Budget '98 -- Table E1: Social and Income Transfer Programs

Report E: TAX EXPENDITURES

TABLE E1
SOCIAL AND INCOME TRANSFER PROGRAMS

TAX EXPENDITURE
1997/98
Estimated
Cost

PROVINCIAL SALES TAX ($ millions)

Exemptions for the following items:

• Food (basic groceries, snack foods, candies, soft drinks and restaurant meals) 627

• Residential fuels (electricity, natural gas, fuel oil, etc.) 110

• Prescription and non-prescription drugs, vitamins and certain other health care products and appliances 58

• Children’s clothing and footwear 26

• Clothing patterns, fabrics and notions 7

• Specified school supplies 11

• Books, magazines and newspapers 52

• Basic telephone and cable service 50

• Exempt safety equipment 8

• Labour to repair major household appliances, clothing and footwear 6

• Miscellaneous consumer exemptions (e.g. used clothing under $100) 3

PERSONAL INCOME TAX

Provincial Measures

BC Family Bonus ¹ 120

Sales tax credit 43

Political contributions tax credit 2

Federal Measures ²

Deduction and inclusion of alimony and child support payments 19

Charitable donations tax credit 92

Tax credits for tuition and education 48

Tax credits for disabilities and medical expenses 48

Pension income tax credit 28

Credit for persons older than 65 years 101

Exemption from capital gains up to $500,000 for small businesses and family farms 77

Deduction for residents of northern and isolated areas 15

Non-taxation of employer-paid insurance premiums for group private health and welfare plans 114

Registered Retirement Savings Plans ³:

exemption for -- contributions 505

-- investment earnings 400

taxation of -- withdrawals (162)

Total 743

Registered Pension Plans ³:

exemption for -- contributions 449

-- investment earnings 893

taxation of -- withdrawals (434)

Total 908

CORPORATION INCOME TAX ⁴

Charitable donations deduction
8

SCHOOL AND RURAL AREA
PROPERTY TAXATION ⁵

Home owner grant
456

Exemption for places of worship
8

Municipal discretionary exemptions
15

PROPERTY TRANSFER TAX

Exemption for first-time home buyers
32

Exemptions for the following items:

•
Property transfers between related individuals
34

•
Property transfers to municipalities, regional districts, hospital districts, library boards, school boards, water districts and educational institutions
14

•
Property transfers to charities registered under the Income Tax Act (Canada)
3

¹ The above estimate of $120 million represents the tax expenditure portion of the program’s cost. The tax-expenditure portion represents family bonus payments that effectively reduce the recipient’s personal income tax. The remaining cost of the program, including recoveries and administration costs, $274 million for 1997/98, is presented in the BC Benefits Vote because it represents payments to families which exceed their provincial income tax liabilities.

²
The estimates show provincial revenue losses only. They are based on estimates of projected federal losses contained in Government of Canada: Tax Expenditures, 1997. British Columbia personal income tax expenditures for the federal measures are estimated by applying British Columbia’s share of basic federal tax to the federal estimates for the relevant period and then applying the relevant provincial tax rates. (Previous federal tax expenditure reports did not include projections; previous estimates of provincial revenue losses were based on historical federal estimates.) Certain tax expenditure items have been excluded where no data were available or the amounts were immaterial.

³
Registered retirement savings plans and registered pension plans are treated in the same way as in the federal tax expenditure report. The tax expenditure associated with these schemes is presented as the amount of tax that would otherwise be paid in the year of deferral, were the deferral not available. However, this type of estimate overstates the true costs of these preferences because taxes are eventually paid, including tax on investment earnings. An estimate that does not overstate these costs would, however, be difficult to develop and would require some largely speculative assumptions.

⁴
The deduction offered for corporate charitable donations is a federal measure, but the estimate shows only the provincial revenue loss. The provincial revenue loss estimate is based on the estimate of the federal loss contained in Government of Canada: Tax Expenditures, 1997. The federal estimate is based on 1997 estimated incomes. The provincial loss is estimated by applying British Columbia’s share of corporate taxable income to the federal estimate, and then applying the relevant tax rates. (Prior year’s federal tax expenditure reports did not include projections; previous estimates of provincial revenue losses were based on historical federal estimates.)

⁵
The property tax estimates, except for the home owner grant amount, are for the 1997 calendar year, and include only school and rural area property taxes levied by the province.

Return to Report E: Tax Expenditures

TAX EXPENDITURE					1997/98 Estimated Cost
PROVINCIAL SALES TAX					($ millions)
Exemptions for the following items:
•	Food (basic groceries, snack foods, candies, soft drinks and restaurant meals)				627
•	Residential fuels (electricity, natural gas, fuel oil, etc.)				110
•	Prescription and non-prescription drugs, vitamins and certain other health care products and appliances				58
•	Children’s clothing and footwear				26
•	Clothing patterns, fabrics and notions				7
•	Specified school supplies				11
•	Books, magazines and newspapers				52
•	Basic telephone and cable service				50
•	Exempt safety equipment				8
•	Labour to repair major household appliances, clothing and footwear				6
•	Miscellaneous consumer exemptions (e.g. used clothing under $100)				3
PERSONAL INCOME TAX
Provincial Measures
	BC Family Bonus ¹				120
	Sales tax credit				43
	Political contributions tax credit				2
Federal Measures ²
	Deduction and inclusion of alimony and child support payments				19
	Charitable donations tax credit				92
	Tax credits for tuition and education				48
	Tax credits for disabilities and medical expenses				48
	Pension income tax credit				28
	Credit for persons older than 65 years				101
	Exemption from capital gains up to $500,000 for small businesses and family farms				77
	Deduction for residents of northern and isolated areas				15
	Non-taxation of employer-paid insurance premiums for group private health and welfare plans				114
	Registered Retirement Savings Plans ³:
		exemption for	-- contributions	505
			-- investment earnings	400
		taxation of	-- withdrawals	(162)
	Total				743
	Registered Pension Plans ³:
		exemption for	-- contributions	449
			-- investment earnings	893
		taxation of	-- withdrawals	(434)
	Total				908
CORPORATION INCOME TAX ⁴
	Charitable donations deduction				8
SCHOOL AND RURAL AREA PROPERTY TAXATION ⁵
	Home owner grant				456
	Exemption for places of worship				8
	Municipal discretionary exemptions				15
PROPERTY TRANSFER TAX
	Exemption for first-time home buyers				32
	Exemptions for the following items:
	•	Property transfers between related individuals			34
	•	Property transfers to municipalities, regional districts, hospital districts, library boards, school boards, water districts and educational institutions			14
	•	Property transfers to charities registered under the Income Tax Act (Canada)			3

¹	The above estimate of $120 million represents the tax expenditure portion of the program’s cost. The tax-expenditure portion represents family bonus payments that effectively reduce the recipient’s personal income tax. The remaining cost of the program, including recoveries and administration costs, $274 million for 1997/98, is presented in the BC Benefits Vote because it represents payments to families which exceed their provincial income tax liabilities.
²	The estimates show provincial revenue losses only. They are based on estimates of projected federal losses contained in Government of Canada: Tax Expenditures, 1997. British Columbia personal income tax expenditures for the federal measures are estimated by applying British Columbia’s share of basic federal tax to the federal estimates for the relevant period and then applying the relevant provincial tax rates. (Previous federal tax expenditure reports did not include projections; previous estimates of provincial revenue losses were based on historical federal estimates.) Certain tax expenditure items have been excluded where no data were available or the amounts were immaterial.
³	Registered retirement savings plans and registered pension plans are treated in the same way as in the federal tax expenditure report. The tax expenditure associated with these schemes is presented as the amount of tax that would otherwise be paid in the year of deferral, were the deferral not available. However, this type of estimate overstates the true costs of these preferences because taxes are eventually paid, including tax on investment earnings. An estimate that does not overstate these costs would, however, be difficult to develop and would require some largely speculative assumptions.
⁴	The deduction offered for corporate charitable donations is a federal measure, but the estimate shows only the provincial revenue loss. The provincial revenue loss estimate is based on the estimate of the federal loss contained in Government of Canada: Tax Expenditures, 1997. The federal estimate is based on 1997 estimated incomes. The provincial loss is estimated by applying British Columbia’s share of corporate taxable income to the federal estimate, and then applying the relevant tax rates. (Prior year’s federal tax expenditure reports did not include projections; previous estimates of provincial revenue losses were based on historical federal estimates.)
⁵	The property tax estimates, except for the home owner grant amount, are for the 1997 calendar year, and include only school and rural area property taxes levied by the province.