Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2020: part 7

A 100% rebate is provided in respect of GST paid on books acquired by:

• schools, universities, public colleges and municipalities;
• charities and qualifying non-profit organizations that operate public lending libraries; and
• designated charities and qualifying non-profit organizations whose primary purpose is the promotion of literacy.
• The rebate is not available when the books are acquired for resale.

• Introduced on October 23, 1996 (Department of Finance Canada news release 1996-076). Effective in respect of GST paid after that date.
• Budget 2012 extended the rebate to include books acquired to be given away by designated literacy organizations.

• The rebate for public hospitals has been in effect since the inception of the GST in 1991.
• Budget 2005 extended the 83% rebate to facility operators and external suppliers to accommodate the restructuring by provinces and territories of the delivery of health care services that has resulted in some services formerly provided by hospitals being performed by other non-profit organizations.

• This measure has been in effect since the inception of the GST in 1991, initially with a rebate rate of 57.14%.
• The rebate rate was increased to 100%, generally effective since February 2004 (Department of Finance Canada news release 2004-007, February 3, 2004).

• This measure has been in effect since the inception of the GST in 1991.
• The maximum dollar value of the rebate was lowered in Budget 2006 and in the 2007 Economic Statement concurrently with the reductions in the GST rate from 7% to 6% on July 1, 2006 and to 5% on January 1, 2008.

• Introduced in Budget 2000. Effective February 28, 2000.
• The maximum dollar value of the rebate was lowered in Budget 2006 and in the 2007 Economic Statement concurrently with the reductions in the GST rate from 7% to 6% on July 1, 2006 and to 5% on January 1, 2008.

• Introduced on October 28, 2010 (Department of Finance Canada news release 2010-101). Effective in respect of tax payable or paid after 2009.

• This measure has been in effect since the inception of the GST in 1991.

• This measure has been in effect since the inception of the GST in 1991.

• This measure has been in effect since the inception of the GST in 1991.

• Introduced on April 3, 1998 (Department of Finance Canada news release 1998-036). Effective in respect of new vehicles paid for after April 3, 1998.
• An amendment to extend the relief to used vehicles was announced on November 27, 2006 (Department of Finance Canada news release 2006-073), effective retrospectively to vehicles paid for after April 3, 1998.

• This measure has been in effect since the inception of the GST in 1991.

• Introduced in the 1992 Economic and Fiscal Statement. Effective after December 2, 1992.
• Budget 1996 reduced the amount of CDE that can be reclassified to $1 million per year from $2 million and restricted the reclassification to firms with less than $15 million of taxable capital employed in Canada.
• Budget 2017 announced the elimination of this tax expenditure. This will generally apply to expenses incurred after 2018.

• Introduced as part of the 1971 Tax Reform to enable investment corporations and mutual fund corporations that realize capital gains to flow them out to shareholders in a subsequent distribution.

• Introduced in Budget 1997. Effective for the 1997 and subsequent taxation years.
• The maximum supplement amount was increased to $750 in Budget 2005 (from $562 in 2004) and to $1,000 in Budget 2006.

An individual could defer personal income tax on investment income if the individual earned the investment income through a private corporation that is subject to a corporate income tax rate that is significantly lower than the highest personal income tax rate. Consequently, the Income Tax Act provides rules that counter such a deferral:

• Under Part I of the Income Tax Act, investment income (other than taxable dividends) received by a Canadian-controlled private corporation is subject to a partly refundable 38⅔% income tax rate (an unreduced 28% general tax rate plus an additional tax of 10⅔%). The refundable portion corresponds to 30⅔% of the investment income. 
• Under Part IV of the Act, taxable dividends received by a private corporation are generally subject to a 38⅓% income tax rate.  
• The refundable portion of the Part I tax and the Part IV tax paid on ineligible dividends are added to the corporation’s Non-Eligible Refundable Dividend Tax on Hand account. The Part IV tax paid on eligible dividends is added to the corporation’s Eligible Refundable Dividend Tax on Hand account. Amounts in both accounts are refundable to the corporation upon the payment of ineligible dividends, at the effective rate of 38⅓% of ineligible dividends paid. Only amounts in the corporation’s Eligible Refundable Dividend Tax on Hand account, however, are refundable upon the payment of eligible dividends, also at the effective rate of 38⅓%.

• Introduced as part of the 1971 Tax Reform. The Part I tax was 50% and the refundable portion of that tax was 25%. The Part IV tax was introduced at a rate of 33⅓% and was fully refundable. The refundable tax paid on investment income was refundable at a basic rate of one dollar for every three dollars of taxable dividends paid.
• Amended as part of the 1987 Tax Reform, effective after 1987, to reflect changes in federal tax rates. The Part I tax was reduced to 28% from 36%, and its refundable portion to 20%. The Part IV tax was reduced to 25%. The rate of refund was decreased to one dollar for every four dollars of taxable dividends paid.
• Budgets 1994 and 1995 increased the rate of the Part IV tax to 33⅓% to further reduce personal income tax deferral possibilities. The rate of refund was increased to one dollar for every three dollars of taxable dividends paid. These changes were generally effective for taxation years beginning after June 1995.
• Budget 1995 introduced an additional refundable 6⅔% Part I tax on investment income earned by Canadian-controlled private corporations.
• These refundable taxes (and the related refund rate) were increased to their current levels effective January 1, 2016, in order to reflect the new 33% top personal income tax rate applicable as of that date.
• In July 2017, the Government launched consultations on proposals to limit tax planning strategies using private corporations. The 2017 Fall Economic Statement announced that the Government will move forward with measures to limit tax deferral opportunities related to investment income earned through private corporations, with further details to be announced in Budget 2018.
• Budget 2018 announced that Canadian-controlled private corporations would no longer be able to obtain refunds of taxes paid on investment income while distributing dividends from income taxed at the general corporate rate. Private corporations will now track two Refundable Dividend Tax on Hand accounts to allow Part IV tax paid on eligible dividend income to be recovered upon the payment of eligible dividends. This measure applies in respect of tax years beginning after 2018.

• The refund first became available in the late 1990s in Self-Government Agreements signed with certain Yukon First Nations.
• To date, 18 combined Comprehensive Land Claims and Self-Government Agreements have been concluded (in the Yukon, British Columbia, the Northwest Territories and Newfoundland and Labrador) and several other Indigenous groups, mainly in British Columbia, Saskatchewan, Quebec and the Northwest Territories, are at the final agreement stage.

• Introduced in Budget 2007. Effective for the 2008 and subsequent taxation years.
• Budget 2019 proposed to eliminate the requirement to close an RDSP when a beneficiary no longer qualifies for the Disability Tax Credit.

• Introduced in 1973 (Department of Finance Canada news release 1973-97). Effective for the 1972 and subsequent taxation years.
• Budget 1998 introduced the CESG, equal generally to 20% of annual contributions made after 1997 to an RESP for beneficiaries up to and including age 17.
• Budget 2004 introduced the CLB and enhanced the CESG.
• Budget 2007 eliminated the $4,000 limit on annual contributions and increased the maximum CESG annual amount to $500 from $400 (to $1,000 from $800 if there is unused grant room). The lifetime RESP contribution limit was raised to $50,000 from $42,000.
• Budget 2008 raised the number of years that contributions can be made to an RESP (to 31 years from 21 years) and the number of years before an RESP must be terminated (to 35 years from 25 years).

• Employer RPP contributions became deductible with the introduction of income tax in 1917. Employee RPP contributions became deductible in 1919.
• A major reform of the RPP and Registered Retirement Savings Plan limits was introduced in 1990 in order to provide more comparable tax-assisted savings opportunities for Canadians regardless of whether they saved in a defined benefit RPP, a defined contribution RPP or a Registered Retirement Savings Plan.
• The maximum dollar contribution and benefit limits for RPPs were increased in 2003 and 2005.
• The RPP dollar limits were indexed to average wage growth for 2010 and subsequent years. 

• Introduced in Budget 2000. Effective for dispositions after February 27, 2000.
• The October 2000 Economic Statement and Budget Update increased the size of an eligible investment from $500,000 to $2 million and the size of business eligible for the rollover from $10 million to $50 million.
• Budget 2003 eliminated the individual investor limits on the amount of the original investment and reinvestment eligible for the deferral and allowed a reinvestment to be eligible for the rollover when made at any time in the year of disposition or within 120 days after the end of the year.

• The SPP was introduced in 1986. Deductible contributions were initially limited to $600 annually, if made within an SPP member’s available RRSP contribution limit.
• In 2011, the federal tax rules were amended to accommodate certain changes proposed by the Saskatchewan government to improve the plan, in particular an increase in the annual contribution limit to $2,500 (Department of Finance Canada news release 2010-118, December 7, 2010).
• In January 2018, the SPP increased its annual contribution limit to $6,000 and indexed the limit to increases in the Year’s Maximum Pensionable Earnings for the Canada Pension Plan.

• Federal tax incentives for SR&ED were first introduced in 1948. The basic structure of the current credit system was put in place between 1983 and 1985.
• Several changes were introduced in Budget 2012, including: the reduction of the general credit rate to 15% from 20% and the removal of capital expenditures from the base of expenditures eligible for the credit (both changes effective January 1, 2014); the reduction in the prescribed proxy amount in respect of overhead expenses from 65% of the salaries and wages of employees directly engaged in the conduct of SR&ED to 60% in 2013 and 55% in subsequent years; and the removal of the profit element for arm’s length third-party contracts (effective January 1, 2013).
• For taxation years ending after March 19, 2019, Budget 2019 announced the repeal of the use of taxable income as a factor in determining a CCPC’s annual expenditure limit for the purpose of the enhanced SR&ED tax credit. 

• Introduced in Budget 2014. Effective for the 2014 and subsequent taxation years.

• This measure has been in effect since the inception of the GST in 1991.
• Municipalities that are small suppliers are required to charge and remit GST on sales of their capital property, effective after March 9, 2004 (Department of Finance Canada news release 2004-018, March 9, 2004). This change was made concurrently with the increase to 100% of the rebate for municipalities.
• Budget 2017 announced that the definition of “taxi business” in the Excise Tax Act would be amended to include providers of ride-sharing services. This means that the small suppliers’ threshold no longer applies to these providers; they must register for and collect GST/HST regardless of the total amount of sales they make. The change was effective July 1, 2017.

• Introduced in Budget 1999. Effective for the 1995 and subsequent taxation years.

• Introduced in 1972 to provide credit unions with access to the preferential tax rate for small businesses.
• Over time, changes made to the design of the preferential tax rate for small businesses resulted in a more generous tax preference being available to credit unions.
• Budget 2013 announced the phase-out over five years of this additional preference for credit unions (see the description for details).
• On October 16, 2017 the Government announced a further reduction in the preferential tax rate to 10% as of January 1, 2018, and to 9% as of January 1, 2019.

• Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous married exemption.
• Until 2007, the Spouse or Common-Law Partner Credit amount was less than the Basic Personal Amount, and was reduced dollar-for-dollar by the net income of the dependent spouse or common-law partner in excess of the income threshold applicable for the taxation year.
• Budget 2007 introduced two changes to the Spouse or Common-Law Partner Credit: (i) the credit amount was set equal to the Basic Personal Amount; and (ii) the income threshold was eliminated, resulting in the credit amount being reduced dollar-for-dollar by the net income of the dependent spouse or common-law partner. These changes became effective in 2007.
• In December 2019, the Government announced its intention to increase the Spouse or Common-Law Partner Credit to $15,000 by 2023. The increase will be gradually implemented from 2020 to 2023 through annual increases in excess of inflation. The new, increased portion of the credit will be subject to an income test beginning at a level of individual net income equal to the fourth federal tax bracket threshold ($150,473 in 2020), and be fully phased out by the fifth federal bracket threshold ($214,368 in 2020).

• Introduced in Budget 1998. Effective for the 1998 and subsequent taxation years.
• Extended to Canada Apprentice Loans in Budget 2014.

• Introduced in February 1994 as part of the National Action Plan to Combat Smuggling for a three-year period at a level equivalent to an additional income tax of 8.4% on Canadian tobacco manufacturing profits.
• Announcement in November 1996 that the surtax would be extended for another three years from February 1997 to February 2000.
• Announcement in November 1999 that the surtax would be made permanent, effective February 2000.
• The surtax was increased to a level equivalent to an income tax of 10.5% on Canadian tobacco manufacturing profits, effective April 2001.
• Following the review of federal tax expenditures, Budget 2017 announced that the tobacco surtax would be eliminated effective March 23, 2017, and tobacco excise duty rates would be adjusted in order to maintain the intended tax burden of the manufacturers’ surtax on tobacco products.

• The taxation of prescribed federal Crown corporations was introduced in 1952.
• The list of prescribed federal Crown corporations is reviewed and updated as required.

• Most aspects of the current system were introduced as part of the 1972 Tax Reform and became effective as of 1976.
• Budget 2007 added the provisions related to TIEAs, effective 2008.
• The hybrid surplus provisions were added in 2014, effective retrospectively to August 2011.

• Budget 1944 made alimony and comparable payments deductible from income.
• Budget 1958 extended the tax treatment of payments in support of a dependant to cases where no divorce or written separation agreement was made, so long as the payments are made under a court order.

• Budget 1965 introduced a deduction for Canada Pension Plan contributions, effective for the 1965 and subsequent taxation years. This deduction was replaced by a non-refundable tax credit as part of the 1987 Tax Reform.
• Budget 2016 introduced the enhancement of the Canada Pension Plan, which is being phased in from 2019 to 2025. Employee contributions to the enhanced portion of the Canada Pension Plan are deductible.
• Budget 2018 introduced an amendment to provide a tax deduction for employee contributions to the enhanced portion of the Quebec Pension Plan (the enhanced portion of the Quebec Pension Plan is being phased in from 2019 to 2025).

• Budget 1971 introduced a deduction for employee premiums. This deduction was replaced by a non-refundable tax credit as part of the 1987 Tax Reform.
• The credit was amended in 2010 to allow for a credit in respect of Quebec Parental Insurance Plan premiums, effective for 2006 and subsequent years, and to allow for a credit in respect of premiums paid by self-employed individuals.

• Introduced in Budget 2007. Effective for the 2007 and subsequent taxation years. A similar tax treatment was previously granted to accounts established under the Net Income Stabilization Account program. This program was introduced in 1991 and terminated in 2009.
• Budget 2011 extended the AgriInvest tax treatment to the Agri-Québec program, effective for the 2011 and subsequent taxation years.

• Prior to 1968, the accumulated savings within a life insurance policy were not taxed.
• To reduce the tax preference given to savings accumulated in a life insurance policy, the Investment Income Tax was introduced in 1968, along with additional rules to tax on an accrual basis the income earned in non-exempt life insurance policies.
• The Investment Income Tax was repealed in 1978, reintroduced in 1987, and modified and considerably simplified in 1990.

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.

• Introduced in Budget 1961. Retroactive to the 1958 taxation year and effective in subsequent taxation years. The exemption was initially limited to volunteer firefighters.
• Budget 1998 increased the exemption for volunteer firefighters to $1,000 from $500 and extended the exemption to other emergency services volunteers.

• Introduced in Budget 2008. Effective for 2009 and subsequent years.
• The TFSA annual contribution limit was initially $5,000 per individual, indexed to inflation in $500 increments. The limit increased to $5,500 on January 1, 2013 due to indexation.
• Budget 2015 increased the TFSA annual contribution limit to $10,000, not indexed to inflation, for 2015 and subsequent taxation years.
• On December 7, 2015, the Government announced that the TFSA annual contribution limit would be returned to $5,500 and that indexation would be reinstated, effective for 2016. 

• Introduced in Budget 2016, effective for the 2016 and subsequent taxation years.

• Introduced in Budget 2006. Effective for the 2006 and subsequent taxation years.
• Budget 2016 announced the elimination of this measure as of 2017.

• In 1967, the federal government transferred four points of personal income tax to all provinces in place of certain direct cash transfers under the then-existing cost-shared program for post-secondary education.
• In 1977, the federal government agreed to transfer an additional 9.143 points of personal income tax and one point of corporate income tax to all provinces and territories as part of the Established Programs Financing for health and post-secondary education.
• The 1977 reform involved a reduction of federal tax by 9.143% and a concurrent increase in provincial rates. This is the equivalent of 14.85851 tax points.

• Introduced as a deduction in Budget 1960. Effective for the 1961 and subsequent taxation years.
• Replaced by a non-refundable tax credit and made transferable to spouses, parents or grandparents as part of the 1987 Tax Reform.
• Budget 1997 introduced a provision allowing unused tuition amounts to be carried forward for use in a subsequent year.
• Budget 2011 made occupational, trade or professional examinations eligible for the Tuition Tax Credit. The 13-week minimum duration requirement applying to studies undertaken by Canadians at foreign universities was also reduced to 3 consecutive weeks.
• Budget 2017 expanded the range of courses eligible for the credit to include occupational skills courses that are undertaken at a post-secondary institution in Canada, effective for the 2017 and subsequent taxation years. 

• Introduced in Budget 2011. Effective for the 2011 and subsequent taxation years.
• The Volunteer Firefighters Tax Credit was extended to recognize hours of eligible search and rescue volunteer service in Budget 2014.

• This measure has been in effect since the inception of the GST in 1991.

• This measure has been in effect since the inception of the GST in 1991.

• Budget 2016 confirmed and implemented a previous Notice of Ways and Means Motion tabled in Parliament on May 28, 2015. The relief was effective in respect of supplies made on or after July 1, 2015.

• This measure has been in effect since the inception of the GST in 1991.
• The list of zero-rated devices is periodically expanded and amended. Most recently, Budget 2016 announced that insulin pens, insulin pen needles, and intermittent urinary catheters would be zero-rated.

The following are zero-rated under the GST:

• drugs that are controlled substances for which a prescription is required;
• drugs that have been prescribed by a recognized health care practitioner;
• certain drugs that do not require a prescription but that are used to treat life-threatening conditions; and
• the service of dispensing a zero-rated drug.
• Drugs labelled or supplied for veterinary use are not zero-rated.

• This measure has been in effect since the inception of the GST in 1991.