Taxation Transparency Report 2018

Taxation Transparency Report

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 tax expenditures under the following:

  • 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/fallstatement/2018/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 includes support the government provides to Ontario individuals, families and businesses through the 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 Ontario-only measures that the federal government administers for the Province.

This report does not include tax provisions for which an estimate is not available. Also, not included in this report are measures that were repealed or phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario.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 and the Ontario Political Contribution Tax Credit for individuals and the Ontario Innovation Tax Credit for corporations.

Method

The estimates in this report were developed using the latest available taxation and economic data, forecast to the 2018 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, which includes the full-year impact of tax provisions that 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.
It is important to note that each estimate in this report has been determined separately. Due to the possible interaction between tax measures, caution must be applied in adding estimates together to determine the total cost of a 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).

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.

Table 1
Personal Income Tax1
Ontario Non-Refundable Tax Credits and Ontario Tax Reductions
Tax Provisions 2018 Estimates2
($ Millions)
Ontario Non-Refundable Tax Credits — Adoption Expense Credit s
Ontario Non-Refundable Tax Credits — Age Credit 330
Ontario Non-Refundable Tax Credits — Amounts Transferred from a Spouse or Common-Law Partner 30
Ontario Non-Refundable Tax Credits — Basic Personal Credit 4,805
Ontario Non-Refundable Tax Credits — Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit 660
Ontario Non-Refundable Tax Credits — Ontario Caregiver Credit3 25
Ontario Non-Refundable Tax Credits — Charitable Donations Credit 655
Ontario Non-Refundable Tax Credits — Community Food Program Donation Tax Credit for Farmers s
Ontario Non-Refundable Tax Credits — Disability Credit 175
Ontario Non-Refundable Tax Credits — Eligible Dependant Credit 85
Ontario Non-Refundable Tax Credits — Employment Insurance (EI) Premiums Credit 205
Ontario Non-Refundable Tax Credits — Medical Expense Credit 195
Ontario Non-Refundable Tax Credits — Pension Income Credit 130
Ontario Non-Refundable Tax Credits — Spouse or Common-Law Partner Credit 190
Ontario Non-Refundable Tax Credits — Student Loan Interest Credit 6
Ontario Non-Refundable Tax Credits — Tuition and Education Credits 200
Ontario Tax Reduction — Basic Reduction 245
Ontario Tax Reduction — Reduction for Dependent Children Under 19 210
Ontario Tax Reduction — Reduction for Disabled or Infirm Dependants 25
Ontario Tax Reduction — Total 415
Table 1
Personal Income Tax4
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
Tax Provisions 2018 Estimates5
($ Millions)
Business — Deduction for Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions on Self- Employment and Other Earnings 55
Employment — Deduction for Clergy Residence 15
Employment — Deduction for Military and Police Deployed to High-Risk International Missions 7
Employment — Deduction of Other Employment Expenses 210
Employment — Deduction of Union and Professional Dues 195
Employment — Deduction for Employee Stock Options 220
Employment — Moving Expense Deduction 20
Employment — Northern Residents Deductions 2
Investment — Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares 370
Investment — Deduction of Allowable Business Investment Losses 6
Investment — Deduction of Carrying Charges Incurred to Earn Income 420
Investment — Deduction of Resource-Related Expenditures 60
Investment — Partial Inclusion of Capital Gains 1,600
Investment — Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income6 235
Non-Taxable Income — Guaranteed Income Supplement and Allowance Benefits 50
Non-Taxable Income — Social Assistance Benefits and Provincial Supplements 45
Non-Taxable Income — Workers’ Compensation Benefits 130
Special Circumstances — Child Care Expense Deduction 220
Special Circumstances — Pension Income Splitting 290
Special Circumstances — Treatment of Spousal and Child Support Payments 50
Tax-Deferred Savings — Registered Pension Plans (RPPs) — Deduction for Contributions 1,285
Tax-Deferred Savings — Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions 2,600

Table 1 footnotes:

[1], [4] 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], [5] Estimates are based on 2015 tax filer data forecast to represent the 2018 taxation year.

[3] In 2017, the Ontario Caregiver Credit replaced two former tax credits: the Caregiver Credit and the Infirm Dependant Credit.

[6] Estimate represents the forgone revenue from non-taxation of 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, 2017 report.

Ontario Changes

The tuition and education tax credits were discontinued in September 2017. Tax filers who were resident in Ontario on December 31, 2017 can claim unused tuition and education tax credits carried forward from previous years.

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.

Table 2
Corporate Income Tax
Ontario Deductions, Non-Refundable Tax Credits and Exemptions
Tax Provisions 2018 Estimates1
($ Millions)
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 Tax Credit2 190
Ontario Resource Tax Credit 6
Ontario Small Business Deduction3 2,405
Ontario Tax Credit for Manufacturing and Processing 290
Table 2
Corporate Income Tax
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
Tax Provisions 2018 Estimates4
($ Millions)
Allowable Business Investment Losses 3
Deductibility of Charitable Donations 125
Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land 1
Deductibility of Gifts to the Crown s
Holdback on Progress Payments to Contractors 10
Non-Taxation of Non-Profit Organizations 35
Partial Inclusion of Capital Gains 1,790

Table 2 footnotes:

[1], [4] Estimates are forecast to the 2018 calendar year based on preliminary tax administration data for 2017 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 Research and Development Tax Credit.

[3] The cost of the Ontario small business deduction is partially offset by the lower Dividend Tax Credit rate that is applied to non-eligible dividends. This offset is not included in the Ontario small business deduction estimate.

Corporate Income Tax — Description of Changes to Tax Provisions

The following Corporate Income Tax provisions have changed since the Transparency in Taxation, 2017 report.

Ontario Deductions, Non-Refundable Tax Credits And Exemptions

Ontario small business deduction – Effective January 1, 2018, the small business Corporate Income Tax rate was reduced from 4.5 per cent to 3.5 per cent. The tax rate reduction is prorated for taxation years straddling January 1, 2018.

Ontario Credit Union Tax Reduction – The reduction in the small business Corporate Income Tax rate from 4.5 per cent to 3.5 per cent effective January 1, 2018 also applies to the Ontario Credit Union Tax Reduction. As of January 1, 2018, credit unions are eligible for the reduced rate of 3.5 per cent on taxable income in excess of the income eligible for the Ontario small business deduction.

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.

Table 3
Harmonized Sales Tax
Ontario-Specific Items
Tax Provisions 2018 Estimates1
($ Millions)
Ontario Point-of-Sale Rebates — Books 115
Ontario Point-of-Sale Rebates — Children’s Car Seats/Car Booster Seats 5
Ontario Point-of-Sale Rebates — Children’s Clothing 125
Ontario Point-of-Sale Rebates — Children’s Diapers 30
Ontario Point-of-Sale Rebates — Children’s Footwear 35
Ontario Point-of-Sale Rebates — Prepared Foods and Beverages ($4.00 or less) 135
Ontario Point-of-Sale Rebates — Print Newspapers 45
Ontario Point-of-Sale Rebates — Qualifying Purchases by First Nations 40
Ontario Public Service Body Rebates — Hospitals, Facility Operators and External Suppliers 465
Ontario Public Service Body Rebates — Municipalities 1,305
Ontario Public Service Body Rebates — Public Colleges 80
Ontario Public Service Body Rebates — Qualifying Non-Profit Organizations 55
Ontario Public Service Body Rebates — Registered Charities 380
Ontario Public Service Body Rebates — School Authorities 375
Ontario Public Service Body Rebates — Universities 190
Other Ontario Measures — Ontario Energy and Property Tax Credit — Energy Component2 460
Other Ontario Measures — Ontario New Housing Rebate (including new residential rental property) 1,310
Other Ontario Measures — Ontario Sales Tax Credit3 1,315
Table 3
Harmonized Sales Tax
Exemptions, Zero-Rating and Other Measures Shared with the Federal Government4
Tax Provisions 2018 Estimates5
($ Millions)
Business — Exemption for Ferry, Road and Bridge Tolls 20
Business — Exemption and Rebate for Legal Aid Services 25
Business — Foreign Convention and Tour Incentive Program 9
Business — Rebate for Poppies and Wreaths s
Business — Small Suppliers’ Threshold 185
Charities and Non-Profit Organizations — Exemption for Certain Supplies Made by Charities and Non-Profit Organizations 870
Education — Exemption for Tuition and Educational Services 540
Health Care — Exemption for Health Care Services 695
Health Care — Exemption for Hospital Parking 25
Health Care — Zero-Rating of Medical and Assistive Devices 230
Health Care — Zero-Rating of Prescription Drugs 610
Households — Exemption for Child Care 125
Households — Zero-Rating of Basic Groceries 2,840
Households — Zero-Rating of Feminine Hygiene Products 20
Housing — Exemption for Certain Residential Rent 1,695
Municipalities — Exemption for Municipal Transit 165
Municipalities — Exemption for Water, Sewage and Basic Garbage Collection Services 190

Table 3 footnotes:

[1], [5] Estimates are based on preliminary administrative data or data from Statistics Canada, unless otherwise noted.

[2], [3] Estimate is based on entitlements data for 2017 forecast to 2018.

[4] Estimates represent the forgone revenue associated with the Provincial component of the Harmonized Sales Tax.

Table 4
Retail Sales Tax
Tax Provisions 2018 Estimates
($ Millions)
Exemption for Automobile Insurance Premiums1 1,045
Exemption for Individual Life and Health Insurance Premiums2 715
Vendor Compensation3 3

Table 4 footnotes:

[1] Estimate based on industry data.

[2] Estimate based on insurance premiums data published by the Canadian Life and Health Insurance Association Inc.

[3] Estimate based on returns filed by registered tax collectors.

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.

Table 5
Commodity Tax
Fuel Tax
Tax Provisions 2018 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Coloured Fuel1 225
Exemptions/Reduced Rates — Reduced Rate for Railway Diesel2 60
Refunds — Auxiliary Power Take-Off Equipment3 3
Table 5
Commodity Tax
Gasoline Tax
Tax Provisions 2018 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Methanol and Natural Gas4 25
Exemptions/Reduced Rates — Reduced Rate for Aviation Fuel5 260
Exemptions/Reduced Rates — Reduced Rate for Propane6 8
Refunds — Auxiliary Power Take-Off Equipment7 s
Refunds — Aviation Fuel8 s
Refunds — Tax-Exempt Use in Unlicensed Equipment9 2
Table 5
Commodity Tax
Land Transfer Tax
Tax Provisions 2018 Estimates
($ Millions)
Exemptions — Deferrals and Exemptions for Corporate Reorganizations10 40
Exemptions — Family Business Conveyances11 1
Exemptions — Family Farms12 15
Exemptions — Life Leases13 1
Refunds — First-Time Homebuyers Refund14 240
Table 5
Commodity Tax
Tobacco Tax
Tax Provision 2018 Estimate
($ Millions)
Compensation for Tax Collectors15 s
Table 5
Commodity Tax
Beer, Wine and Spirits Tax16
Tax Provisions 2018 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Promotional Distribution17 3
Exemptions/Reduced Rates — Reduced Rate for Beer Made by Ontario Microbrewers18 15
Exemptions/Reduced Rates — Reduced Rate for Beer Made and Sold at Ontario Brew Pubs19 s
Exemptions/Reduced Rates — Reduced Rate for Ontario Wine and Ontario Wine Coolers20 25
Exemptions/Reduced Rates — Reduced Rate for Wine that is not Ontario Wine and not Ontario Wine Coolers21 8
Exemptions/Reduced Rates — Reduced Rate for Wine Coolers22 s
Exemptions/Reduced Rates — Reduced Rate for Spirits Coolers23 s

Table 5 footnotes:

[1], [12], [13], [15] Estimate based on tax administrative data.

[2] Foregone revenue estimated as difference from the general Fuel Tax rate.

[3], [7], [8], [9], [10], [11], [14] Based on refunds filed or deferrals claimed.

[4] Forecast for the 2018 calendar year is based on 2014 provincial Supply and Use Tables from Statistics Canada.

[5], [6] Forgone revenue estimated as difference from the general Gasoline Tax rate.

[16] Beer, Wine and Spirits tax applies on sales of domestic beer in the Beer Store, on-site manufacturers’ stores and licensed establishments, on wine sales in winery retail stores, and on spirits sales in distillery retail stores. Does not include sales in LCBO stores or licensed establishments where the purchase is from the LCBO.

[17] Estimate based on estimated manufacturers’ promotional distribution.

[18] Forgone revenue estimated as difference from the basic tax on beer made by a beer manufacturer.

[19] Forgone revenue estimated as difference from the basic tax and volume tax on beer made by a beer manufacturer.

[20] Forgone revenue estimated as difference from the basic tax on wine or wine coolers that is not Ontario wine or Ontario wine coolers.

[21] Forgone revenue estimated as difference from the basic tax on wine that is not Ontario wine and not Ontario wine coolers at wine boutiques.

[22] Forgone revenue estimated as difference from the volume tax on wine.

[23] Forgone revenue estimated as difference from the volume tax on spirits.

Education Property Tax

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

Table 6
Education Property Tax1
Tax Provisions 2018 Estimates2
($ Millions)
Brownfields Financial Tax Incentive Program3 s
Charity Rebate 10
Conservation Land Property Tax Exemption Program 5
Eligible Convention Centres Exemption s
Eligible Live Performance Theatres Exemption and Professional Sports Facility Tax Rate Reduction 15
Farm Property Class Tax Rate Reduction 100
Farmlands Awaiting Development Sub-Class Tax Rate Reduction s
Heritage Property Tax Rebate 1
Managed Forest Tax Incentive Program 5
Ontario Energy and Property Tax Credit — Property Tax Component4 900
Ontario Senior Homeowners’ Property Tax Grant5 195
Seniors and Persons with Disabilities Property Tax Relief6 s
Tax Exemptions under Private Statutes 5
Vacant Commercial and Industrial Unit Rebate 20
Vacant Land and Excess Land Sub-Class Tax Rate Reduction 50

Table 6 footnotes:

[1] Expenditures related to Provincial Land Taxes or payments made in lieu of taxes have not been included.

[2] Estimates based on 2018 Education Tax Rates, 2018 Assessment Roll, 2016 and 2017 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 2017 forecast to 2018.

[5] Estimate is based on entitlements data for 2018.

[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.

Employer Health Tax

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

Table 7
Employer Health Tax
Tax Provision 2018 Estimate
($ Millions)
$450,000 Exemption for Private-Sector Employers 895

Mining Tax

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

Table 8
Mining Tax
Tax Provisions 2018 Estimates1
($ Millions)
Annual $500,000 Deduction s
Tax Holiday for New Mines (other than remote mines) s
Tax Holiday for New Remote Mines s
Reduced Tax Rate for Remote Mines 4
Processing Allowance 55

Table 8 footnotes:

[1] Estimates are forecast to the 2018 calendar year based on preliminary Ontario Mining Tax administration data for 2017 and prior years.

Estate Administration Tax

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

Table 9
Estate Administration Tax
Tax Provision 2018 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.

Table 10
Gross Revenue Charge (GRC)
Tax Provision 2018 Estimate
($ Millions)
Gross Revenue Charge 10-Year Holiday No estimate available
Updated: November 15, 2018
Published: November 15, 2018