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/2023/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 Also not included in this report are measures that were repealed, phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario.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 2023 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 $1 million are denoted by the letter “s” (small).
Personal Income Tax
Table 1 provides estimates of tax provisions relating to Ontario’s Personal Income Tax. Business provisions listed here are for unincorporated businesses.
| Tax Provisions | 2023 Estimates2 ($ Millions) |
|---|---|
| Adoption Expense Credit | s |
| Age Credit | 390 |
| Amounts Transferred from a Spouse or Common-Law Partner | 30 |
| Basic Personal Credit | 5,735 |
| Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit | 840 |
| Ontario Caregiver Credit | 20 |
| Charitable Donations Credit | 800 |
| Community Food Program Donation Tax Credit for Farmers | s |
| Disability Credit | 230 |
| Eligible Dependant Credit | 105 |
| Employment Insurance (EI) Premiums Credit | 245 |
| Medical Expense Credit | 245 |
| Pension Income Credit | 170 |
| Spouse or Common-Law Partner Credit | 200 |
| Student Loan Interest Credit | 2 |
| Tuition and Education Credits | 5 |
| Tax Provisions | 2023 Estimates4 ($ Millions) |
|---|---|
| Ontario Tax Reduction | 335 |
| Low-income Individuals and Families Tax (LIFT) Credit | 620 |
| Tax Provisions | 2023 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 | 365 |
| Employment — Deduction for Clergy Residence | 20 |
| Employment — Deduction of Employment Expenses | 240 |
| Employment — Deduction of Union and Professional Dues | 260 |
| 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 | 430 |
| Investment — Deduction of Allowable Business Investment Losses | 10 |
| Investment — Deduction of Carrying Charges Incurred to Earn Income | 590 |
| Investment — Deduction of Resource-Related Expenditures | 100 |
| Investment — Partial Inclusion of Capital Gains | 3,365 |
| Investment — Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income7 | 420 |
| Investment — First Home Savings Accounts (FHSAs) — Deduction for Contributions and Non-Taxation of Investment Income8 | s |
| Non-Taxable Income — Guaranteed Income Supplement (GIS) and Allowance Benefits | 105 |
| Non-Taxable Income — Social Assistance Benefits and Provincial Supplements | 55 |
| Non-Taxable Income — Workers’ Compensation Benefits | 175 |
| Special Circumstances — Child Care Expense Deduction | 210 |
| Special Circumstances — Pension Income Splitting | 330 |
| Special Circumstances — Treatment of Spousal and Child Support Payments | 55 |
| Tax-Deferred Savings — Registered Pension Plans (RPPs) — Deduction for Contributions | 1,505 |
| Tax-Deferred Savings — Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions | 3,475 |
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 2023 taxation year.
[7] Estimate represents the forgone revenue from non-taxation of investment income earned in the accounts.
[8] Estimate represents the forgone revenue from deductions of contributions to, and 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, 2022.
First Home Savings Accounts (FHSAs)— Deduction for Contributions and Non-Taxation of Investment Income — Starting April 1, 2023, qualifying individuals aged between 18 and 71 may open an FHSA. This type of registered plan gives prospective first-time home buyers the ability to save up to $40,000 on a tax-free basis.
Corporate Income Tax
Estimates of tax provisions relating to the Ontario Corporate Income Tax system are presented in Table 2.
| Tax Provisions | 2023 Estimates1 ($ Millions) |
|---|---|
| Community Food Program Donation Tax Credit for Farmers | s |
| Ontario Credit Union Tax Reduction | 25 |
| Ontario Research and Development Tax Credit2 | 265 |
| Ontario Small Business Deduction3 | 3,330 |
| Ontario Tax Credit for Manufacturing and Processing | 340 |
| Tax Provisions | 2023 Estimates4 ($ Millions) |
|---|---|
| Allowable Business Investment Losses | 3 |
| Deductibility of Charitable Donations | 250 |
| Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land | s |
| Deductibility of Gifts to the Crown | s |
| Holdback on Progress Payments to Contractors | 50 |
| Non-Taxation of Non-Profit Organizations | 75 |
| Partial Inclusion of Capital Gains | 3,390 |
Table 2 footnotes:
[1], [4] Estimates are forecast to the 2023 calendar year based on preliminary tax administrative data for 2021 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 provision has changed since the Taxation Transparency Report, 2022.
Ontario Small Business Deduction – As announced in the 2023 Budget, the phase out range for the $500,000 income limit for the Ontario Small Business Deduction has been extended. For taxation years that begin on or after April 7, 2022, the $500,000 income limit phases out between $10 million and $50 million of taxable capital. For taxation years that begin before April 7, 2022, the $500,000 income limit phases out between $10 million and $15 million of taxable capital.
Sales and Commodity Taxes
Sales Tax
Estimates of tax provisions relating to sales taxes, including the Harmonized Sales Tax and Retail Sales Tax, are presented in Tables 3 and 4.
| Tax Provisions | 2023 Estimates1 ($ Millions) |
|---|---|
| Ontario Point-of-Sale Rebates — Books | 115 |
| Ontario Point-of-Sale Rebates — Children’s Car Seats/Car Booster Seats | 4 |
| Ontario Point-of-Sale Rebates — Children’s Clothing | 125 |
| 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 ($4.00 or less) | 135 |
| Ontario Point-of-Sale Rebates — Print Newspapers | 30 |
| Ontario Point-of-Sale Rebates — Qualifying Purchases by First Nations | 55 |
| Ontario Public Service Body Rebates — Hospitals, Facility Operators and External Suppliers | 695 |
| Ontario Public Service Body Rebates — Municipalities | 1,715 |
| Ontario Public Service Body Rebates — Public Colleges | 95 |
| Ontario Public Service Body Rebates — Qualifying Non-Profit Organizations | 90 |
| Ontario Public Service Body Rebates — Registered Charities | 455 |
| Ontario Public Service Body Rebates — School Authorities | 455 |
| Ontario Public Service Body Rebates — Universities | 225 |
| Other Ontario Measures — Ontario Energy and Property Tax Credit — Energy Component2 | 590 |
| Other Ontario Measures — Ontario New Housing Rebate (including New Residential Rental Housing) | 1,355 |
| Other Ontario Measures — Ontario Sales Tax Credit3 | 1,495 |
| Tax Provisions | 2023 Estimates5 ($ 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 | 200 |
| Charities and Non-Profit Organizations — Exemption for Certain Supplies Made by Charities and Non-Profit Organizations | 1,215 |
| Education — Exemption for Tuition and Educational Services | 585 |
| Health Care — Exemption for Health Care Services | 710 |
| Health Care — Exemption for Hospital Parking | 25 |
| Health Care — Zero-Rating of Face Masks and Face Shields | 25 |
| Health Care — Zero-Rating of Medical and Assistive Devices | 390 |
| Health Care — Zero-Rating of Prescription Drugs | 740 |
| Households — Exemption for Child Care | 110 |
| Households — Zero-Rating of Basic Groceries | 3,695 |
| Households — Zero-Rating of Feminine Hygiene Products | 25 |
| Housing — Exemption for Certain Residential Rent | 1,690 |
| Municipalities — Exemption for Municipal Transit | 140 |
| Municipalities — Exemption for Water, Sewage and Basic Garbage Collection Services | 300 |
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 administrative data (up to preliminary data for 2022) used for the 2023–24 benefit year.
[3] Estimate is based on administrative data (up to preliminary data for 2022) used for the 2022–23 and 2023–24 benefit years.
[4] Estimates represent the forgone revenue associated with the provincial component of the Harmonized Sales Tax.
| Tax Provisions | 2023 Estimates ($ Millions) |
|---|---|
| Exemption for Automobile Insurance Premiums1 | 1,385 |
| Exemption for Individual Life and Health Insurance Premiums2 | 935 |
| 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, Wine and Spirits Taxes, are presented in Table 5.
| Tax Provisions | 2023 Estimates ($ Millions) |
|---|---|
| Exemptions/Reduced Rates — Exemption for Coloured Fuel1 | 280 |
| Exemptions/Reduced Rates — Reduced Rate for Railway Diesel2 | 50 |
| Refunds — Auxiliary Power Take Off Equipment3 | 5 |
| Tax Provisions | 2023 Estimates ($ Millions) |
|---|---|
| Exemptions/Reduced Rates — Exemption for Methanol and Natural Gas4 | 25 |
| Exemptions/Reduced Rates — Reduced Rate for Aviation Fuel5 | 255 |
| Exemptions/Reduced Rates — Reduced Rate for Propane6 | 7 |
| Refunds — Auxiliary Power Take Off Equipment7 | s |
| Refunds — Aviation Fuel8 | s |
| Refunds — Tax-Exempt Use in Unlicensed Equipment9 | 1 |
| Tax Provisions | 2023 Estimates ($ Millions) |
|---|---|
| Exemptions — Deferrals and Exemptions for Corporate Reorganizations10 | 45 |
| Exemptions — Family Business Conveyances11 | s |
| Exemptions — Family Farms12 | 25 |
| Exemptions — Life Leases13 | 1 |
| Refunds — First-Time Homebuyers Refund14 | 250 |
| Tax Provision | 2023 Estimate ($ Millions) |
|---|---|
| Compensation for Tax Collectors15 | s |
| Tax Provisions | 2023 Estimates ($ Millions) |
|---|---|
| Exemptions/Reduced Rates — Exemption for Promotional Distribution17 | 2 |
| 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 wine and wine coolers sold at off-site winery retail stores, including wine boutiques.20 | 10 |
| Exemptions/Reduced Rates — Reduced rate for Ontario wine and Ontario wine coolers sold at on-site winery retail stores21 | 15 |
| 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 2023 calendar year is based on 2019 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 2023 actual wine, beer and spirits tax return data.
[17] Forgone revenue estimated as basic tax, volume tax and environmental tax rates on reported manufacturers’ promotional distributions.
[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 rates on Ontario and non-Ontario wine/wine coolers in off-site winery retail stores, including wine boutiques, relative to non-Ontario wine/wine coolers in on-site winery retail stores.
[21] Forgone revenue estimated as difference from the basic tax rates on Ontario wine/wine coolers in on-site winery retail stores relative to non-Ontario wine/wine coolers in on-site winery retail stores.
[22] Forgone revenue estimated as difference from the volume tax on wine.
[23] Forgone revenue estimated as difference from the volume tax on spirits.
Beer, Wine, and Spirits Taxes - Description of Changes to Tax Provisions
The following Beer, Wine and Spirits Tax provisions have changed or been introduced since the Taxation Transparency Report, 2022.
Wine Tax Harmonization— Effective July 1, 2023, the government of Ontario set a single 12 per cent basic tax rate on wine and wine coolers sold in off-site winery retail stores, including wine boutiques. This change replaced the four separate basic tax rates that applied to wine sold in off-site winery retail stores, including wine boutiques, with a single rate.
Education Property Tax
Table 6 provides estimates of tax provisions relating to the Education Property Tax system.
| Tax Provisions | 2023 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 | 2 |
| Managed Forest Tax Incentive Program | 6 |
| Ontario Energy and Property Tax Credit — Property Tax Component3 | 1,090 |
| Ontario Senior Homeowners’ Property Tax Grant4 | 190 |
| Seniors and Persons with Disabilities Property Tax Relief5 | 4 |
| Small Business Subclass Tax Rate Reduction | 30 |
| Small-Scale On-Farm Business Subclass Tax Rate Reduction | s |
| Tax Exemptions Under Private Statutes | 4 |
| Vacant Commercial and Industrial Unit Rebate | s |
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 2023 Education Tax Rates, 2023 Assessment Roll, 2021 and 2022 Municipal Financial Information Returns and municipal tax policies, unless otherwise noted.
[3], [4] Estimate is based on administrative data (up to preliminary data for 2022) used for the 2023–24 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.
| Tax Provision | 2023 Estimate ($ Millions) |
|---|---|
| Exemption for Private-Sector Employers | 1,670 |
Mining
Estimates of tax provisions relating to the Ontario Mining Tax system are presented in Table 8.
| Tax Provisions | 2023 Estimates1 ($ Millions) |
|---|---|
| Annual $500,000 Deduction | s |
| Tax Holiday for New Mines (other than Remote Mines) | s |
| Tax Holiday for New Remote Mines | s |
| Reduced Tax Rate for Remote Mines | s |
| Processing Allowance | 65 |
Table 8 footnote:
[1] Estimates are forecast to the 2023 calendar year based on preliminary Ontario Mining Tax administrative data for 2021 and prior years.
Estate Administration Tax
Table 9 provides an estimate of a tax provision relating to the Estate Administration Tax.
| Tax Provision | 2023 Estimate ($ Millions) |
|---|---|
| Zero-Rating the First $50,000 of Estate Value | 15 |
Gross Revenue Charge
Table 10 provides an estimate of the tax holiday under the Gross Revenue Charge.
| Tax Provision | 2023 Estimate ($ Millions) |
|---|---|
| Gross Revenue Charge 10-Year Holiday | 2 |