office or employment or a business. |
Tax | Personal income tax |
Beneficiaries | Members of the clergy or of a religious order, regular ministers of a religious denomination |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 8(1)(c) |
Implementation and recent history |
|
Objective – category | To achieve a social objective |
Objective | This measure recognizes the special nature of the contributions and circumstances of members of the clergy (Budget, March 1949). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure exempts from tax income or gains that are included in a comprehensive income tax base. |
Subject | Social |
CCOFOG 2014 code | 70849 - Recreation, culture, and religion - Religious and other community services |
Other relevant government programs | Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 27,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 85 | 90 | 85 | 90 | 95 | 95 | 100 | 100 |
Deduction for self-employed artists
Value | |
---|---|
Description | Artists who are self-employed and who create paintings, prints, etchings, drawings, sculptures or similar works of art (but not including those in the business of reproducing works of art) may elect to value their inventory at nil, effectively allowing them to deduct the costs of creating a work of art in the year the costs are incurred rather than in the year the work of art is sold. |
Tax | Personal income tax |
Beneficiaries | Self-employed artists |
Type of measure | Timing preference |
Legal reference | Income Tax Act,subsection 10(6) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | The special treatment of costs incurred by artists recognizes artists’ problems in valuing their works of art on hand, attributing costs to particular works and carrying inventories over long periods of time (Budget 1985). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Arts and culture |
CCOFOG 2014 code | 70829 - Recreation, culture, and religion - Cultural services |
Other relevant government programs | Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deduction for tradespeople’s tool expenses
Value | |
---|---|
Description | A tradesperson can claim a deduction of up to $500 of the total cost of eligible new tools acquired in a taxation year as a condition of employment that exceeds the amount of the Canada Employment Credit ($1,161 in 2016). The total cost of eligible new tools cannot exceed the total of the employment income earned as a tradesperson and apprenticeship grants received to acquire the tools, which are required to be included in income. |
Tax | Personal income tax |
Beneficiaries | Tradespeople |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 8(1)(s) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure provides tax recognition for the extraordinary cost of tools that tradespeople must provide as a condition of employment (Budget 2006). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T777 Statement of Employment Expenses |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 21,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 3 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
Deduction for tuition assistance for adult basic education
Value | |
---|---|
Description | A student can claim a deduction for the amount of tuition assistance received for adult basic education when the tuition assistance has been included in the student’s income and the student does not qualify for the Tuition Tax Credit. In order to be eligible, the tuition assistance must be received under a program established under Part II of the Employment Insurance Act, a program established under the authority of the Department of Employment and Social Development Act, a similar program (in certain circumstances) or a prescribed program. |
Tax | Personal income tax |
Beneficiaries | Students |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraph 110(1)(g) |
Implementation and recent history |
|
Objective – category | To recognize education costs |
Objective | This measure provides assistance to adults undertaking basic education courses as part of a government training program (Budget 2001). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Education |
CCOFOG 2014 code | 70959 - Education - Education not definable by level |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T4E Statement of Employment Insurance and Other Benefits |
Estimation method | The value of this measure is calculated by multiplying total non-taxable tuition assistance by an assumed marginal tax rate. |
Projection method | The value of this measure is projected based on historical growth. |
Number of beneficiaries | About 3,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 3 | 3 | 3 | 2 | 2 | 2 | 2 | 2 |
Deduction of allowable business investment losses
Value | |
---|---|
Description | Capital losses arising from the disposition of shares and debt instruments are generally deductible only against capital gains. However, one-half of the capital loss from a deemed disposition of bad debts or shares of a bankrupt corporation or from a disposition to an arm’s length person of shares or debts of a small business corporation (known as an “allowable business investment loss”) may be used to offset other income. Unused allowable business investment losses may be carried back 3 years and forward 10 years. After 10 years, the loss reverts to an ordinary capital loss and may be carried forward indefinitely. Allowable business investment losses must be reduced by the sum of Lifetime Capital Gains Exemptions claimed in prior years multiplied by the inclusion rate of capital gains applicable to the particular year (to the extent that allowable business investment losses have not already been reduced by those exemptions). The amount by which a taxpayer’s allowable business investment loss is reduced under this provision is treated as a capital loss for the year in which it arose, and may be carried back three years and forward indefinitely to offset capital gains of other years. |
Tax | Personal and corporate income tax |
Beneficiaries | Individual and corporate investors |
Type of measure | Deduction |
Legal reference | Income Tax Act, subsection 38(c) and paragraph 39(1)(c) |
Implementation and recent history |
|
Objective – category | To encourage or attract investment |
Objective | This measure recognizes that small businesses often have difficulty obtaining adequate financing, and provides special assistance for risky investments in such businesses (Budget 1985; Budget 2004). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deduction of capital losses otherwise than against capital gains. |
Subject | Business - small businesses Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: T2 Corporation Income Tax Return |
Estimation method | The value of this tax expenditure corresponds to the tax relief provided by permitting allowable business investment losses to be deducted from other income in the year they arise. The tax expenditure is overstated since it is assumed that the losses would not have been otherwise deducted against capital gains. Personal income tax: T1 micro-simulation model Corporate income tax: T2 micro-simulation model |
Projection method | Personal income tax: T1 micro-simulation model Corporate income tax: Projections are based on the average cost of the previous three years, projected to grow in line with nominal gross domestic product. |
Number of beneficiaries | About 9,600 individuals and 1,600 corporations claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 35 | 40 | 30 | 40 | 40 | 40 | 40 | 40 |
Corporate income tax | 15 | 10 | 10 | 10 | 15 | 10 | 10 | 10 |
Total | 50 | 50 | 40 | 50 | 50 | 50 | 50 | 50 |
Deduction of carrying charges incurred to earn income
Value | |
---|---|
Description | Interest and other carrying charges incurred to earn business or investment income are deductible under certain conditions. Carrying charges generally include fees, other than commissions, paid for advice sought by a taxpayer on buying or selling specific securities, or for the administration or the management of securities of the taxpayer. The management of securities includes the custody of securities, the maintenance of accounting records, and the collection and remittance of income. Carrying charges also include certain legal fees incurred in relation to the establishment or collection of support payments from a current or former spouse or common-law partner, or from the natural parent of the taxpayer’s child. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations |
Type of measure | Deduction |
Legal reference | Income Tax Act, paragraphs 20(1)(c) and (bb) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn business or property income |
Objective | This measure recognizes that carrying charges are incurred for the purpose of earning income. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure. |
Subject | Business - other Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: No data is available. |
Estimation method | Personal income tax: T1 micro-simulation model Corporate income tax: No estimate is available. |
Projection method | Personal income tax: T1 micro-simulation model Corporate income tax: No projection is available. |
Number of beneficiaries | About 2 million individuals claimed this deduction in 2014. No data is available for corporations. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 1,105 | 1,100 | 1,200 | 1,305 | 1,430 | 1,485 | 1,550 | 1,640 |
Corporate income tax | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Total | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Deduction of other employment expenses
Value | |
---|---|
Description | Under certain conditions, an employee can deduct a number of specific employment expenses in computing income, such as automobile expenses, the cost of meals and lodging for certain transport employees, and legal expenses paid to collect salary. |
Tax | Personal income tax |
Beneficiaries | Employees |
Type of measure | Deduction |
Legal reference | Income Tax Act, section 8 |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure provides tax recognition for certain expenses incurred for the purpose of earning employment income. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 785,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 955 | 970 | 955 | 920 | 960 | 1,000 | 1,010 | 1,055 |
Deduction of union and professional dues
Value | |
---|---|
Description | A deduction is available in respect of annual union, professional or like dues paid in the year by an employee (or paid by the employer and included in the employee’s income) in the course of employment. The deduction does not apply to the extent the employee is, or is entitled to be, reimbursed by the employer. |
Tax | Personal income tax |
Beneficiaries | Employees |
Type of measure | Deduction |
Legal reference | Income Tax Act, subparagraphs 8(1)(i)(i) and (iv)-(vii) |
Implementation and recent history |
|
Objective – category | To recognize expenses incurred to earn employment income |
Objective | This measure provides tax recognition for mandatory employment-related expenses. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. |
Subject | Employment |
CCOFOG 2014 code | 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 5.7 million individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 825 | 860 | 890 | 915 | 975 | 985 | 1,025 | 1,070 |
Deferral for asset transfers to a corporation and corporate reorganizations
Value | |
---|---|
Description | Transfers of assets to a taxable Canadian corporation for consideration that includes at least one share of the corporation may be made on a tax-deferred basis. The tax deferral, which is on an elective basis, includes accrued capital gains and recapture of excess capital cost allowance deductions that would otherwise be realized on a taxable transfer. In general, the deferral results in the transferor having an accrued gain in respect of the share(s) acquired from the corporation and the corporation having deferred tax consequences in respect of the acquired property. Shareholders of a taxable Canadian corporation as well as the corporation are also permitted tax deferrals under certain corporate reorganization rules in which corporate assets are transferred. These reorganization rules include amalgamations, windings-up and so-called “corporate butterflies”. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations |
Type of measure | Timing preference |
Legal reference | Income Tax Act, sections 55, 85, 87 and 88 and subsection 84(2) |
Implementation and recent history |
|
Objective – category | To extend or modify the unit of taxation To support business activity |
Objective | These measures facilitate tax-deferred transfers of assets used in business to a corporation and the reorganization of the corporation itself. |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure extends the unit of taxation. This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral of capital gains through intergenerational rollovers of family farms or fishing businesses
Value | |
---|---|
Description | Sales or gifts of assets to children, grandchildren or great-grandchildren typically give rise to taxable capital gains to the extent that the fair market value exceeds the adjusted cost base of the property. However, capital gains realized by an individual on intergenerational transfers of certain types of farm or fishing property (i.e., land, depreciable property including buildings, and eligible capital property such as quotas) and shares in a family farm or fishing corporation or interests in a family farm or fishing partnership, may be deferred in certain circumstances until the property is disposed of in an arm's length transaction, if the farm or fishing property continues to be used principally in a farming or fishing business. |
Tax | Personal income tax |
Beneficiaries | Farming and fishing businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 70(9) to (9.31) and 73(3) to (4.1) |
Implementation and recent history |
|
Objective – category | To achieve an economic objective - other |
Objective | This measure allows for continuity in the management of family farms or family fishing businesses in Canada by permitting property used principally in a family farming or fishing business to pass from generation to generation on a tax-deferred basis (Budget 1973; Budget 2006). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. This measure extends the unit of taxation. |
Subject | Business - farming and fishing |
CCOFOG 2014 code | 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture 70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral of capital gains through transfers to a spouse, spousal trust or alter ego trust
Value | |
---|---|
Description | When a property is transferred to another person, capital gains are generally considered to be realized at the time of the transfer on the basis of the fair market value of the property at that time. However, if an individual transfers capital property to a spouse, spousal trust or alter ego trust (i.e., a trust for the benefit of the transferor), the capital property is deemed to have been disposed of by the individual at its adjusted cost base (or at the undepreciated capital cost in the case of depreciable property), and to have been acquired by the spouse or trust for an amount equal to those deemed amounts. This treatment effectively provides a deferral of the taxable capital gain until the disposition of the property by the spouse or trust, or until the transferee or relevant trust beneficiary dies. |
Tax | Personal income tax |
Beneficiaries | Individuals, their spouses and common-law partners |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsection 70(6) and section 73 |
Implementation and recent history |
|
Objective – category | To extend or modify the unit of taxation |
Objective | This measure recognizes that it is not always appropriate to treat a transfer of assets between spouses (or to a trust for one’s own benefit or for the benefit of a spouse) as a disposition for income tax purposes, and therefore allows families flexibility in structuring their total assets (Budget 1971). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. This measure extends the unit of taxation. |
Subject | Families and households |
CCOFOG 2014 code | 71049 - Social protection - Family and children |
Other relevant government programs | Programs within the mandates of Employment and Social Development Canada and Indigenous and Northern Affairs Canada also support Canadian families and households. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral of income from destruction of livestock
Value | |
---|---|
Description | A taxpayer may defer to the following taxation year, in part or in full, the income received in compensation for the forced destruction of livestock under statutory authority. |
Tax | Personal and corporate income tax |
Beneficiaries | Farming businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, section 80.3 |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | This measure was introduced to allow farmers adequate time to replace their herds, destroyed under statutory authority, without imposing a tax burden in the year of livestock destruction (Budget 1976). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - farming and fishing |
CCOFOG 2014 code | 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Statistics Canada, Direct Payments to Agriculture Producers, Table 1-33 |
Estimation method | Personal income tax (unincorporated farms): The value of this measure is calculated as the total deferred income in a given year minus the total amount deferred from the year before, multiplied by the share of farm income accruing to unincorporated farms and the average marginal tax rate applicable to farm income. Corporate income tax (incorporated farms): A similar methodology is used except that the average tax rate used is the estimated average tax rate applicable to meals and entertainment expenses. |
Projection method | Projections for 2016 through 2018 are not provided as the value of this measure cannot be reliably forecast for these years. |
Number of beneficiaries | No data is available. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | S | S | S | S | 1 | n.a. | n.a. | n.a. |
Corporate income tax | S | S | S | S | 1 | n.a. | n.a. | n.a. |
Total | S | S | S | S | 2 | n.a. | n.a. | n.a. |
Deferral of income from grain sold through cash purchase tickets
Value | |
---|---|
Description | Farmers may make deliveries of grain to a grain elevator and receive payment in the form of a cash purchase ticket. If a cash purchase ticket is issued upon the delivery to an elevator of certain listed grains and the holder of the cash purchase ticket is entitled to payment after the end of the taxation year in which the grain is delivered, then the taxpayer may exclude the amount stated on the cash purchase ticket from income for the taxation year in which the grain was delivered, and instead include it in income for the immediately following taxation year. |
Tax | Personal and corporate income tax |
Beneficiaries | Farming businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 76(4) and (5) |
Implementation and recent history |
|
Objective – category | To achieve an economic objective - other |
Objective | By permitting the deferred reporting of income on grain sales, this measure facilitates the orderly delivery of grain to elevators, which helps meet Canada’s grain export commitments (Budget May 1974). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - farming and fishing |
CCOFOG 2014 code | 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Statistics Canada, CANSIM table 002-0001 |
Estimation method | Personal income tax (unincorporated farms): The value of this measure is calculated as the total deferred income from cash purchase tickets in a given year minus the total income from exchanging cash purchase tickets for their cash value, multiplied by the share of farm income accruing to unincorporated farms and the average marginal tax rate applicable to farm income. Corporate income tax (incorporated farms): A similar methodology is used except that the average tax rate used is the estimated average tax rate applicable to meals and entertainment expenses. |
Projection method | The projection for 2016 uses data available for the first three quarters of the calendar year. Projections for 2017 and 2018 are not provided as the value of this measure cannot be reliably forecast for these years. |
Number of beneficiaries | No data is available. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 45 | 20 | -10 | -20 | 10 | 10 | n.a. | n.a. |
Corporate income tax | 55 | 20 | -10 | -25 | 15 | 10 | n.a. | n.a. |
Total | 100 | 40 | -15 | -45 | 30 | 20 | n.a. | n.a. |
Deferral of income from sale of livestock in a region of drought, flood or excessive moisture
Value | |
---|---|
Description | Farmers may defer recognition of a portion of the income received on the sale of breeding livestock (breeding animals and breeding bees) in prescribed regions affected by drought, flood or excessive moisture. Such deferred income must be recognized in the first taxation year beginning after the region ceases to be a prescribed region. |
Tax | Personal and corporate income tax |
Beneficiaries | Farming businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, section 80.3 Income Tax Regulations, sections 7305 and 7305.02 |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | This measure allows farmers to use the proceeds from the forced sale of livestock due to drought, flood or excessive moisture conditions to fund the acquisition of replacement livestock (Department of Finance Canada news release 88-155, December 12, 1988; Department of Finance Canada news release 2009-024, March 5, 2009; Budget 2014). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - farming and fishing |
CCOFOG 2014 code | 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral through 10-year capital gain reserve
Value | |
---|---|
Description | If the proceeds derived from the sale of a farm or fishing property or small business shares to a child, grandchild or great-grandchild are not all receivable in the year of sale, recognition of a portion of the capital gain realized may be deferred until the year in which the proceeds become receivable. However, a minimum of 10% of the gain must be brought into income per year, creating a maximum 10-year reserve period. This contrasts with the treatment of capital property generally, where the maximum reserve period is five years (see measure “Deferral through five-year capital gain reserve”). |
Tax | Personal income tax |
Beneficiaries | Farming and fishing businesses, individual investors |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsection 40(1.1) |
Implementation and recent history |
|
Objective – category | To achieve an economic objective - other |
Objective | This measure eases the intergenerational transfer of farm or fishing property sold to a child (Explanatory Notes for Act to Amend the Income Tax Act, December 1982; Budget 2006). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - farming and fishing Business - small businesses |
CCOFOG 2014 code | 70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture 70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model. The value of this tax expenditure corresponds to the difference between the amount of tax that would have been payable if capital gain reserves were fully included in income in the year of disposition of the asset and the amount of tax that is payable as reserve amounts are included in income over time. |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 11,000 individuals claimed a 10-year capital gain reserve in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
By type of property | ||||||||
Farm and fishing property | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Small business shares | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Total – personal income tax | 20 | 30 | 25 | 35 | 30 | 45 | 45 | 45 |
Deferral through five-year capital gain reserve
Value | |
---|---|
Description | In some cases, a taxpayer may receive portions of the payment from the sale of a capital property over a number of years. Under those circumstances, realization of a portion of the capital gain may be deferred until the year in which the proceeds are received. A minimum of 20% of the gain must be brought into income per year, creating a maximum five-year deferral period. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations |
Type of measure | Timing preference |
Legal reference | Income Tax Act,subsection 40(1) |
Implementation and recent history |
|
Objective – category | To assess tax liability over a multi-year period |
Objective | This measure, while limiting tax deferral opportunities, recognizes that where capital gain proceeds are receivable over time, fully taxing gains in the year of sale could result in significant liquidity problems for taxpayers (Explanatory Notes for Act to Amend the Income Tax Act, December 1982). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - other Savings and investment |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | Personal income tax: T1 Income Tax and Benefit Return Corporate income tax: No data is available. |
Estimation method | The value of this tax expenditure corresponds to the difference between the amount of tax that would have been payable if capital gain reserves were fully included in income in the year of disposition of the asset and the amount of tax that is payable as reserve amounts are included in income over time. Personal income tax: T1 micro-simulation model Corporate income tax: No estimate is available. |
Projection method | Personal income tax: T1 micro-simulation model Corporate income tax: No projection is available. |
Number of beneficiaries | About 8,400 individuals claimed a five-year capital gain reserve in 2014. No data is available for corporations. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 3 | 10 | 10 | 10 | 10 | 20 | 20 | 20 |
Corporate income tax | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Total | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. | n.a. |
Deferral through rollover of capital gains and capital cost allowance recapture in respect of dispositions of land and buildings
Value | |
---|---|
Description | Capital gains and capital cost allowance recapture resulting from the voluntary disposition of land and buildings by businesses may be deferred if replacement properties are purchased within a specified time period (e.g., a business changing location). The rollover is generally not available for properties used to generate rental income. |
Tax | Personal and corporate income tax |
Beneficiaries | Businesses |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 13(4) and 44(1) |
Implementation and recent history |
|
Objective – category | To support business activity |
Objective | This measure supports businesses by permitting the deferral of capital gains and capital cost allowance recapture that are incidental to an active business. |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral through rollover of capital gains and capital cost allowance recapture in respect of involuntary dispositions
Value | |
---|---|
Description | Capital gains and capital cost allowance recapture resulting from an involuntary disposition (e.g., insurance proceeds received for an asset destroyed in a fire) may be deferred if the funds are reinvested in a replacement asset within a specified period. The capital gain and capital cost allowance recapture are taxable upon disposition of the replacement property. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations |
Type of measure | Timing preference |
Legal reference | Income Tax Act, subsections 13(4) and 44(1) |
Implementation and recent history |
|
Objective – category | To provide relief for special circumstances |
Objective | Rollover provisions are provided in some situations in which it would be unfair to collect capital gains tax even though the taxpayer has sold or otherwise disposed of an asset at a profit (Proposals for Tax Reform, 1969). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferral through use of billed-basis accounting by professionals and professional corporations
Value | |
---|---|
Description | In computing income for tax purposes, individuals and corporations carrying on the practice of certain professions (i.e., accounting, legal, medical doctor, dental, chiropractic or veterinary professional practice) can either use an accrual accounting method by default, or elect to use a billed-basis accounting method. Under the default accrual method, expenses must be matched with their associated revenues. Under the elective billed-basis method, the expenses relating to work in progress can be deducted as incurred even though the associated revenues are not brought into income until either the revenues are billed and become receivable or are paid. This treatment gives rise to a deferral of tax. |
Tax | Personal and corporate income tax |
Beneficiaries | Individuals and corporations carrying on certain professional practices |
Type of measure | Timing preference |
Legal reference | Income Tax Act, section 34 |
Implementation and recent history |
|
Objective – category | To reduce administration or compliance costs |
Objective | This measure recognizes the inherent difficulty in valuing unbilled time and work in progress (Summary of 1971 Tax Reform Legislation, 1971). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Business - other |
CCOFOG 2014 code | 70499 - Economic affairs - Economic affairs not elsewhere classified |
Other relevant government programs | Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Deferred Profit-Sharing Plans
Value | |
---|---|
Description | A Deferred Profit-Sharing Plan (DPSP) is an arrangement under which an employer contributes profits from their business to a trust for the benefit of a designated group of employees. Employers may make tax-deductible contributions to a DPSP on behalf of their employees. The contributions are not immediately taxed in the hands of the employee, and the investment income is not taxed as it is earned. Withdrawals are included in the income of the employee for tax purposes. Employer contributions are limited to 18% of an employee’s earnings up to one-half of the defined contribution Registered Pension Plan (RPP) dollar limit for the year ($13,005 for 2016). Total contributions to a DPSP and a defined contribution RPP are limited to 18% of an employee’s earnings up to a specified dollar amount ($26,010 for 2016). |
Tax | Personal income tax |
Beneficiaries | Employees with a Deferred Profit-Sharing Plan |
Type of measure | Timing preference |
Legal reference | Income Tax Act, section 147 |
Implementation and recent history |
|
Objective – category | To encourage savings To achieve an economic objective - other |
Objective | The tax treatment of these plans encourages additional retirement savings, and fosters co-operation between employers and their workers by encouraging employees to participate in their employer’s business (Budget 1960). |
Category | Non-structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure permits the deferral of the recognition of income or gains for income tax purposes. |
Subject | Retirement Savings and investment |
CCOFOG 2014 code | 71029 - Social protection - Old age |
Other relevant government programs | Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | No data is available. |
Estimation method | No estimate is available. |
Projection method | No projection is available. |
Number of beneficiaries | No data is available. |
Disability supports deduction
Value | |
---|---|
Description | Attendant care as well as certain other disability supports expenses incurred to carry on a business or for education or employment purposes are deductible from income unless they have been reimbursed by a non-taxable payment (e.g., insurance payment). Generally, the deduction is limited to the lesser of the amounts paid for eligible expenses and the taxpayer’s earned income. Students are additionally entitled to claim the deduction against up to $15,000 of non-earned income, subject to the length of their educational program. Individuals do not have to be eligible for the Disability Tax Credit in order to claim the deduction, although other criteria may apply for eligibility of certain types of disability supports. Expenses claimed under the disability supports deduction cannot be claimed under the Medical Expense Tax Credit. |
Tax | Personal income tax |
Beneficiaries | Individuals with disabilities |
Type of measure | Deduction |
Legal reference | Income Tax Act, section 64 |
Implementation and recent history |
|
Objective – category | To recognize non-discretionary expenses (ability to pay) |
Objective | This measure recognizes the costs incurred by taxpayers with disabilities for disability supports required to enable them to earn business or employment income or to attend school (Budget 1989; Budget 2000; Budget 2004). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure provides tax recognition for an expense that is incurred to earn employment income. This measure provides tax recognition for an expense that is incurred for education purposes. |
Subject | Health Employment Education |
CCOFOG 2014 code | 71012 - Social protection - Sickness and disability - Disability 70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs 70989 - Education - Education not elsewhere classified |
Other relevant government programs | Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous and Northern Affairs Canada also support objectives related to education and training. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 2,000 individuals claimed this deduction in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 2 | 2 | 1 | 3 | 3 | 3 | 3 | 4 |
Disability Tax Credit
Value | |
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Description | The Disability Tax Credit provides tax relief for non-itemizable disability-related costs in respect of an eligible individual that has been certified by a qualified medical practitioner as having a severe and prolonged disability. The value of the non-refundable credit is calculated by applying the lowest personal income tax rate to the disability credit amount ($8,001 in 2016). The credit amount is indexed to inflation and can be transferred to a supporting spouse, parent, grandparent, child, grandchild, brother, sister, aunt, uncle, nephew or niece of the individual. Families caring for eligible children with severe and prolonged impairments may claim an additional amount as a supplement to the credit. For the 2016 taxation year, the value of the supplement is calculated by applying the lowest personal income tax rate to the supplement amount ($4,667 in 2016) and is reduced dollar-for-dollar by the amount of child care or attendant care expenses in excess of $2,734 that is claimed under the child care expense deduction, the disability supports deduction or the Medical Expense Tax Credit. Both the expense threshold and the supplement amount are indexed to inflation. |
Tax | Personal income tax |
Beneficiaries | Individuals with disabilities |
Type of measure | Credit, non-refundable |
Legal reference | Income Tax Act, subsection 118.3(1) |
Implementation and recent history |
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Objective – category | To recognize non-discretionary expenses (ability to pay) |
Objective | This measure improves tax fairness by recognizing the effect of a severe and prolonged disability on an individual’s ability to pay tax (Budget 1997; Budget 2005). |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | Tax credits are treated as deviations from the benchmark tax system. This measure extends the unit of taxation. |
Subject | Health |
CCOFOG 2014 code | 71012 - Social protection - Sickness and disability - Disability |
Other relevant government programs | Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant Government programs is provided in the table at the end of Part 3. |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 674,000 individuals claimed this credit for themselves in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 685 | 760 | 815 | 890 | 935 | 960 | 995 | 1,035 |
Dividend gross-up and tax credit
Value | |
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Description | Income earned by corporations is subject to corporate income tax and, on distribution as dividends to individuals, personal income tax. The result is that dividends received by Canadian taxpayers are taxed at both the corporate and the personal levels. The Dividend Tax Credit (DTC), provided within the personal income tax system, is intended to compensate a taxable individual for corporate income taxes that are presumed to have been paid. The DTC is generally meant to ensure that income earned by a corporation and paid out to an individual as a dividend will be subject to the same amount of tax as income earned directly by the individual. The DTC mechanism calculates a proxy for pre-tax corporate profits and then provides a tax credit to individuals in recognition of corporate-level tax. Under this approach, an individual is first required to include the grossed-up amount of taxable dividends (i.e., the proxy for pre-tax profits) in income. Using the grossed-up amount, the tax system in effect treats the individual as having directly earned the amount that the corporation is presumed to have earned in order to pay the dividend. The DTC then compensates the individual for the amount of corporate-level tax presumed to have been paid on the grossed-up amount. The tax system has two DTC rates and gross-up factors to recognize the two different corporate income tax rates that generally apply to corporations. The enhanced DTC (15.0198% in 2016) and gross-up (38% in 2016) are applied to dividends distributed to an individual from corporate income taxed at the general corporate tax rate (eligible dividends). The ordinary DTC (10.5217% in 2016) and gross-up (17% in 2016) are applied to dividends distributed to an individual from corporate income not taxed at the general corporate tax rate (ineligible dividends). |
Tax | Personal income tax |
Beneficiaries | Individual investors |
Type of measure | Other; credit, non-refundable |
Legal reference | Income Tax Act, sections 82 and 121 |
Implementation and recent history |
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Objective – category | To prevent double taxation |
Objective | These measures contribute to the integration of the corporate and personal income tax systems. |
Category | Structural tax measure |
Reason why this measure is not part of benchmark tax system | This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure. |
Subject | Savings and investment |
CCOFOG 2014 code | n/a |
Other relevant government programs | n/a |
Source of data | T1 Income Tax and Benefit Return |
Estimation method | T1 micro-simulation model |
Projection method | T1 micro-simulation model |
Number of beneficiaries | About 4.2 million individuals claimed this credit in 2014. |
Cost Information:
Millions of dollars | 2011 | 2012 | 2013 | 2014 | 2015 (P) | 2016 (P) | 2017 (P) | 2018 (P) |
---|---|---|---|---|---|---|---|---|
Personal income tax | 4,145 | 4,415 | 5,025 | 4,625 | 5,695 | 3,560 | 4,595 | 4,870 |
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