NOTE: The calculatins below represent best estimates based on available data and extrapoloations.
Partial Inclusion of Capital Gains
Like the federal government, provincial and territorial governments across Canada allow for the partial inclusion of net realized capital gains in income, effectively taxing these gains at a lower rate than other income
Estimating Provincial Partial Inclusion of Capital Gains Tax Expenditures
While detailed data on provincial and territorial tax expenditures is inconsistent across Canada, using data from Ontario (FAO 2020) an estimation of the aggregate provincial and teritorial cost for these tax expenditures can be completed.
- The reported expenditures from the Financial Accountability Office of Ontario (FAO), indicate that in 2019 the total cost of the provision for the partial inclusion of capital gains in the province was $2.147 billion (included PIT, CIT, and trust income).
- Extrapolating from this number, an estimate of the 2019 Ontario tax expenditures cost of the partial inclusion of capital gains provisions can be calculated, and from this, assuming the same per capita cost, and extrapolation of the costs for all of the provincial and territorial governments could be acheived.
- The most recent Report on Federal Tax Expenditures lists federal costs in 2019 of partial inclusion of capital gains at $10.205 billion.
- Therefore, the Ontario government cost for these tax expenditures is 21.04% ($2.1474B / $10.205B) of the federal costs. As Ontario’s population is 38.26% of Canada’s population, we can extrapolate to estimate the total provincial/territorial proportions at 54.99%.
- The federal tax expenditure for the partial inclusion of capital gains in 2020, including the cost from the personal income tax, corporate income tax, and personal income tax on trusts, is $20.655 billion ($10.690 billion for personal income tax, $10.090 billion for corporate income tax, and $865 million for trusts).
- Thus, extrapolating from the Ontario government tax expenditures, we can estimate total provincial/territorial tax expenditures in 2020 for the partial inclusion of capital gains at $11.359 billion (54.99% x $20.655 billion).
Based on the above, the estimated total provincial and territorial tax expenditures in 2020 for the partial inclusion of capital gains is at $11.359 billion.