Annex 5 - Government Tax Expenditure and Spending Reviews

Overview

In 2015, the Government committed to achieving up to $3 billion in annual savings by 2019–20 through a number of targeted changes to federal tax expenditures and program spending.

As a first step, in Budget 2016, the Government announced a significant cut to its advertising budget and federal spending on professional services and travel. As a result of these early actions, $221 million in annual savings were made available to reinvest in better government services, and new and enhanced programs to strengthen and grow the middle class.

Since then, the Government has undertaken a comprehensive review of federal tax expenditures. Over the four-year period ending in 2018–19, the tax expenditure review resulted in savings of $3.9 billion, and will lead to estimated savings of more than $3 billion annually starting in 2019–20.  

The continuous improvement of government programming is vital to ensuring that tax dollars are delivering the value and results that Canadians expect and deserve. 

In addition to the review of its tax expenditures, the Government undertook several comprehensive program spending reviews to ensure that the resources invested in these areas are administered effectively and continue to deliver value for Canadians.

Tax Expenditure Review

In Budget 2016, the Government committed to undertake a wide-ranging review of federal tax expenditures. Individuals and businesses had expressed concerns about the efficiency and fairness of Canada’s tax system, and how the increasing number of tax expenditures had made the federal tax system more complex.

The review’s objectives were to eliminate poorly targeted and inefficient tax measures, and allow the Government to identify opportunities to reduce tax benefits that unfairly help the wealthiest Canadians rather than the middle class and those working hard to join it.

The Government has completed a wide-ranging review of federal tax expenditures to ensure that they are fair for Canadians, efficient and fiscally responsible.  

• The Government’s comprehensive review has resulted in the elimination of measures that were found to be ineffective and inefficient.  
• The review also identified opportunities to crack down on tax evasion and aggressive tax avoidance, and reduce tax benefits that disproportionately helped the wealthiest Canadians rather than the middle class and those working hard to join it.
• Finally, the review led to measures that made existing tax relief for individuals and families more effective and accessible.

In each of its budgets, the Government has made improvements to the tax system—many of which have been informed by this comprehensive review. Table A5.2 below provides a detailed breakdown of the savings resulting from tax measures introduced from the beginning of the Government’s mandate up to and including Budget 2018.

Additional Tax Savings Introduced in Budget 2019

Budget 2019 builds on the Government’s earlier efforts to build an economy that works for everyone, and maintain a tax system in which all Canadians pay their fair share. It also proposes measures to further strengthen the Canada Revenue Agency’s ability to crack down on tax evasion and combat tax avoidance, and makes additional progress in closing tax loopholes.

Table A5.3 provides a breakdown of the savings resulting from tax measures proposed in Budget 2019.

To ensure the tax system operates as fairly and effectively as possible moving forward, the Government will continue to study, identify and address tax loopholes and tax planning schemes.

Government Spending Reviews

Responsible fiscal management requires that government spending and programming be managed wisely and be continuously improved in order to ensure that the investment of Canadian taxpayer dollars is delivering results in the most effective and efficient manner possible. Since 2015, the Government has undertaken a number of targeted program expenditure reviews to specifically achieve this aim.

A detailed breakdown of the savings that were created as a result of several of the comprehensive reviews outlined above can be found in Table A5.4 below.