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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/2019/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 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 Also, not included in this report are measures that were repealed, phased out in the calendar year or are reported as expenses in the Public Accounts of Ontario. 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, the Ontario Political Contribution Tax Credit for individuals, the Ontario Innovation Tax Credit for corporations and the new Ontario Childcare Access and Relief from Expenses tax credit for families.

Method

The estimates in this report were developed using the latest available taxation and economic data, forecast to the 2019 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
Tax Provisions 2019 Estimates2
($ Millions)
Adoption Expense Credit s
Age Credit 330
Amounts Transferred from a Spouse or Common-Law Partner 25
Basic Personal Credit 4,655
Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit 645
Ontario Caregiver Credit 20
Charitable Donations Credit 750
Community Food Program Donation Tax Credit for Farmers s
Disability Credit 180
Eligible Dependant Credit 80
Employment Insurance (EI) Premiums Credit 190
Medical Expense Credit 200
Pension Income Credit 140
Spouse or Common-Law Partner Credit 180
Student Loan Interest Credit 6
Tuition and Education Credits 70
Table 1
Personal Income Tax3
Ontario-Specific Tax Reductions
Tax Provisions 2019 Estimates4
($ Millions)
Ontario Tax Reduction 305
Low-income Individuals and Families Tax Credit 495
Table 1
Personal Income Tax5
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
Tax Provisions 2019 Estimates6
($ Millions)
Business – Deduction for CPP/QPP Contributions on Self-Employment and Other Earnings 60
Business/Employment – Deductions for CPP and QPP Enhanced Contributions on Self-Employment and Other Earnings and for CPP and QPP Enhanced Contributions on Employment Income7 40
Employment – Deduction for Clergy Residence 20
Employment – Deduction of Employment Expenses 215
Employment – Deduction of Union and Professional Dues 205
Employment – Deduction for Employee Stock Options 275
Employment – Moving Expense Deduction 20
Employment – Northern Residents Deductions 3
Investment – Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares 400
Investment – Deduction of Allowable Business Investment Losses 10
Investment – Deduction of Carrying Charges Incurred to Earn Income 505
Investment – Deduction of Resource-Related Expenditures 65
Investment – Partial Inclusion of Capital Gains 2,110
Investment – Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income8 295
Non-Taxable Income – Guaranteed Income Supplement (GIS) and Allowance Benefits 55
Non-Taxable Income – Social Assistance Benefits and Provincial Supplements 45
Non-Taxable Income – Workers’ Compensation Benefits 145
Special Circumstances – Child Care Expense Deduction 230
Special Circumstances – Pension Income Splitting 310
Special Circumstances – Treatment of Spousal and Child Support Payments 50
Tax-Deferred Savings – Registered Pension Plans (RPPs) — Deduction for Contributions 1,360
Tax-Deferred Savings – Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions 2,685

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 2016 tax filer data forecast to represent the 2019 taxation year, unless otherwise noted.

[7] The $40 million estimate is for the following two items: Deduction for CPP and QPP Enhanced Contributions on Self-Employment and Other Earnings; Deduction for CPP and QPP Enhanced Contributions on Employment Income.

[8] 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 Taxation Transparency Report, 2018.

Federal Changes

Since January 1, 2019, people have been contributing more to the CPP/QPP as part of the CPP/QPP enhancement. Both employees and self-employed individuals may deduct the enhanced portion of their CPP contributions from their income.

Ontario Changes

Beginning in 2019, tax filers who have employment income may claim the Low-income Individuals and Families Tax Credit to reduce the amount of Ontario Personal Income Tax they pay by up to $850.

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 2019 Estimates1
($ Millions)
Community Food Program Donation Tax Credit for Farmers s
Ontario Credit Union Tax Reduction 15
Ontario Research and Development Tax Credit2 205
Ontario Small Business Deduction3 2,400
Ontario Tax Credit for Manufacturing and Processing 270
Table 2
Corporate Income Tax
Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government
Tax Provisions 2019 Estimates4
($ Millions)
Allowable Business Investment Losses 1
Deductibility of Charitable Donations 130
Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land 2
Deductibility of Gifts to the Crown s
Holdback on Progress Payments to Contractors 20
Non-Taxation of Non-Profit Organizations 50
Partial Inclusion of Capital Gains 2,070

Table 2 footnotes:

[1], [4] Estimates are forecast to the 2019 calendar year based on preliminary tax administrative data for 2018 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.

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 2019 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 135
Ontario Point-of-Sale Rebates – Children’s Diapers 35
Ontario Point-of-Sale Rebates – Children’s Footwear 40
Ontario Point-of-Sale Rebates – Prepared Foods and Beverages ($4.00 or less) 140
Ontario Point-of-Sale Rebates – Print Newspapers 40
Ontario Point-of-Sale Rebates – Qualifying Purchases by First Nations 45
Ontario Public Service Body Rebates – Hospitals, Facility Operators and External Suppliers 495
Ontario Public Service Body Rebates – Municipalities 1,400
Ontario Public Service Body Rebates – Public Colleges 90
Ontario Public Service Body Rebates – Qualifying Non-Profit Organizations 60
Ontario Public Service Body Rebates – Registered Charities 405
Ontario Public Service Body Rebates – School Authorities 415
Ontario Public Service Body Rebates – Universities 225
Other Ontario Measures – Ontario Energy and Property Tax Credit — Energy Component2 490
Other Ontario Measures – Ontario New Housing Rebate (including New Residential Rental Housing) 980
Other Ontario Measures – Ontario Sales Tax Credit3 1,395
Table 3
Harmonized Sales Tax
Exemptions, Zero-Rating and Other Measures Shared with the Federal Government4
Tax Provisions 2019 Estimates5
($ 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 6
Business – Rebate for Poppies and Wreaths s
Business – Small Suppliers’ Threshold 195
Charities and Non-Profit Organizations – Exemption for Certain Supplies Made by Charities and Non-Profit Organizations 925
Education – Exemption for Tuition and Educational Services 655
Health Care – Exemption for Health Care Services 665
Health Care – Exemption for Hospital Parking 25
Health Care – Zero-Rating of Medical and Assistive Devices 285
Health Care – Zero-Rating of Prescription Drugs 650
Households – Exemption for Child Care 135
Households – Zero-Rating of Basic Groceries 2,925
Households – Zero-Rating of Feminine Hygiene Products 20
Housing – Exemption for Certain Residential Rent 1,375
Municipalities – Exemption for Municipal Transit 185
Municipalities – Exemption for Water, Sewage and Basic Garbage Collection Services 215

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 preliminary 2018 administrative data used for the 2019–20 benefit year.

[3] Estimate is based on preliminary 2017 and 2018 administrative data used for the 2018–19 and 2019–20 benefit years, respectively.

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

Table 4
Retail Sales Tax
Tax Provisions 2019 Estimates
($ Millions)
Exemption for Automobile Insurance Premiums1 1,125
Exemption for Individual Life and Health Insurance Premiums2 750
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 2019 Estimates
($ Millions)
Exemptions/Reduced Rates – Exemption for Coloured Fuel1 345
Exemptions/Reduced Rates – Reduced Rate for Railway Diesel2 60
Refunds – Auxiliary Power Take Off Equipment3 5
Table 5
Commodity Tax
Gasoline Tax
Tax Provisions 2019 Estimates
($ Millions)
Exemptions/Reduced Rates – Exemption for Methanol and Natural Gas4 30
Exemptions/Reduced Rates – Reduced Rate for Aviation Fuel5 280
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
Table 5
Commodity Tax
Land Transfer Tax
Tax Provisions 2019 Estimates
($ Millions)
Exemptions – Deferrals and Exemptions for Corporate Reorganizations10 40
Exemptions – Family Business Conveyances11 s
Exemptions – Family Farms12 15
Exemptions – Life Leases13 s
Refunds – First-Time Homebuyers Refund14 240
Table 5
Commodity Tax
Tobacco Tax
Tax Provision 2019 Estimate
($ Millions)
Compensation for Tax Collectors15 s
Table 5
Commodity Tax
Beer, Wine and Spirits Taxes16
Tax Provisions 2019 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 Other Wine and Other Wine Coolers21 10
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 2019 calendar year is based on 2015 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 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 coolers from a spirits manufacturer’s on-site store.

[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 other wine or other wine coolers.

[21] Forgone revenue estimated as difference from the basic tax on other wine or other 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 2019 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 10
Farm Property Class Tax Rate Reduction 110
Farmlands Awaiting Development Sub-Class Tax Rate Reduction s
Heritage Property Tax Rebate s
Managed Forest Tax Incentive Program 5
Ontario Energy and Property Tax Credit — Property Tax Component4 970
Ontario Senior Homeowners’ Property Tax Grant5 200
Seniors and Persons with Disabilities Property Tax Relief6 1
Tax Exemptions under Private Statutes 5
Vacant Commercial and Industrial Unit Rebate 3
Vacant Land and Excess Land Sub-Class Tax Rate Reduction 25

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 2019 Education Tax Rates, 2019 Assessment Roll, 2017 and 2018 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], [5] Estimate is based on preliminary 2018 administrative data used for the 2019–20 benefit year.

[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.

The exemption is adjusted for inflation every five years using the Ontario Consumer Price Index. As a result, effective January 1, 2019, the Employer Health Tax exemption increased from $450,000 to $490,000.

Table 7
Employer Health Tax
Tax Provision 2019 Estimate
($ Millions)
$490,000 Exemption for Private-Sector Employers 960

Mining Tax

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

Table 8
Mining Tax
Tax Provisions 2019 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 5
Processing Allowance 45

Table 8 footnote:

[1] Estimates are forecast to the 2019 calendar year based on preliminary Ontario Mining Tax administrative data for 2018 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 2019 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 2019 Estimate
($ Millions)
Gross Revenue Charge 10-Year Holiday No estimate available