More than $16 billion of annual "tax expenditures" never show up on the federal government’s books, according to a new report from the C.D. Howe Institute. In Hidden Spending: The Fiscal Impact of Federal Tax Concessions, authors William B.P. Robson and Alexandre Laurin tally transfers delivered through the tax system that Ottawa should report as spending.
"Spending programs netted against taxes get less scrutiny than equivalent explicit spending would. So they often get a pass from legislators that a program might not," commented Robson. "MPs and taxpayers would get a truer picture of Ottawa’s activities if these programs appeared as explicit spending in budgets, estimates, and the public accounts."
Some of the 37 tax provisions in question include: the First-Time Home Buyers’ Tax Credit, the Labour-Sponsored Venture Capital Corporations Credit, the Political Contribution Tax Credit, the Age Credit, and the GST/HST Credit.
The authors show that in the fiscal year 2015/16, putting these 37 provisions on the spending side of the ledger rather than deducting them from tax revenue reveals personal income taxes to be $5.0 billion higher than reported, corporate income taxes $2.3 billion higher than reported, and GST revenues $9.1 billion higher than reported. Total revenue would have been $16.4 billion higher, and spending would have been higher by the same amount.
The restated totals – $311.9 in revenue, not the $295.5 billion reported, and $312.8 billion in spending, not the $296.4 billion reported, more accurately reflect Ottawa’s impact on the Canadian economy.
Laurin concludes: "Reporting these outlays as spending rather than deducting them against tax revenue would give Canadians much needed information about how much tax they pay, and what Ottawa does with their money."
William B.P. Robson is President and CEO of the C.D. Howe Institute.
Alexandre Laurin is Director of Research at the C.D. Howe Institute.