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Tax Expenditures 1999: 2-1
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Chapter 2 - Estimates and Projections

Tables 1 to 3 provide tax expenditure values for personal income tax, corporate income tax and the goods and services tax (GST) for the years 1994 to 2001. In the case of personal income tax, tax expenditures are grouped according to functional categories. This grouping into functional categories is not intended as a policy justification for the specific provisions nor is it the case that all tax measures fall neatly into one of the categories. The categories are provided solely for organizational purposes.

All estimates are reported in millions of dollars. The letter "S" indicates that the cost is less than $2.5 million while "n.a." signifies that data were not available. The inclusion in the report of items for which estimates are not available is warranted given that the report is designed to provide information on the type of assistance delivered through the tax system even if it is not always possible to provide a quantitative estimate. Work is continuing to obtain quantitative estimates where possible.

Table 1
Personal income tax expenditures*
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Culture and recreation
Deduction for clergy residence 60 56 59 57 57 57 57 57
Flow-through of capital cost allowance (CCA)on Canadian films1 12 48 – – – – – –
Deduction for certain contributions by individuals who have taken vows of perpetual poverty S S S S S S S S
Write-off of Canadian art purchased by unincorporated businesses n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Assistance for artists n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deduction for artists and musicians n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of capital gains on gifts of cultural property n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Education
Tuition fee credit2 185 195 210 265 295 315 340 365
Education credit3 43 44 55 92 190 195 195 195
Education and tuition fee credits transferred4 205 215 260 315 320 340 360 390
Carry-forward of education and tuition fee credits5 – – – – 10 25 40 50
Student loan interest credit6 – – – – 120 135 150 160
Registered education savings plans (RESPs)7 n.a. n.a. 35 32 44 78 125 185
Exemption on first $500 of scholarship, fellowship and bursary income 6 6 6 6 6 6 6 6
Deduction of teachers' exchange fund contributions S S S S S S S S
* The elimination of a tax expenditure would not necessarily yield the full tax revenues shown in the table. See pages 42-47 for a discussion of the reasons for this.
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Employment
Deduction of home relocation loans S S S S S S S S
Non-taxation of allowances to volunteer firefighters8 4 4 4 4 – – – –
Deduction for emergency service volunteers8 – – – – 14 14 14 14
Northern residents deductions9 155 125 125 115 120 120 125 125
Overseas employment credit 30 31 44 36 37 37 37 37
Employee stock options10 56 74 125 195 130 135 140 145
Non-taxation of strike pay n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deferral of salary through leave of absence/sabbatical plans n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Employee benefit plans n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of certain non-monetary employment benefits n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Family
Spousal credit11 1,190 1,200 1,205 1,185 1,195 1,315 1,435 1,450
Equivalent-to-spouse credit11 470 470 470 475 480 510 540 550
Infirm dependant credit12 10 6 7 7 7 7 7 7
Caregiver credit6 – – – – 120 125 125 125
Canada Child Tax Benefit13 5,275 5,240 5,215 5,315 5,550 6,010 6,525 6,820
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Farming and fishing
$500,000 lifetime capital gains exemption for farm property14 470 275 325 320 310 310 310 310
Net Income Stabilization Account
Deferral of tax on government contributions15 43 31 115 98 86 100 100 100
Deferral of tax on bonus and interest income 8 14 19 23 35 42 52 60
Taxable withdrawals -15 -15 -35 -39 -69 -48 -48 -48
Deferral of income from destruction of livestock S S S S S S S S
Deferral of income from grain sold through cash purchase tickets16 31 19 6 -1 8 8 8 8
Deferral through 10-year capital gain reserve16 14 8 -2 6 6 6 6 6
Deferral of capital gain through intergenerational rollovers of family farms n.a. n.a n.a n.a n.a n.a n.a n.a
Exemption from making quarterly tax instalments n.a. n.a n.a n.a n.a n.a n.a n.a
Cash basis accounting n.a. n.a n.a n.a n.a n.a n.a n.a
Flexibility in inventory accounting n.a. n.a n.a n.a n.a n.a n.a n.a
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Federal-provincial financing arrangements
Quebec abatement 2,185 2,320 2,410 2,560 2,640 2,740 2,810 2,935
Transfers of income tax room to provinces 9,090 9,745 10,240 11,215 11,600 12,030 12,350 12,885
General business and investment
$100,000 lifetime capital gains exemption17 8,815 34 – – – – – –
Partial inclusion of capital gains18 385 405 655 850 635 655 675 695
Deduction of limited partnership losses16, 19 295 195 205 195 210 210 210 210
Investment tax credits16 70 54 39 22 38 38 38 38
Deferral through five-year capital gain reserve16 -27 -6 12 -7 -7 -7 -7 -7
Deferral through capital gains rollovers n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deferral through billed-basis accounting by professionals n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Deduction of accelerated tax depreciation20 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
$1,000 capital gains exemption on personal-use property n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
$200 capital gains exemption on foreign exchange transactions n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Taxation of capital gains upon realization n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Health
Non-taxation of business-paid health and dental benefits21 1,270 1,440 1,490 1,605 1,665 1,715 1,745 1,765
Disability credit 275 270 265 270 275 275 280 285
Medical expense credit22 260 305 330 350 370 390 410 430
Medical expense supplement for earners23 – – – 24 40 40 40 40
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Income maintenance and retirement
Non-taxation of guaranteed income supplement and spouse's allowance benefits 260 285 300 305 310 315 320 325
Non-taxation of social assistance benefits24 705 635 560 510 490 490 490 490
Non-taxation of workers' compensation benefits16, 25 585 635 620 605 615 615 615 615
Non-taxation of amounts received as damages in respect of personal injury or death 20 19 18 17 18 18 18 18
Non-taxation of employer-paid premiums for group term life insurance of up to $25,00026 87 – – – – – – –
Non-taxation of veterans' allowances, civilian war pensions and allowances, and other service pensions (including those from Allied countries)27 6 4 4 S S S S S
Non-taxation of veterans' disability pensions and support for dependants 140 135 140 140 140 140 140 140
Treatment of alimony and maintenance payments28 260 250 250 250 250 250 250 250
Age credit 1,290 1,270 1,320 1,345 1,490 1,515 1,540 1,570
Pension income credit 325 350 365 385 390 400 405 415
Saskatchewan Pension Plan S S S S S S S S
Registered retirement savings plans
Deduction for contributions 4,785 5,290 5,940 6,345 6,975 7,675 8,070 8,880
Non-taxation of investment income29 3,565 3,850 3,520 3,400 3,310 3,890 4,370 4,880
Taxation of withdrawals -1,620 -1,750 -2,192 -2,510 -2,750 -3,020 -2,945 -3,230
Net expenditure30 6,730 7,390 7,270 7,235 7,535 8,545 9,495 10,530
Registered pension plans
Deduction for contributions 4,890 4,925 4,930 4,980 5,030 5,080 5,150 5,200
Non-taxation of investment income29 9,540 10,040 9,020 8,095 7,335 7,985 8,675 8,880
Taxation of withdrawals -4,010 -4,520 -4,905 -5,490 -6,150 -6,890 -7,800 -8,735
Net expenditure30 10,420 10,445 9,045 7,585 6,215 6,175 6,025 5,345
Deferred profit-sharing plans n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of RCMP pensions/compensation in respect of injury, disability or death31 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of up to $10,000 of death benefits n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of investment income on life insurance policies32 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Small business
$500,000 lifetime capital gains exemption for small business shares16, 33 1,725 590 475 875 645 645 645 645
Deduction of allowable business investment losses16 77 79 74 64 72 72 72 72
Labour-sponsored venture capital corporations (LSVCCs) credit34, 35 110 235 91 80 130 130 130 130
Deferral through 10-year capital gain reserve16 4 -2 -5 -1 -1 -1 -1 -1
Other items
Non-taxation of capital gains on principal residences36
Partial inclusion rate 1,795 1,085 1,245 1,270 920 905 905 905
Full inclusion rate 2,390 1,445 1,660 1,690 1,225 1,205 1,205 1,205
Non-taxation of income from the Office of the Governor General S S S S S S S S
Assistance for prospectors and grubstakers S S S S S S S S
Charitable donations credit37 900 940 1,090 1,265 1,305 1,350 1,385 1,425
Reduced inclusion rate for capital gains arising from certain charitable donations38 – – – 90 95 100 105 110
Gifts to the Crown credit39 21 34 28 15 25 25 25 25
Political contribution credit16 9 10 11 16 12 12 12 12
Retroactive lump-sum payments40 – 10 10 10 10 10 10 10
Non-taxation of income of Indians on reserves n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Non-taxation of gifts and bequests n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Estimates Projections
1994 1995 1996 1997 1998 1999 2000 2001
($ millions)
Memorandum items
Non-taxation of lottery and gambling winnings41 960 1,155 1,380 1,440 1,475 1,510 1,560 1,610
Non-taxation of specified incidental expenses 6 6 5 5 5 5 5 5
Non-taxation of allowances for diplomats and other government employees posted abroad 8 9 8 8 8 8 8 8
Child care expense deduction42 305 365 420 480 560 565 570 575
Attendant care expense deduction S S S S S S S S
Moving expense deduction16, 43 64 61 64 62 73 73 73 73
Deduction of carrying charges incurred to earn income16, 44 540 645 590 540 600 600 600 600
Deduction of meals and entertainment expenses45 110 97 130 85 110 110 110 110
Deduction of farm losses for part-time farmers 48 52 52 51 51 51 51 51
Farm and fishing loss carry-overs16 9 10 10 13 11 11 11 11
Capital loss carry-overs16 87 89 160 115 115 115 115 115
Non-capital loss carry-overs16 74 86 100 89 89 89 89 89
Logging tax credit S S S S S S S S
Deduction of resource-related expenditures46 77 78 170 160 135 135 135 135
Deduction of other employment expenses 540 540 585 615 635 655 675 695
Deduction of union and professional dues 465 505 510 520 525 530 535 540
Employment insurance
Employment insurance contribution credit 1,300 1,320 1,260 1,325 1,250 1,255 1,280 1,255
Non-taxation of employer-paid premiums 2,655 2,710 2,605 2,735 2,585 2,600 2,650 2,590
Canada and Quebec Pension Plans
Canada and Quebec Pension Plan credit 1,055 1,135 1,195 1,315 1,590 1,775 2,020 2,290
Non- taxation  of employer- paid premiums 1,360 1,465 1,545 1,685 1,730 2,090 2,335 2,660
Foreign tax credit47 220 280 300 320 345 365 390 410
Dividend gross-up and credit 645 730 815 880 945 1,010 1,075 1,140
Supplementary low-income credit48 – – – – 140 150 – –
Basic personal credit49 17,325 17,650 17,885 18,120 19,015 21,320 23,580 24,220
Non-taxation of capital dividends n.a n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Notes (Table 1)

  1. The increase in this tax expenditure in 1995 reflects increases in the average amount of CCA claimed and the number of individuals claiming CCA in that year. The flow-through of CCA on Canadian films is not available for taxation years later than 1995, and is replaced by a tax credit to producers.
  2. The 1997 budget extended this credit to most mandatory ancillary fees imposed by post-secondary institutions, beginning in 1997.
  3. The 1996 budget increased this credit from $80 to $100 per month, beginning in 1996. The 1997 budget increased this credit to $150 per month for 1997, and $200 per month thereafter. The 1998 budget proposed to allow part-time students to claim a part-time education amount of $60 per month.
  4. The 1996 budget increased from $4,000 to $5,000 the limit on the transfer of these amounts, beginning in 1996. The increase in this tax expenditure in 1997 reflects a 50-per-cent increase in the average claim in that year, based on preliminary information.
  5. The 1997 budget introduced this measure, effective for 1997 and subsequent years.
  6. This measure was proposed in the 1998 budget.
  7. The 1998 budget proposed to supplement annual contributions to RESPs with a 20-per-cent grant, the Canada Education Savings Grant, beginning in 1998. While this enhancement does not represent a tax expenditure, it increases the cost of the tax expenditure to the extent that it encourages participation in the RESP program. No information is available for years prior to 1996.
  8. The 1998 budget proposed to replace the $500 tax-free allowance for volunteer firefighters with a deduction of up to $1,000 for emergency service volunteers. The tax expenditure estimate for the emergency service volunteer deduction includes claims by firefighters after 1997.
  9. The higher level of the tax expenditure in 1994 reflects the fact that residents of communities who are no longer eligible for benefits following the reform of northern benefits were eligible for one-third benefits in 1994, and none thereafter.
  10. The increase in this tax expenditure in 1996 reflects a 30-per-cent increase in the number of claimants and a 30-per-cent increase in the average claim in that year. The increase in this tax expenditure in 1997 reflects a 50-per-cent increase in the number of claimants, based on preliminary information.
  11. The 1999 budget proposed to increase this tax credit by $675 for all taxpayers, beginning July 1, 1999.
  12. The decline in this tax expenditure for 1995 reflects a 35-per-cent decrease in the number of claimants in that year. The 1996 budget increased the maximum credit per dependant from $270 to $400.
  13. The 1996 and 1997 budgets increased this tax benefit. The 1998 and 1999 budgets proposed additional enrichments to this provision. Payments made between January and December of the year are reported.
  14. The decline in this tax expenditure in 1995 reflects a 20-per-cent decrease in the number of claimants and a 25-per-cent decrease in the average claim in that year. The increase in this tax expenditure in 1996 reflects a 15-per-cent increase in the number of claimants in that year.
  15. The high level of this tax expenditure in 1996 reflects special start-up payments to farmers in Saskatchewan in that year.
  16. This tax expenditure is highly volatile. It is projected at its historical average.
  17. The lifetime capital gains exemption for general property is not available for taxation years later than 1994. The tax expenditure for 1995 reflects late and adjusted elections filed in that year with respect to gains accrued up to February 22, 1994. The large value of this tax expenditure in 1994 reflects the special election to claim the exemption for eligible capital gains accrued up to February 22, 1994 on 1994 tax returns.
  18. The increase in the value of this tax expenditure in 1996 reflects a 50-per-cent increase in the number of claimants partially offset by a 10-per-cent decrease in the average claim in that year. The increase in the value for 1997 reflects a 30-per-cent increase in the number of claimants in that year, based on preliminary information. However, projections are based on historical trends.
  19. The decline in the value of this tax expenditure in 1995 reflects a 40-per-cent decline in the number of claimants in that year.
  20. This tax expenditure includes the deduction of scientific research and experimental development expenditures. Data are not available to estimate this tax expenditure with precision.
  21. The 1998 budget proposed to allow unincorporated owner-operators to deduct premiums for supplementary health care coverage against their business income to a maximum amount, beginning in 1998.
  22. The 1997 budget broadened this credit to cover additional expenses, beginning in 1997. The 1999 budget proposed to further broaden this credit for the care and education of persons with disabilities, beginning in 1999.
  23. This measure was introduced in the 1997 budget. The value of this tax expenditure in 1997 reflects preliminary information.
  24. The decline in this tax expenditure in 1997 reflects preliminary information, suggesting lower levels in future years.
  25. The increase in this tax expenditure in 1995 reflects a 10-per-cent increase in the number of claimants in that year.
  26. These amounts became taxable after July 1, 1994.
  27. The expected decrease in this tax expenditure is in line with the historical trend.
  28. The 1996 budget eliminated the income inclusion for recipients of child support payments and disallowed the deduction to payers for agreements made after April 30, 1997.
  29. Projected values for this tax expenditure are lower than those provided in last year's publication due to lower-than-expected interest rates in those years.
  30. Net expenditure represents the total tax expenditure associated with this measure.
  31. The amounts reported in previous years for this tax expenditure included taxable amounts and did not cover all non-taxable RCMP pensions. This tax expenditure cannot be estimated with precision.
  32. Although this measure does provide tax relief for individuals, it is implemented through the corporate tax system. See under "Interest credited to life insurance policies" in the corporate income tax expenditure tables for an estimate of the value of this tax expenditure.
  33. The decline in this tax expenditure in 1995 reflects a 50-per-cent decline in the number of claimants and a 15-per-cent decline in the average claim in that year. The decline in this tax expenditure in 1996 reflects a further 30-per-cent decline in the average claim, partially offset by a 15-per-cent increase in the number of claims in that year. The increase in this tax expenditure in 1997 reflects a 65-per-cent increase in the number of claims and a 10-per-cent increase in the average claim in that year, based on preliminary information.
  34. The 1996 budget reduced this credit from 20 per cent to 15 per cent and the purchase amount eligible for the credit from $5,000 to $3,500 per year, for purchases made after March 5, 1996. The purchase amount eligible for the credit was increased to $5,000 in 1998, effective for 1998 and subsequent years.
  35. The high value of this tax expenditure in 1995 reflects record sales of shares of LSVCCs for that year. The decline in the value of this expenditure in 1996 reflects a 30-per-cent decline in the number of claimants and a 45-per-cent decline in the average claim in that year. The value of this tax expenditure in 1998 is based on preliminary information of sales of shares of LSVCCs for that year.
  36. The decline in this tax expenditure in 1995 and 1998 reflects declines in home values and home sales in these years. Overall, this tax expenditure is expected to remain below its 1994 value, reflecting projected home values and sales.
  37. The 1994 budget lowered the threshold at which charitable donations begin to earn the 29-per-cent credit from $250 to $200. The 1996 and 1997 budgets further enriched this credit. The increase in the value of this tax expenditure in 1997 reflects a 20-per-cent increase in the average claim in that year, based on preliminary information.
  38. This measure was introduced in the 1997 budget. The value of this tax expenditure in 1997 reflects preliminary information.
  39. The increase in the value of this tax expenditure in 1995 reflects a 10-per-cent increase in the number of claimants and a 45-per-cent increase in the average claim in that year. The decrease in the value of this tax expenditure in 1997 reflects a 35-per-cent decrease in the number of claimants and a 15-per-cent decrease in the average claim in that year, based on preliminary information.
  40. This measure was proposed in the 1999 budget, effective for qualifying retroactive lump-sum payments received after 1994.
  41. This estimate assumes that the total amount of lottery and horse racing winnings would be included in income and be subject to tax. However, there is some uncertainty regarding the proper benchmark tax system in this area. For example, if the benchmark system included taxation of winnings, it would also have to include a deduction for the purchase cost of tickets. A threshold below which winnings would not be taxable may also be necessary, due to the large administrative cost of taxing very small prizes. In addition, proceeds from the sale of lottery tickets are an important source of funds for provincial governments and not-for-profit organizations. As a result, there is already an element of taxation to lottery and gambling proceeds. This estimate is therefore included as a memorandum item only.
  42. The 1996 budget broadened eligibility criteria for claiming this deduction, beginning in 1996. The 1998 budget proposed to increase the maximum claim under this provision and to extend it to part-time students, beginning in 1998.
  43. The 1998 budget proposed to enhance the moving expense deduction by including certain costs of maintaining a vacant former residence (including mortgage interest and property taxes) and other miscellaneous relocation expenses.
  44. The increase in this tax expenditure in 1995 reflects a 10-per-cent increase in the average claim in that year. The decline in this tax expenditure in 1996 reflects a 15-per-cent decrease in the number of claimants in that year. The further decline in this tax expenditure in 1997 reflects a 10-per-cent decrease in the number of claimants in that year, based on preliminary information.
  45. The deduction is limited to 50 per cent of eligible amounts incurred after February 1994. Amounts incurred earlier were deductible at 80 per cent.
  46. The increase in this tax expenditure in 1996 reflects a 40-per-cent increase in the number of claimants, and a 55-per-cent increase in the average claim in that year.
  47. The expected increase in this tax expenditure is in line with the historical trend.
  48. This measure was proposed in the 1998 budget. The 1999 budget proposed to extend this measure to all taxpayers, effective July 1, 1999. This latter proposal would increase the tax expenditures associated with the basic personal credit and the spousal/equivalent-to-spouse credits and eliminate the supplementary low-income credit. The 1998 budget also proposed relief from the general surtax for low- and middle-income taxpayers while the 1999 budget extended this relief to all taxpayers. These proposals represent a change in the benchmark tax system, and consequently there is no associated tax expenditure.
  49. The 1999 budget proposed to increase the basic personal credit by $675, effective July 1, 1999.

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