Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2023: part 3
Descriptions of Tax Expenditures
Description
A short description is provided of the key design features of the tax expenditure, as applicable on December 31, 2021 (unless otherwise noted).
Type of tax
Whether a measure is a tax expenditure under the personal income tax, the corporate income tax and/or the GST.
Beneficiaries
Indicates the group of taxpayers (e.g., families, seniors, small businesses) benefiting from the tax expenditure.
Type of measure
One of the following types of measures is attributed to the tax expenditure:
Exemption: The non-taxation of certain taxpayers, income or gains.
Exemption and zero-rating under the GST: No GST is charged on exempt goods and services, while the GST applies on zero-rated goods and services, but at a zero GST rate. Vendors of zero-rated goods and services are entitled to claim input tax credits to recover the full amount of GST they paid on inputs used to produce or market zero-rated products; in contrast, vendors of exempt goods and services are not entitled to claim input tax credits to recover the GST they paid on their inputs. A number of GST expenditures are not exemptions or zero-rating provisions from a legal perspective, yet have the effect of not imposing the GST on certain goods and services (e.g., travellers’ exemption, small suppliers’ threshold). These measures are classified as “other”.
Deduction: An amount subtracted from total income in determining net income, or from net income in determining taxable income.
Deemed remittance: A measure that deems a certain amount to be tax already remitted by the taxpayer.
Credit (refundable, non-refundable): An amount subtracted from tax payable. A credit is refundable when any excess of the credit over the amount of tax payable is refunded to the taxpayer.
Rebate and refund: An amount of tax paid that is refunded to the taxpayer.
Preferential tax rate: A tax rate that is lower than the general benchmark rate.
Surtax: A tax that is imposed in addition to the basic tax payable.
Timing preference: A measure that permits the deferral of tax relative to the benchmark tax treatment, for instance by delaying the time income or gains are brought into income, or by accelerating the use of deductions.
Legal reference
Indicates the legal provisions that relate to the tax expenditure. Only the main acting provision is generally indicated, but more than one provision may be indicated when a tax expenditure results from the interaction of multiple key provisions.
Implementation and recent history
Indicates the date or year the tax expenditure was implemented and became effective. Key recent developments are also reported.
Objective
Indicates the objective(s) being pursued by the tax expenditure, as officially stated by the government when the tax expenditure was introduced or subsequently. When no official statement could be found, the objective currently pursued by the tax expenditure is indicated, as can be determined from the design and effects of the tax expenditure.
For presentation purposes, objectives have been classified in the following standard categories:
Objectives that are internal to the tax system:
To reduce administration or compliance costs
To provide relief for special circumstances
To assess tax liability over a multi-year period
To prevent double taxation
To recognize non-discretionary expenses (ability to pay)
To recognize expenses incurred to earn employment income
To recognize education costs
To promote the fairness of the tax system
To ensure a neutral tax treatment across similar situations
To implement intergovernmental tax arrangements
To implement a judicial decision
General revenue raising
Other objectives:
To extend or modify the unit of taxation
To provide income support or tax relief
To encourage savings
To encourage or attract investment
To encourage investment in education
To encourage employment
To support competitiveness
To support business activity
To achieve an economic objective - other
To achieve a social objective
Category
The category indicates whether the measure is structural or non-structural. A structural tax measure is one whose main objective is internal to the tax system (see above list under “Objective”). When a measure pursues both structural and non-structural objectives, it is categorized based on an assessment of whether the structural or non-structural component predominates; for instance, the Home Accessibility Tax Credit supports independent living and as such is classified as non-structural, even though this credit also provides tax recognition for some non-discretionary expenses, which is a structural objective. The classification of a tax expenditure as structural or non-structural is not indicative of the relevance and performance of the measure.
Refundable tax credits (with the exception of the GST/HST Credit) are treated as direct spending for government accounting purposes, and for that reason are assigned to a separate category.
Reason why this measure is not part of benchmark tax system
Indicates the manner(s) in which the tax expenditure is departing from the benchmark tax system (see the section “Main Types of Tax Expenditures” in Part 1 of the report). Measures that are part of the benchmark tax system are indicated as such.
Subject
Tax expenditures are classified based on their subject matter. This classification is provided solely for presentational purposes and is not intended to reflect underlying policy considerations. The following subjects have been identified:
Arts and culture
Business - farming and fishing
Business - natural resources
Business - research and development
Business - small businesses
Business - other
Donations, gifts, charities and non-profit organizations
Education
Employment
Environment
Families and households
Health
Housing
Income support
Intergovernmental tax arrangements
International
Retirement
Savings and investment
Social
Other
Canadian Classification of Functions of Government 2014 code
The Canadian Classification of Functions of Government (CCOFOG) is a classification used by Statistics Canada in reporting government finance, fiscal and public sector statistics. This classification is a variant of the international functional expenditure classification standard that was developed by the Organisation for Economic Co-operation and Development to facilitate international comparisons. The full 2014 CCOFOG can be accessed on the Statistics Canada website at www.statcan.gc.ca.
Other relevant government programs
This provides background information on spending programs of the federal government that are relevant to the policy area of the tax expenditure. Additional information on these programs can be found in the table at the end of Part 3 and in the Departmental Plans and Departmental Results Reports of the relevant departments and agencies.Footnote 1
Source of data
Indicates the source of the data used in calculating the cost estimates and projections for the tax expenditure.
Estimation method
Provides a short description of the method used to calculate the cost estimates for the tax expenditure. For additional details, see the section “Calculation of the Tax Expenditure Estimates and Projections” in Part 1 of the report.
Projection method
Provides a short description of the method used to calculate the cost estimates for the tax expenditure. For additional details, see the section “Calculation of the Tax Expenditure Estimates and Projections” in Part 1 of the report.
Number of beneficiaries
Provides a short description of the method used to calculate the cost projections for the tax expenditure. For additional details, see the section “Calculation of the Tax Expenditure Estimates and Projections” in Part 1 of the report
Cost information
Cost estimates and projections for the tax expenditure, when available, are copied from the table in Part 2 for convenience. Additional details are also provided for some measures.
Cost estimates and projections are presented on a calendar year basis. The fiscal period of a corporation may overlap more than one calendar year; when this is the case, the value of a tax expenditure is allocated to the calendar year in which the corporation’s fiscal period ends.
Totals may not add due to rounding.
Notes:
Amounts under $500,000 are reported as “S” (“small”), amounts between $500,000 and $5 million are rounded to the nearest $1 million and amounts above $5 million are rounded to the nearest $5 million.
n.a. No data available to support a meaningful estimate or projection
n/a Not applicable
– Tax expenditure not in effect
X Not published for confidentiality reasons
P Projection
List of Tax Expenditures
10% Temporary Wage Subsidy for Employers
$200 capital gains exemption on foreign exchange transactions
Accelerated capital cost allowance for clean energy generation equipment
Accelerated capital cost allowance for liquefied natural gas facilities
Accelerated capital cost allowance for manufacturing or processing machinery and equipment
Accelerated capital cost allowance for mining and oil sands assets
Accelerated capital cost allowance for vessels
Accelerated capital cost allowance for zero-emission automotive equipment and vehicles
Accelerated deductibility of Canadian Renewable and Conservation Expenses
Accelerated deductibility of some Canadian Exploration Expenses
Accelerated Investment Incentive
Additional deduction for gifts of medicine
Additional Tax on Banks and Life Insurers
Apprentice vehicle mechanics' tools deduction
Apprenticeship Job Creation Tax Credit
Atlantic Investment Tax Credit
Canada Emergency Rent Subsidy and Lockdown Support
Canada Recovery Hiring Program
Canada Workers Benefit / Working Income Tax Benefit
Canadian Film or Video Production Tax Credit
Canadian Journalism Labour Tax Credit
Capital gains exemption on personal-use property
Carbon Capture, Utilization and Storage Investment Tax Credit
Charitable Donation Tax Credit
Corporate Mineral Exploration and Development Tax Credit
Credit for subscriptions to Canadian digital news media
Credit for the Basic Personal Amount
Critical Mineral Exploration Tax Credit for Flow-Through Share Investors
Deductibility of certain costs incurred by musicians
Deductibility of charitable donations
Deductibility of contributions to a qualifying environmental trust
Deductibility of countervailing and anti-dumping duties when paid
Deductibility of earthquake reserves
Deductibility of expenses by employed artists
Deduction for certain contributions by individuals who have taken vows of perpetual poverty
Deduction for clergy residence
Deduction for self-employed artists
Deduction for tradespeople's tool expenses
Deduction for tuition assistance for adult basic education
Deduction of allowable business investment losses
Deduction of interest and carrying charges incurred to earn investment income
Deduction of other employment expenses
Deduction of union and professional dues
Deferral for asset transfers to a corporation and corporate reorganizations
Deferral of capital gains through intergenerational rollovers of family farms or fishing businesses
Deferral of capital gains through transfers to a spouse, spousal trust or alter ego trust
Deferral of income from destruction of livestock
Deferral of income from grain sold through cash purchase tickets
Deferral of income from sale of livestock in a region of drought, flood or excessive moisture
Deferral through ten-year capital gain reserve
Deferral through five-year capital gain reserve
Deferral through use of billed-basis accounting by professionals and professional corporations
Dividend gross-up and tax credit
Employee stock option deduction
Exemption for insurers of farming and fishing property
Exemption for international shipping and aviation by non-residents
Exemption from branch tax for transportation, communications, and iron ore mining corporations
Exemption from GST and rebate for legal aid services
Exemption from GST for certain residential rent
Exemption from GST for certain supplies made by charities and non-profit organizations
Exemption from GST for child care
Exemption from GST for domestic financial services
Exemption from GST for ferry, road and bridge tolls
Exemption from GST for health care services
Exemption from GST for hospital parking
Exemption from GST for municipal transit
Exemption from GST for personal care services
Exemption from GST for sales of used residential housing and other personal-use real property
Exemption from GST for short-term accommodation
Exemption from GST for tuition and educational services
Exemption from GST for water, sewage and basic garbage collection services
Exemption of scholarship, fellowship and bursary income
Exemptions from non-resident withholding tax
Expensing of advertising costs
Expensing of current expenditures on scientific research and experimental development
Expensing of employee training costs
Expensing of incorporation expenses
First-Time Donor's Super Credit
First-Time Home Buyers' Tax Credit
Foreign Convention and Tour Incentive Program
Foreign tax credit for individuals
Goods and Services Tax/Harmonized Sales Tax Credit
Hardest-Hit Business Recovery Program
Holdback on progress payments to contractors
Immediate expensing for small businesses
Income tax exemption for certain public bodies
Investment Tax Credit for Child Care Spaces
Investment Tax Credit for Clean Technologies
Labour Mobility Deduction for Tradespeople
Labour-Sponsored Venture Capital Corporations Credit
Lifetime Capital Gains Exemption
Mineral Exploration Tax Credit for Flow-Through Share Investors
Multigenerational Home Renovation Tax Credit
Non-deductibility of advertising expenses in foreign media
Non-taxation of allowances for diplomats and other government employees posted abroad
Non-taxation of allowances for members of legislative assemblies and certain municipal officers
Non-taxation of benefits from private health and dental plans
Non-taxation of benefits in respect of home relocation loans
Non-taxation of capital dividends
Non-taxation of capital gains on donations of cultural property
Non-taxation of capital gains on donations of ecologically sensitive land
Non-taxation of capital gains on donations of publicly listed securities
Non-taxation of capital gains on principal residences
Non-taxation of certain importations
Non-taxation of certain non-monetary employment benefits
Non-taxation of certain veterans' benefits
Non-taxation of Guaranteed Income Supplement and Allowance benefits
Non-taxation of income earned by military and police deployed to international operational missions
Non-taxation of life insurance companies' foreign income
Non-taxation of lottery and gambling winnings
Non-taxation of non-profit organizations
Non-taxation of personal property of status Indians and Indian bands situated on reserve
Non-taxation of provincial assistance for venture investments in small businesses
Non-taxation of RCMP pensions and other compensation in respect of injury, disability or death
Non-taxation of registered charities
Non-taxation of social assistance benefits
Non-taxation of up to $10,000 of death benefits
Non-taxation of workers' compensation benefits
Partial deduction of and partial input tax credits for meals and entertainment
Partial inclusion of capital gains
Partial inclusion of U.S. Social Security benefits
Patronage dividends paid as shares by agricultural cooperatives
Political Contribution Tax Credit
Pooled Registered Pension Plans
Preferential tax rate for small businesses
Rate reduction for zero-emission technology manufacturers
Rebate for book purchases made by certain organizations
Rebate for hospitals, facility operators and external suppliers
Rebate for new residential rental property
Rebate for poppies and wreaths
Rebate for qualifying non-profit organizations
Rebate for registered charities
Rebate for schools, colleges and universities
Rebate for specially equipped motor vehicles
Rebate to employees and partners
Reclassification of expenses under flow-through shares
Refundable Medical Expense Supplement
Refundable taxes on investment income of private corporations
Refunds for Indigenous self-governments
Registered Disability Savings Plans
Registered Education Savings Plans
Registered Retirement Savings Plans
Rollovers of investments in small businesses
Scientific Research and Experimental Development Investment Tax Credit
Search and Rescue Volunteers Tax Credit
Small Businesses Air Quality Improvement Tax Credit
Special tax computation for certain retroactive lump-sum payments
Special tax rate for credit unions
Spouse or Common-Law Partner Credit
Surtax on the profits of tobacco manufacturers
Tax status of certain federal Crown corporations
Tax treatment of alimony and maintenance payments
Tax treatment of Canada Pension Plan and Quebec Pension Plan contributions and benefits
Tax treatment of Employment Insurance and Quebec Parental Insurance Plan premiums and benefits
Tax treatment of farm savings accounts (AgriInvest and Agri-Québec)
Tax treatment of investment income from life insurance policies
Taxation of capital gains upon realization
Tax-free amount for emergency services volunteers
Tax-Free First Home Savings Account
Teacher and Early Childhood Educator School Supply Tax Credit
Tourism and Hospitality Recovery Program
Transfer of income tax points to provinces
Volunteer Firefighters Tax Credit
Zero-rating of agricultural and fish products and purchases
Zero-rating of basic groceries
Zero-rating of feminine hygiene products
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