Department of Finance releases Annual Report on Federal Tax Expenditures

Department of Finance releases Annual Report on Federal Tax Expenditures

Today, the Department of Finance Canada released its annual estimates of the fiscal cost of federal tax measures in the 2022 Report on Federal Tax Expenditures—Concepts, Estimates and Evaluations. In addition to providing transparency as to Canada’s tax system, this year’s report contains four analytical papers, including an economic evaluation of the government’s emergency wage subsidy programs, which have protected over 5.3 million Canadian jobs through the worst of the pandemic.

The release of today’s report coincides with the tabling of the Main Estimates in the House of Commons by the President of the Treasury Board.

Quick facts

  • This report has been made available to Canadians, on an annual basis, since 1994.
  • Studies published by international organizations – including the Organisation for Economic Co-operation and Development in 2010 and the International Monetary Fund in 2011 – have recognized the quality of Canada’s reporting on federal tax expenditures, noting the broad range of measures tracked and details provided.
  • Tax expenditures can be described as tax measures that depart from the benchmark tax system and include preferential tax rates, exemptions, deductions, deferrals and tax credits.
  • This year’s report includes four analytical papers:
    • A Gender-based Analysis Plus (GBA+) of tax expenditures accounting for the indirect benefits of refundable credits;
    • A profile of claimants and beneficiaries of the deductions of other employment expenses and union and professional dues;
    • A distributional analysis of effective marginal tax rates; and,
    • An economic evaluation of wage subsidy programs. This study responds to the Office of the Auditor General’s recommendation that “the Department of Finance Canada should complete and publish an economic evaluation of its wage subsidy programs.”
  • Budget 2021 introduced the Canada Recovery Hiring Program to help employers hire the workers they need to recover and grow, with a subsidy of up to 50 per cent of additional eligible salary or wages. This support gives employers the certainty they need to rehire and expand operations.
  • The Canada Emergency Wage Subsidy (CEWS) has helped more than 5.3 million Canadians keep their jobs, with more than $100 billion in support already paid out through the program to help employers rehire workers and avoid layoffs.
  • Canada has exceeded its goal of creating 1 million jobs since August 2020, has the second-fastest jobs recovery in the G7, and despite the challenges of Omicron, Canada today has recovered 101 per cent of the jobs lost during the pandemic, compared to 87 per cent in the U.S.
  • The evaluation of wage subsidy programs reaffirms that the wage subsidy programs were effective, efficient, and critical to supporting Canadian workers and businesses through the pandemic:
    • Employers claiming the CEWS were less likely on average to close than non-claimants, and claimants in the hardest-hit sectors (such as accommodation and food services) were most likely to report rehiring workers.
    • By helping to prevent a prolonged recession, the subsidies prevented longer term reductions in capital and labour productivity, yielding benefits into the future.

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