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:

budget.ontario.ca/2018/fallstatement/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 Also, not included in this report are measures that were repealed or phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario.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

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

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 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

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

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

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

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