The Department of Finance released its annual tax expenditure report for 2002 today.

The report provides estimates and projections of the revenue consequences of all tax expenditures. Tax expenditures, which take the form of exemptions, deductions, rate reductions, rebates, deferrals, credits and carry-overs, reduce federal tax payable and provide benefits to individuals and businesses on the basis of economic, social or other tax policy objectives.

Projections in this year’s report have been adjusted to account for tax measures that have been introduced or modified since last year’s report. New tax expenditures include changes to the Canada and Quebec Pension Plan deduction for the self-employed, the federal tax credit for flow-through share investors, the apprentice vehicle mechanics’ tools deduction and the tax deduction for tuition assistance for adult basic education.

Since this year’s projections extend to 2004, the calculations account for the full effect of the general corporate tax rate reduction that was legislated in June 2001 as part of the government’s five-year $100 billion tax reduction plan. This plan provides for a reduction in the corporate rate from 28% to 21% in 2004. Currently the corporate rate is 25%.

The annual tax expenditure report is designed to promote accountability and transparency by providing detailed information about tax measures. This year’s edition includes two papers, “The Impact of the Canada Child Tax Benefit on the Incomes of Families With Children” and “Special Federal Tax Assistance for Charitable Donations of Publicly Traded Securities,” which provide additional information on these two tax measures.