Tax Expenditures 1999: 2-2
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Chapter 2 - Estimates and Projections (cont'd)

Table 2
Corporate income tax expenditures*

Notes (Table 2)

1. Unless otherwise indicated in the footnotes, changes in the projections from the figures in last year's edition of this document result from changes in the explanatory economic variables upon which the projections are based.
2. The 1994 figures are based upon final data and may differ from the figures in last year's edition of this document which were based on preliminary data.
3. The increase from 1994 to 1995 in the revenue cost of the low tax rate for manufacturing and processing (M&P) profits reflects both a decrease in the tax rate on M&P profits from 22 per cent to 21 per cent and an increase in the level of M&P profits. The decrease from 1995 to 1996 reflects a projected decrease in the level of M&P profits.
4. The projected cost of the tax expenditure for 1998 and beyond is lower because a large portion of this tax expenditure relates to the Hibernia offshore oil project, which has completed its investment phase. No new offshore projects have been included in the projections. The tax expenditure could be higher if a project were to proceed.
5. New investments did not earn this credit after December 31, 1994. Credits not claimed in 1994 and prior years may be carried forward. However, they are included in the investment tax credits claimed in a current year but earned in prior years.
6. New investments did not earn the small business investment tax credit after December 31, 1993. As a result, this credit could only be earned in the 1994 and previous taxation years. Unclaimed credits are carried forward and may be claimed in subsequent years. When claimed, these unused credits are included under investment tax credits claimed in a current year but earned in prior years.
7. All investment tax credits earned in previous years but not claimed until the current year are included under this item. Because this tax expenditure fluctuates significantly from year to year, the tax expenditure projections are based upon an average of the amounts of 1992 to 1995.
8. Taxation year 1995 is a transition year. Some films are financed by tax shelter deductions for accelerated capital cost allowance.
9. This measure was introduced in 1997.
10. Due to the elimination of the earned depletion allowance, there have been no additions to this tax expenditure pool since 1989. Amounts claimed in the current years relate to depletion earned in 1989 and prior years.
11. This tax expenditure consists of the fast write-off of certain capital assets, including capital equipment used for scientific research and experimental development, and of resource exploration and development expenditures and energy conservation and efficiency equipment. See text on page 88 for a further explanation of why no figures have been calculated.
12. The tax expenditure for allowable business investment losses fluctuates from year to year depending upon the amount of current year losses and the availability of income against which to apply these losses.
13. The amount of this tax expenditure can fluctuate significantly from year to year depending primarily upon the level of construction activity.
14. This measure was introduced in 1998.
15. This measure was introduced in 1998.
16. These estimates are based on the benchmark assumption that no behavioural response would occur after the hypothetical removal of existing withholding tax exemptions. This assumption is particularly difficult to sustain for this type of tax, as indicated in the text, which means that the amounts shown in the table should not be regarded as estimates of the revenue gain that would be realized from the hypothetical removal of the listed withholding tax exemptions.
17. The low level in 1994 is due to the low level of exempt payments made to non-residents that year. This can be expected on occasion since the events that trigger such payments will not necessarily occur on a regular basis.
18. The large increase from 1995 to 1996 can be attributed to protocol changes to the Canada-U.S. tax treaty.
19. The low level in 1994 is due to the low level of exempt payments made to non-residents that year. This can be expected on occasion since the events that trigger such payments will not necessarily occur on a regular basis.
20. This rebate was applicable to purchases of diesel and aviation fuel subject to federal excise tax during the 1991 and 1992 calendar years only.
21. This measure is effective for the years 1997 to 2000 inclusive.
22. This measure was introduced in 1994 and is scheduled to expire in 2000.
23. This measure was introduced in the 1995 budget and extended in the 1996, 1997, 1998 and 1999 budgets. The measure is scheduled to expire after October 31, 2000.
24. The increase over the 1994 to 1996 period results from an increase in the amount of investment income and the introduction of an additional refundable tax of 6 2/3 per cent effective July 1, 1995.
25. The impact of loss carry-overs can fluctuate significantly from year to year depending upon the amount of current and prior years' losses and the availability of income against which to apply these losses.
26. The decrease in this amount from 1994 to 1995 results from a decrease in the amount of losses available for carry-back to reduce income of prior years.
27. The increase in this amount from 1994 to 1995 results from an increase in the amount of income against which to apply losses of prior years.
28. The decrease in this amount from 1994 to 1995 results from a decrease in the amount of losses available for carry-back to reduce income of prior years.
29. The increase in this amount from 1994 to 1995 results from an increase in the amount of income against which to apply losses of prior years.
30. The decrease in the tax expenditure for meals and entertainment expenses from 1994 to 1995 results from the decrease in the deductible portion of such expenses from 80 per cent to 50 per cent, effective after February 1994.
31. The large corporations tax rate increased to 0.225 per cent from 0.2 per cent, effective February 28, 1995. Therefore, the value of the exempt threshold was increased for taxpayers.
32. Projections for the 1996-2001 period reflect lower commodity prices for natural resources.
33. The amount of this tax expenditure can fluctuate significantly from year to year depending primarily upon profitability and capital expenditures. These two factors can change the payments made under the joint venture agreement with the Government of Alberta. The large decrease from 1996 to 1997 can be attributed to changes in the joint venture agreement implemented on January 1, 1997.

Table 3
GST tax expenditures*

* The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the table.
See pages 42-47 for a discussion of the reasons for this.

Notes (Table 3)

1. This measure was introduced in October 1996.
2. The sharp decline in 1995 reflects the significant weakness in residential construction in that year.
3. Estimates of this tax expenditure were derived as part of a review of the Visitors' Rebate Program conducted during 1997.
4. Since the value of this tax expenditure is influenced by provincial budgetary decisions, the projected value of the tax expenditure for the relevant years is simply the value estimated for 1997.
5. The decline in the GST credit between 1998 and 2001 reflects actual and anticipated growth in nominal personal income. It should be noted that the 1998 figure is based on actual data provided by Revenue Canada.
6. The numerical approach used to derive the tax expenditure figures is tightly integrated with the tax expenditure estimates reported for the personal and corporate tax system.

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