Taxation Transparency Report, 2025

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/2025/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 Also not included in this report are measures that were repealed, phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario.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 2025 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. This year, the province has proposed to expand the Ontario Made Manufacturing Investment Tax Credit in the 2025 Ontario Budget and 2025 Ontario Economic Outlook and Fiscal Review. The proposed legislation for the expansion has not received Royal Assent. However, material revenue impacts associated with the proposed expansion are expected and are reflected in this report.

It is important to note that each estimate in this report has been determined separately and only estimates forgone 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.

Personal Income Tax — Description of Changes to Tax Provisions

The following Personal Income Tax provisions have changed since the Taxation Transparency Report, 2024.

Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares — The exemption limit is increasing to $1,250,000 on the sale of qualified small business shares and farming and fishing property. Legislation enacting the increase has not yet been passed by the federal government.

Deduction for Employee Stock Options — The Taxation Transparency Report, 2024 incorporated estimated impacts from a proposed federal increase in the capital gains/losses inclusion rate. The proposed federal change did not take effect and the estimate in this Report is based on the one-half capital gains/losses inclusion rate that is in effect.

Deduction of Allowable Business Investment Losses — The Taxation Transparency Report, 2024 incorporated estimated impacts from a proposed federal increase in the capital gains/losses inclusion rate. The proposed federal change did not take effect and the estimate in this Report is based on the one-half capital gains/losses inclusion rate that is in effect.

Partial Inclusion of Capital Gains — The Taxation Transparency Report, 2024 incorporated estimated impacts from a proposed federal increase in the capital gains/losses inclusion rate. The proposed federal change did not take effect and the estimate in this Report is based on the one-half capital gains/losses inclusion rate that is in effect.

Corporate Income Tax

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

Corporate Income Tax — Description of Changes to Tax Provisions

The following Corporate Income Tax provisions have changed since the Taxation Transparency Report, 2024.

Ontario Made Manufacturing Investment Tax Credit — This is a new provision included in the Taxation Transparency Report, 2025. A 15 per cent non-refundable version of the Ontario Made Manufacturing Investment Tax Credit was proposed in the 2025 Ontario Budget and 2025 Ontario Economic Outlook and Fiscal Review. The estimate is presented on a full year basis for the proposed non-refundable tax credit that would be available to qualifying corporations that are not Canadian-controlled private corporations on up to $20 million of eligible expenditures made on or after May 15, 2025, and before January 1, 2030.

Allowable Business Investment Losses — The Taxation Transparency Report, 2024 incorporated estimated impacts from a proposed federal increase in the capital gains/losses inclusion rate. The proposed federal change did not take effect and the estimate in this Report is based on the one-half capital gains/losses inclusion rate that is in effect.

Partial Inclusion of Capital Gains — The Taxation Transparency Report, 2024 incorporated estimated impacts from a proposed federal increase in the capital gains/losses inclusion rate. The proposed federal change did not take effect and the estimate in this Report is based on the one-half capital gains/losses inclusion rate that is in effect.

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.

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.

Commodity Tax — Description of Changes to Tax Provisions

The following Commodity Tax provision has changed since the Taxation Transparency Report, 2024.

Reduced Rate for Propane — Effective July 1, 2025, the government of Ontario eliminated the tax on propane used in licensed road vehicles.

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, 2024.

Reduced Rate for Beer made by Ontario Microbrewers — As announced in the 2025 Budget, the microbrewer basic tax rates were reduced by 50 per cent, to support the competitiveness of smaller brewers. The rates were reduced from 35.96 cents per litre to 17.98 cents per litre for draft beer and from 39.75 cents per litre to 19.88 cents per litre for non-draft beer, effective August 1, 2025, and subject to a transitional rule that was applicable to facilitate compliance.

Education Property Tax

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

Employer Health Tax

Table 7 provides an estimate of a tax provision relating to the Employer Health Tax.

Mining Tax

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

Estate Administration Tax

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

Gross Revenue Charge

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