Transparency in Taxation, 2015

Transparency in Taxation

Tax expenditure reporting is an important element of fiscal accountability. It increases fiscal transparency by providing a comprehensive picture of forgone revenue in the tax system. As required under the Fiscal Transparency and Accountability Act, 2004, the Minister of Finance has released information about the estimated cost of expenditures made through the tax system each year beginning in 2005 as part of the mid-year review of the fiscal plan.

Structure of the Report

This report provides the most current estimates of forgone revenue with respect to provisions in the following taxes:

  • Personal Income Tax;
  • Corporate Income Tax;
  • Sales and Commodity Tax;
  • Education Property Tax;
  • Employer Health Tax;
  • Mining Tax;
  • Estate Administration Tax; and
  • Gross Revenue Charge.

Descriptions of the tax provisions listed in this report are available at:
www.fin.gov.on.ca/en/budget/fallstatement/2015/provisions.html

Scope

Given the absence of a universally accepted definition of a “tax expenditure,” this report continues the approach adopted in previous reports of listing estimates of forgone revenue that could potentially be included under a broad-based tax system. 

This report includes:

  • provincial tax reductions and exemptions administered by the Province or Ontario’s municipalities;
  • tax expenditures that are shared with the federal government under income tax and sales tax collection agreements; and
  • Ontario-only tax expenditures administered by the federal government under those agreements.

Under the tax collection agreements, the federal government determines the tax bases for the Personal Income Tax, Corporate Income Tax and Harmonized Sales Tax.  As a result, Ontario parallels federal tax expenditures associated with these tax bases. The agreements allow Ontario to implement certain measures that the federal government administers for the Province.

Not included in this report are measures that were repealed or phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario. Tax expenditures that are not related to relief of taxes paid are reported as expenses in Volume 1 of the Public Accounts of Ontario. Examples of these include the Northern Ontario Energy Credit, the Children’s Activity Tax Credit, the Healthy Homes Renovation Tax Credit, and the Ontario Innovation Tax Credit.

Method

The estimates in this report were developed using the latest available taxation and economic data, forecast to the 2015 calendar year. The data used to estimate the values of the tax provisions come from a variety of sources. The estimated value of a tax provision may differ from the amount reported in a prior year for a variety of reasons including amendments to the provision, changes in economic factors, revisions to the underlying data and improvements to the estimation method. Some tax provision estimates are particularly sensitive to economic conditions or other variables and, therefore, can fluctuate significantly from year to year.

Each estimate is presented on a full-year basis, regardless of when a tax provision took effect within the year. This approach enables a better comparison of the revenue forgone from measures that come into effect at different times in the year. Tax expenditure reports prior to 2010 presented estimates only for the portion of the year that a tax provision was in place. Hence, care must be taken when comparing this report to earlier reports.

It is important to note that the estimates in this report are not intended to represent the potential change in revenue if the tax provisions were not in place. Each estimate has been determined separately and in isolation from other factors, such as the interactions between various tax provisions. As a result, the estimates cannot be added together to determine the total cost of a particular group of tax expenditures.

Tax expenditure estimates below $10 million are rounded to the nearest $1 million and estimates above $10 million are rounded to the nearest $5 million. Tax expenditure estimates of less than $1 million are denoted by the letter “s” (small). This report also includes tax provisions for which relevant data are not currently available.

Personal Income Tax

Table 1 provides estimates of tax provisions relating to the Ontario Personal Income Tax system. Business provisions listed here are for unincorporated businesses.

                                                                                                                                                                                                   
Personal Income Tax1Table 1
Tax Provisions 2015 Estimates2
($ Millions)
Ontario Non-Refundable Tax Credits  
Adoption Expense Credit s
Age Credit 310
Amounts Transferred from a Spouse or Common-Law Partner 30
Basic Personal Credit 4,345
Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit 565
Caregiver Credit 30
Charitable Donations Credit 615
Community Food Program Donation Tax Credit for Farmers s
Disability Credit 165
Eligible Dependant Credit 85
Employment Insurance (EI) Premiums Credit 205
Infirm Dependant Credit 1
Medical Expense Credit 165
Ontario Overseas Employment Tax Credit 2
Pension Income Credit 125
Spouse or Common-Law Partner Credit 180
Student Loan Interest Credit 6
Tuition and Education Credits 365
Ontario Tax Reduction (OTR)  
OTR — Basic Reduction 240
OTR — Reduction for Dependent Children Under 19 205
OTR — Reduction for Disabled or Infirm Dependants 25
OTR — Total 400
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government  
Business  
Deduction for Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions on Self-Employment and Other Earnings                       50
Items for Which an Estimate is not Available    
Assistance for Artists and Deduction for Canadian Art Purchased by Unincorporated Businesses  
Assistance for Prospectors and Grubstakers  
Deduction of Accelerated Capital Cost Allowance  
Deferral through Use of Billed-Basis Accounting by Professionals  
Employment  
Deduction for Clergy Residence 15
Deduction of Home Relocation Loans s
Deduction for Military and Police Deployed to High-Risk International Missions 2
Deduction of Other Employment Expenses 230
Deduction of Union and Professional Dues 180
Deduction for Employee Stock Options 230
Moving Expense Deduction 15
Northern Residents Deductions 2
Items for Which an Estimate is not Available  
Deduction for Artists and Musicians  
Deduction for Tradespersons’ and Apprentice Vehicle Mechanics’ Tools  
Deduction for Tuition Assistance for Adult Basic Education  
Deferral of Salary through Leave of Absence/Sabbatical Plans  
Employee Benefit Plans  
Non-Taxation of Business-Paid Health and Dental Benefits  
Non-Taxation of Certain Non-Monetary Employment Benefits  
Special Tax Computations for Certain Retroactive Lump-Sum Payments  
Farming and Fishing  
Items for Which an Estimate is not Available  
Cash-Basis and Flexibility in Inventory Accounting  
Deferral of Income for Farmers  
Income Stabilization Account for Farmers  
Investment  
Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares 275
Deduction of Allowable Business Investment Losses 10
Deduction of Carrying Charges Incurred to Earn Income 365
Deduction of Resource-Related Expenditures 50
Partial Inclusion of Capital Gains 950
Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income3 145
Items for Which an Estimate is not Available  
Capital Gains Exemptions — $1,000 on Personal-Use Property and $200 on Foreign Exchange Transactions  
Deferral of Capital Gains through Five-Year Reserves  
Deferral of Capital Gains through Rollovers  
Deferral of Capital Gains through 10-Year Reserves for Farm or Fishing Property and Small Business Shares  
Deferral of Capital Gains through Transfers to a Spouse, Spousal Trust or Family Trust  
Exemption for Capital Gains Arising from Certain Donations  
Non-Taxation of Capital Gains on Principal Residences  
Taxation of Capital Gains Upon Realization  
Non-Taxable Income  
Guaranteed Income Supplement and Allowance Benefits 45
Social Assistance Benefits and Provincial Supplements 35
Workers’ Compensation Benefits 120
Items for Which an Estimate is not Available  
Certain Service Pensions, Allowances, Compensation and Amounts, and Certain War Pensions  
Damages with Respect to Personal Injury or Death  
Death Benefits of Up to $10,000  
Employer-Paid CPP/QPP Contributions and EI Premiums  
Gifts and Bequests  
Allowances for Diplomats and Other Government Employees Posted Abroad  
Income of Status Indians and Indian Bands on Reserve  
Investment Income on Life Insurance Policies  
Lottery and Gambling Winnings  
Partial Inclusion of U.S. Social Security Benefits  
Strike Pay  
Special Circumstances  
Child Care Expense Deduction 215
Pension Income Splitting 280
Treatment of Spousal and Child Support Payments 50
Items for Which an Estimate is not Available  
Deduction Related to Vows of Perpetual Poverty  
Disability Supports Deduction  
Exemption of Scholarship, Fellowship and Bursary Income  
Tax-Free Amount for Emergency Service Volunteers  
Tax-Deferred Savings  
Registered Pension Plans (RPPs) — Deduction for Contributions 1,175
Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions 2,250
Items for Which an Estimate is not Available  
Deferred Profit-Sharing Plans  
Registered Disability Savings Plans (RDSPs) — Non-Taxation of Investment Income and Federal Contributions  
Registered Education Savings Plans (RESPs) — Non-Taxation of Investment Income and Federal Contributions  
RPPs — Non-Taxation of Investment Income  
RRSPs and Registered Retirement Income Funds — Non-Taxation of Investment Income  
1 Estimates do not include the impact of revenue forgone from Personal Income Tax provisions for trusts, which are taxed as individuals under the Taxation Act, 2007.
2 Estimates are based on 2012 tax filer data forecast to represent the 2015 taxation year.
3 Estimate represents the revenue that is not collected from investment income earned in the accounts.

Personal Income Tax — Description of Changes to Tax Provisions

The following Personal Income Tax provisions have changed or been introduced since the Transparency in Taxation, 2014 report.

Federal Changes

Changes introduced by the federal government to the Personal Income Tax base are reflected in Ontario’s tax expenditure estimates.

Indexation

Many Ontario non-refundable tax credits and the Ontario Tax Reduction are based on amounts that are adjusted for inflation each year.

Corporate Income Tax

Estimates of tax provisions relating to the Ontario Corporate Income Tax system are presented in Table 2.

Corporate Income TaxTable 2
Tax Provisions 2015 Estimates1
($ Millions)
Ontario Deductions, Non-Refundable Tax Credits and Exemptions  
Community Food Program Donation Tax Credit for Farmers s
Ontario Credit Union Tax Reduction 10
Ontario Political Contributions Tax Credit s
Ontario Research and Development (R&D) Tax Credit2 180
Ontario Resource Tax Credit s
Ontario Small Business Deduction 1,725
Ontario Tax Credit for Manufacturing and Processing 190
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government  
Allowable Business Investment Losses 2
Deductibility of Charitable Donations 85
Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land 3
Deductibility of Gifts to the Crown s
Holdback on Progress Payments to Contractors 30
Non-Taxation of Non-Profit Organizations 160
Partial Inclusion of Capital Gains 1,355
Items for Which an Estimate is not Available  
Accelerated Write-Off of Capital Assets and Resource-Related Expenditures  
Cash-basis and Flexibility in Inventory Accounting  
Deductibility of Countervailing and Anti-Dumping Duties  
Deferral of Income for Farmers  
Deferral Through Capital Gains Rollovers  
Deferral Through Use of Billed-Basis Accounting by Professionals  
Donations of Medicine for the Developing World  
Exemption for Capital Gains Arising from Certain Donations  
Expensing of Advertising Costs  
Non-Taxation of Provincial, Municipal and Federal Crown Corporations  
Non-Taxation of Registered Charities  
Taxation of Capital Gains upon Realization  
Tax Exemption on Income of Foreign Affiliates of Canadian Corporations  
1 Estimates are forecast to the 2015 calendar year based on preliminary tax administration data for 2014 and prior years. Estimates do not include the revenue forgone from Corporate Income Tax provisions for mutual fund corporations.
2 Estimate is net of any recapture of the Ontario R&D Tax Credit.

Corporate Income Tax — Description of Changes to Tax Provisions

The following Corporate Income Tax provisions have changed since the Transparency in Taxation, 2014 report.

Ontario Deductions, Non-refundable Tax Credits and Exemptions

Ontario Resource Tax Credit and the Additional Tax on Crown Royalties — Effective April 23, 2015, the Province harmonized with the federal government and other provinces by eliminating the Ontario Resource Tax Credit and the Additional Tax on Crown Royalties and providing a deduction for royalties and mining taxes paid.  Accrued but unused Ontario Resource Tax Credit amounts are eligible for carry-forward to offset Ontario income tax payable in the first five taxation years beginning after April 23, 2015.

Sales and Commodity Tax

Sales Tax

Estimates of tax provisions relating to sales taxes, including the Harmonized Sales Tax and Retail Sales Tax, are presented in Tables 3 and 4.

Harmonized Sales TaxTable 3
Tax Provisions 2015 Estimates1
($ Millions)
Ontario-Specific Items  
Ontario Point-of-Sale Rebates  
Books 125
Children’s Car Seats/Car Booster Seats 2
Children’s Clothing 100
Children’s Diapers 25
Children’s Footwear 25
Prepared Foods and Beverages ($4 or less) 180
Print Newspapers 50
Qualifying Purchases by First Nations 35
Ontario Public Service Body Rebates  
Hospitals 495
Municipalities 1,100
Public Colleges 60
Qualifying Non-Profit Organizations 50
Registered Charities 345
School Authorities 355
Universities 170
Other Ontario Measures  
Ontario Energy and Property Tax Credit — Energy Component2 425
Ontario New Housing Rebate (including new residential rental property) 975
Ontario Sales Tax Credit2 1,225
Exemptions, Zero-Rating and Other Measures Shared with the Federal Government3  
Business  
Exemption for Ferry, Road and Bridge Tolls 15
Exemption and Rebate for Legal Aid Services 20
Rebate for Foreign Conventions and Tour Packages 9
Rebate for Remembrance Day Poppies and Wreaths s
Small Suppliers’ Threshold 140
Zero-Rating of Agricultural and Fish Products and Purchases s
Items for Which an Estimate is not Available  
Exemption for Domestic Financial Services  
Non-Taxability of Certain Importations  
Charities and Non-Profit Organizations  
Exemption for Certain Supplies Made by Charities and Non-Profit Organizations 665
Education  
Exemption for Education Services (Tuition) 625
Health Care  
Exemption for Health Care Services 525
Exemption for Hospital Parking 30
Zero-Rating of Medical Devices 215
Zero-Rating of Prescription Drugs 540
Households  
Exemption for Child Care and Personal Services 135
Zero-Rating of Basic Groceries 2,430
Zero-Rating of Feminine Hygiene Products 20
Housing  
Exemption for Residential Rent (Long-Term) 1,055
Items for Which an Estimate is not Available  
Exemption for Sales of Used Residential Housing and Other Personal-Use Real Property  
Municipalities  
Exemption for Municipal Transit 165
Exemption for Water and Basic Garbage Collection Services 170
1 Estimates are based on preliminary administrative data or data from Statistics Canada, unless otherwise noted.
2 Estimate is based on entitlements data for 2014 forecast to 2015.
3 Estimates represent the forgone revenue associated with the provincial component of the Harmonized Sales Tax.
Retail Sales TaxTable 4
Tax Provisions 2015 Estimates
($ Millions)
Exemption for Automobile Insurance Premiums1 1,060
Exemption for Individual Life and Health Insurance Premiums2 675
Vendor Compensation3 3
1 Based on industry data.                                                        .
2 Based on insurance premiums data published by the Canadian Life and Health Insurance Association Inc.
3 Based on returns filed by registered tax collectors   

Sales Tax — Description of Changes to Tax Provisions

The following sales tax provisions have changed since the Transparency in Taxation, 2014 report.

The Ontario Energy and Property Tax Credit—Energy Component and the Ontario Sales Tax Credit are based on amounts that are adjusted for inflation each year.

Zero-Rating of Feminine Hygiene Products—Changes introduced by the federal government zero-rate the supply of feminine hygiene products, under the GST/HST.

Commodity Tax

Estimates of tax provisions relating to commodity taxes, including the Fuel Tax, Gasoline Tax, Land Transfer Tax, Tobacco Tax, and Beer and Wine Tax, are presented in Table 5.

                                                                         
Commodity TaxTable 5
Tax Provisions 2015 Estimates
($ Millions)
Fuel Tax  
Exemptions/Reduced Rates  
Exemption for Coloured Fuel1 215
Reduced Rate for Railway Diesel2 65
Refunds  
Auxiliary Power Take-Off Equipment3 3
Gasoline Tax  
Exemptions/Reduced Rates  
Exemption for Methanol and Natural Gas4 15
Reduced Rate for Aviation Fuel5 320
Reduced Rate for Propane5 7
Refunds  
Auxiliary Power Take-Off Equipment3 s
Aviation Fuel3 s
Tax-Exempt Use in Unlicensed Equipment3 3
Land Transfer Tax  
Exemptions  
Deferrals and Exemptions for Corporate Reorganizations3 35
Family Business Conveyances3  s
Family Farms1 15
Life Leases1 1
Items for Which an Estimate is not Available  
Hospital Restructuring  
Oil/Pipeline Easements and Mineral Lands  
Other Transfers and Dispositions  
Reorganization of Charities  
Refunds  
First-Time Home Buyers Refund3 155
Tobacco Tax  
Compensation for Tax Collectors1 s
Beer and Wine Tax6  
Exemptions/Reduced Rates  
Exemption for Promotional Distribution7 1
Reduced Rate for Beer Made by Ontario Microbrewers8 10
Reduced Rate for Beer Made and Sold at Ontario Brew Pubs9 s
Reduced Rate for Ontario Wine and Ontario Wine Coolers10 20
Reduced Rate for Wine Coolers11 s
1 Based on tax administrative data.
2 Forgone revenue estimated as difference from the general fuel tax rate.
3 Based on refunds filed or deferrals claimed.
4 Forecast for the 2015 calendar year is based on 2011 provincial Input–Output tables from Statistics Canada.
5 Forgone revenue estimated as difference from the general gasoline tax rate.
6 Beer and wine taxes apply on sales of domestic beer in the Beer Store, on-site manufacturers’ stores and licensed establishments, and on wine sales in winery retail stores. Does not include sales in LCBO stores or licensed establishments where the purchase is from the LCBO.
7 Based on estimated manufacturers’ promotional distribution.
8 Forgone revenue estimated as difference from the basic tax on beer made by a beer manufacturer.
9 Forgone revenue estimated as difference from the basic tax and volume tax on beer made by a beer manufacturer.
10 Forgone revenue estimated as difference from the basic tax on wine or wine coolers that is not Ontario wine or Ontario wine coolers.
11 Forgone revenue estimated as difference from the volume tax on wine.

Commodity Tax — Description of Changes to Tax Provisions

The following commodity tax provisions have changed since the Transparency in Taxation, 2014 report.

Reduced Rate for Aviation Fuel — On April 1, 2015, the tax rate on aviation fuel increased from 3.7 cents per litre to 4.7 cents per litre. The 2014 Ontario Budget announced an increase to the tax rate on aviation fuel by one cent per litre each year for four years. The first and second tax rate increases occurred on September 1, 2014, and April 1, 2015, and the tax rate will increase by a further one cent per litre annually on April 1 of 2016 and 2017.  Upon full implementation, on April 1, 2017, aviation fuel will be taxed at the rate of 6.7 cents per litre.

Education Property Tax

Table 6 provides estimates of tax provisions relating to the Education Property Tax system.

Education Property Tax1Table 6
Tax Provisions 2015 Estimates2
($ Millions)
Brownfields Financial Tax Incentive Program3 1
Charity Rebate 10
Conservation Land Property Tax Exemption Program 4
Eligible Convention Centres Exemption s
Eligible Live Performance Theatres Exemption and Professional Sports Facility Tax Rate Reduction 15
Farm Property Class Tax Rate Reduction 80
Farmlands Awaiting Development Sub-Class Tax Rate Reduction s
Heritage Property Tax Rebate 2
Managed Forest Tax Incentive Program 5
Ontario Energy and Property Tax Credit — Property Tax Component4 815
Ontario Senior Homeowners’ Property Tax Grant5 205
Seniors and Persons with Disabilities Property Tax Relief6 s
Tax Exemptions Under Private Statutes 5
Vacant Commercial and Industrial Unit Rebate 45
Vacant Land and Excess Land Sub-Class Tax Rate Reduction 50
Items for Which an Estimate is not Available  
Other Tax Exemptions Under Public Statutes  
Discretionary exemptions granted by municipalities to special purpose properties (e.g., legions, navy leagues, public–private capital facilities)  
Mandatory exemptions granted to special purpose/institutional properties (e.g., places of worship, cemeteries, Boy Scouts Association of Canada and Canadian Girl Guides Association, charitable institutions including Canadian Red Cross, St. John Ambulance and charitable,
non-profit philanthropic corporations organized for the relief of the poor)
 
Relief from Property Taxes that are unduly burdensome for Residential, Farm or Managed Forest Properties  
1 Expenditures related to provincial land taxes or payments made in lieu of taxes have not been included.
2 Estimates based on 2015 education tax rates, 2015 Assessment Roll, 2013 Municipal Financial Information Returns and municipal tax policies, unless otherwise noted.
3 Effective October 1, 2004, municipalities may pass bylaws cancelling municipal property taxes on eligible brownfields properties. The Province may match the municipal reduction with an education property tax reduction.
4 Estimate is based on entitlements data for 2014 forecast to 2015.
5 Estimate is based on entitlements data for 2015.
6 Estimate does not include expenditures due to the exemption from taxation on 10 per cent of the assessment of improvements to accommodate seniors and persons with disabilities in newly built homes or the expenditure on such improvements in existing homes.

Education Property Tax — Description of Changes to Tax Provisions

The following Education Property Tax provision has changed since the Transparency in Taxation, 2014 report.

The Ontario Energy and Property Tax Credit—Property Tax Component is based on amounts that are adjusted for inflation each year.

Employer Health Tax

Table 7 provides an estimate of the tax exemption for private-sector employers under the Employer Health Tax.

Employer Health TaxTable 7
Tax Provision 2015 Estimate
($ Millions)
$450,000 Exemption for Private-Sector Employers 840

Mining Tax

Estimates of tax provisions relating to the Ontario Mining Tax system are presented in Table 8.

             
Mining Tax Table 8
Tax Provisions 2015 Estimates1
($ Millions)
Mining Tax Annual $500,000 Deduction s
Mining Tax Holiday for New Mines (other than remote mines) s
Mining Tax Holiday for New Remote Mines s
Mining Tax Rate for Remote Mines 5
Processing Allowance 50
Item for Which an Estimate is not Available  
Fast Write-Off of Exploration Costs  
1 Estimates are forecast to the 2015 calendar year based on 2014 Ontario Mining Tax administration data.

Estate Administration Tax

Table 9 provides an estimate of the tax exemption for small estates under the Estate Administration Tax.

Estate Administration TaxTable 9
Tax Provision 2015 Estimate
($ Millions)
Exemption Where the Value of the Estate Does Not Exceed $1,000 s

Gross Revenue Charge

Table 10 provides an estimate of the tax holiday under the Gross Revenue Charge.

Gross Revenue Charge (GRC)Table 10
Tax Provision 2015 Estimate
($ Millions)
Item for Which an Estimate is not Available
Gross Revenue Charge 10-Year Holiday