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 Sustainability, Transparency and Accountability Act, 2019, the Minister of Finance is releasing information about the estimated cost of expenditures made through the tax system.

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 Taxes;
  • 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:

http://ontario.budget.ca/2022/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 Ontario government or Ontario’s municipalities;
  • Tax expenditures that are shared with the federal government under income tax and sales tax administration agreements; and
  • Ontario-only tax expenditures administered by the federal government under those agreements.

Under the tax administration agreements, the federal government determines the tax bases for the Personal Income Tax (PIT), Corporate Income Tax (CIT) and Harmonized Sales Tax (HST). 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 provincial government.

This report does not include tax provisions for which estimates are not available. Also not included in this report are measures that were repealed, phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario. Examples of provisions reported as expenses include the Northern Ontario Energy Credit, the Ontario Political Contribution Tax Credit, the Ontario Innovation Tax Credit and the Ontario Childcare Access and Relief from Expenses (CARE) Tax Credit.

Method

The estimates in this report were developed using the latest available taxation and economic data, forecast to the 2022 calendar year. The data used to estimate the values of the tax provisions come from a variety of sources. In addition, 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 or 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 and only estimates foregone revenue for the year. 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. However, 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 Ontario’s Personal Income Tax. Business provisions listed here are for unincorporated businesses.

Table 1
Personal Income Tax1
Ontario Non-Refundable Tax Credits
Tax Provisions 2022 Estimates2
($ Millions)
Adoption Expense Credit s
Age Credit 380
Amounts Transferred from a Spouse or Common-Law Partner 30
Basic Personal Credit 5,275
Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit 720
Ontario Caregiver Credit 20
Charitable Donations Credit 795
Community Food Program Donation Tax Credit for Farmers s
Disability Credit 220
Eligible Dependant Credit 100
Employment Insurance (EI) Premiums Credit 210
Medical Expense Credit 240
Pension Income Credit 155
Spouse or Common-Law Partner Credit 180
Student Loan Interest Credit 2
Tuition and Education Credits 10
Table 1
Personal Income Tax3
Ontario-Specific Tax Reductions
Tax Provisions 2022 Estimates4
($ Millions)
Ontario Tax Reduction 345
Low-income Individuals and Families Tax (LIFT) Credit 725
Table 1
Personal Income Tax5
Exemptions, Deductions, Deferrals and Other Measures Shared With the Federal Government
Tax Provisions 2022 Estimates6
($ Millions)
Business — Deduction for CPP/QPP Contributions on Self-Employment and Other Earnings 65
Business/Employment — Deductions for CPP and QPP Enhanced Contributions on Self-Employment and Other Earnings and for CPP and QPP Enhanced Contributions on Employment Income 255
Employment — Deduction for Clergy Residence 20
Employment — Deduction of Employment Expenses 315
Employment — Deduction of Union and Professional Dues 230
Employment — Deduction for Employee Stock Options 370
Employment — Moving Expense Deduction 20
Employment — Northern Residents Deductions 3
Investment — Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares 410
Investment — Deduction of Allowable Business Investment Losses 10
Investment — Deduction of Carrying Charges Incurred to Earn Income 530
Investment — Deduction of Resource-Related Expenditures 95
Investment — Partial Inclusion of Capital Gains 2,940
Investment — Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income7 385
Non-Taxable Income — Guaranteed Income Supplement (GIS) and Allowance Benefits 95
Non-Taxable Income — Social Assistance Benefits and Provincial Supplements 55
Non-Taxable Income — Workers’ Compensation Benefits 160
Special Circumstances — Child Care Expense Deduction 230
Special Circumstances — Pension Income Splitting 340
Special Circumstances — Treatment of Spousal and Child Support Payments 50
Tax-Deferred Savings — Registered Pension Plans (RPPs) — Deduction for Contributions 1,545
Tax-Deferred Savings — Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions 2,825

Table 1 footnotes:

[1], [3], [5] 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], [4], [6] Estimates are based on 2019 tax filer data forecast to represent the 2022 taxation year.

[7] 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 provision has changed since the Taxation Transparency Report, 2021.

Low-income Individuals and Families Tax (LIFT) Credit — Starting in 2022, the credit is calculated as the lesser of $875 (up from $850 in previous years) and 5.05 per cent of employment income. This amount is then reduced by five per cent (down from 10 per cent in previous years) of the greater of adjusted individual net income in excess of $32,500, and adjusted family net income in excess of $65,000 (up from $30,000 and $60,000, respectively, in previous years).

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 2022 Estimates1
($ Millions)
Community Food Program Donation Tax Credit for Farmers s
Ontario Credit Union Tax Reduction 35
Ontario Research and Development Tax Credit2 250
Ontario Small Business Deduction3 3,170
Ontario Tax Credit for Manufacturing and Processing 295
Table 2
Corporate Income Tax
Exemptions, Deductions, Deferrals and Other Measures Shared With the Federal Government
Tax Provisions 2022 Estimates4
($ Millions)
Allowable Business Investment Losses 4
Deductibility of Charitable Donations 250
Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land 2
Deductibility of Gifts to the Crown s
Holdback on Progress Payments to Contractors 35
Non-Taxation of Non-Profit Organizations 40
Partial Inclusion of Capital Gains 3,160

Table 2 footnotes:

[1], [4] Estimates are forecast to the 2022 calendar year based on preliminary tax administrative data for 2020 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. The proposed change to the phase-out announced in the 2022 Ontario Economic Outlook and Fiscal Review is not expected to impact the 2022 estimate, given it is effective for taxation years that begin on or after April 7, 2022.

Sales and Commodity Taxes

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 2022 Estimates1
($ Millions)
Ontario Point-of-Sale Rebates — Books 120
Ontario Point-of-Sale Rebates — Children’s Car Seats/Car Booster Seats 3
Ontario Point-of-Sale Rebates — Children’s Clothing 110
Ontario Point-of-Sale Rebates — Children’s Diapers 20
Ontario Point-of-Sale Rebates — Children’s Footwear 30
Ontario Point-of-Sale Rebates — Prepared Foods and Beverages ($4.00 or less) 110
Ontario Point-of-Sale Rebates — Print Newspapers 40
Ontario Point-of-Sale Rebates — Qualifying Purchases by First Nations 55
Ontario Public Service Body Rebates — Hospitals, Facility Operators and External Suppliers 715
Ontario Public Service Body Rebates — Municipalities 1,650
Ontario Public Service Body Rebates — Public Colleges 85
Ontario Public Service Body Rebates — Qualifying Non-Profit Organizations 80
Ontario Public Service Body Rebates — Registered Charities 420
Ontario Public Service Body Rebates — School Authorities 415
Ontario Public Service Body Rebates — Universities 190
Other Ontario Measures — Ontario Energy and Property Tax Credit — Energy Component2 510
Other Ontario Measures — Ontario New Housing Rebate (including New Residential Rental Housing) 1,920
Other Ontario Measures — Ontario Sales Tax Credit3 1,460
Table 3
Harmonized Sales Tax
Exemptions, Zero-Rating and Other Measures Shared with the Federal Government4
Tax Provisions 2022 Estimates5
($ Millions)
Business — Exemption for Ferry, Road and Bridge Tolls 20
Business — Exemption and Rebate for Legal Aid Services 35
Business — Foreign Convention and Tour Incentive Program 3
Business — Rebate for Poppies and Wreaths s
Business — Small Suppliers’ Threshold 170
Charities and Non-Profit Organizations — Exemption for Certain Supplies Made by Charities and Non-Profit Organizations 1,125
Education — Exemption for Tuition and Educational Services 560
Health Care — Exemption for Health Care Services 495
Health Care — Exemption for Hospital Parking 25
Health Care — Zero-Rating of Medical and Assistive Devices 330
Health Care — Zero-Rating of Prescription Drugs 760
Households — Exemption for Child Care 115
Households — Zero-Rating of Basic Groceries 3,460
Households — Zero-Rating of Feminine Hygiene Products 20
Housing — Exemption for Certain Residential Rent 1,380
Municipalities — Exemption for Municipal Transit 155
Municipalities — Exemption for Water, Sewage and Basic Garbage Collection Services 265

Table 3 footnotes:

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

[2] Estimate is based on 2019 tax filer data and historical administrative data, forecast to represent the 2022–23 benefit year.

[3] Estimate is based on 2019 tax filer data and historical administrative data, forecast to represent the 2021–22 and 2022–23 benefit years.

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

Table 4
Retail Sales Tax
Tax Provisions 2022 Estimates
($ Millions)
Exemption for Automobile Insurance Premiums1 1,330
Exemption for Individual Life and Health Insurance Premiums2 885
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 2022 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Coloured Fuel1 305
Exemptions/Reduced Rates — Reduced Rate for Railway Diesel2 50
Refunds — Auxiliary Power Take Off Equipment3 5
Table 5
Commodity Tax
Gasoline Tax
Tax Provisions 2022 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Methanol and Natural Gas4 25
Exemptions/Reduced Rates — Reduced Rate for Aviation Fuel5 215
Exemptions/Reduced Rates — Reduced Rate for Propane6 6
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 2022 Estimates
($ Millions)
Exemptions — Deferrals and Exemptions for Corporate Reorganizations10 45
Exemptions — Family Business Conveyances11 s
Exemptions — Family Farms12 20
Exemptions — Life Leases13 2
Refunds — First-Time Homebuyers Refund14 305
Table 5
Commodity Tax
Tobacco Tax
Tax Provision 2022 Estimate
($ Millions)
Compensation for Tax Collectors15 s
Table 5
Commodity Tax
Beer, Wine and Spirits Taxes16
Tax Provisions 2022 Estimates
($ Millions)
Exemptions/Reduced Rates — Exemption for Promotional Distribution17 2
Exemptions/Reduced Rates — Reduced Rate for Beer Made by Ontario Microbrewers18 10
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 Cooler20 25
Exemptions/Reduced Rates — Reduced Rate for Wine and Wine Cooler Sold at Winery Retail Stores21 9
Exemptions/Reduced Rates — Reduced Rate for Wine Cooler22 s
Exemptions/Reduced Rates — Reduced Rate for Spirits Cooler23 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 2022 calendar year is based on 2018 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 Taxes apply on purchases where the Liquor Control Board of Ontario (LCBO) is not the retailer or wholesaler of the alcohol product. Beer taxes apply on purchases of beer from a beer manufacturer’s on-site store, brew pub, The Beer Store, or a licensed establishment. Wine taxes apply on purchases of wine and wine coolers from on and off-site winery retail stores. Spirits taxes apply on purchases of spirits and spirits cooler from a spirits manufacturer’s on-site store. Estimates are forecast for the full year based on January to August 2022 actual wine, beer and spirits tax return data.

[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 Ontario Wine and Ontario Wine Cooler relative to non-Ontario Wine and non-Ontario Wine Cooler Sold at Winery Retail Stores and Wine Boutiques.

[21] Forgone revenue estimated as difference from the basic tax on Wine or Wine Cooler sales 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 2022 Estimates2
($ Millions)
Brownfields Financial Tax Incentive Program s
Charity Rebate 10
Conservation Land Property Tax Exemption Program 5
Creative Enterprise Facilities Subclass Tax Rate Reduction s
Eligible Convention Centres Exemption s
Eligible Live Performance Theatres Exemption and Professional Sports Facility Tax Rate Reduction 10
Farm Property Class Tax Rate Reduction 110
Farmlands Awaiting Development Subclass Tax Rate Reduction s
Heritage Property Tax Rebate s
Managed Forest Tax Incentive Program 6
Ontario Energy and Property Tax Credit — Property Tax Component3 1,000
Ontario Senior Homeowners’ Property Tax Grant4 190
Seniors and Persons with Disabilities Property Tax Relief5 1
Small Business Subclass Tax Rate Reduction 25
Small-Scale On-Farm Business Subclass Tax Rate Reduction s
Tax Exemptions Under Private Statutes 4
Vacant Commercial and Industrial Unit Rebate 1

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 2022 Education Tax Rates, 2022 Assessment Roll, 2020 and 2021 Municipal Financial Information Returns and municipal tax policies, unless otherwise noted.

[3], [4] Estimate is based on 2019 tax filer data and historical administrative data, forecast to represent the 2022–23 benefit year.

[5] 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 a tax provision relating to the Employer Health Tax.

Table 7
Employer Health Tax
Tax Provision 2022 Estimate
($ Millions)
Exemption for Private-Sector Employers 1,335

Mining

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

Table 8
Mining Tax
Tax Provisions 2022 Estimates1
($ Millions)
Annual $500,000 Deduction 1
Tax Holiday for New Mines (other than Remote Mines) s
Tax Holiday for New Remote Mines s
Reduced Tax Rate for Remote Mines 3
Processing Allowance 70

Table 8 footnote:

[1] Estimates are forecast to the 2022 calendar year based on preliminary Ontario Mining Tax administrative data for 2020 and prior years.

Estate Administration Tax

Table 9 provides an estimate of a tax provision relating to the Estate Administration Tax.

Table 9
Estate Administration Tax
Tax Provision 2022 Estimate
($ Millions)
Zero-Rating the First $50,000 of Estate Value 15

Gross Revenue Charge

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

Table 10
Gross Revenue Charge
Tax Provision 2022 Estimate
($ Millions)
Gross Revenue Charge 10-Year Holiday 2
Updated: November 14, 2022
Published: November 14, 2022