Auditor-General urges transparency on long-term cost of Tory tax credits

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Parliament is being left in the dark as to the long-term costs of billions of dollars in targeted tax credits, according to a new report from the Auditor-General that takes aim at one of the Conservative Party's favourite approaches to governing.

They include measures such as the Children's Fitness Tax Credit, credits for first-time home buyers and deductions for apprentice vehicle mechanics toward the purchase of new tools. These tax breaks are a preferred option for the Conservatives, who view credits as more efficient than creating new government programs that require bureaucratic support.

The Conservative government is counting on its latest wave of credits – including doubling the annual contribution limit for tax-free savings accounts and credits for parents with children – as the foundation of its re-election bid this fall. The credits frequently appear in the government's taxpayer-funded Economic Action Plan ads.

But the number of credits has grown steadily over the past decade to about 140, prompting concerns that the tax code is becoming excessively complicated.

Officially known as tax expenditures, they are not subject to the same level of scrutiny or spending limits as traditional government programs.

Auditor-General Michael Ferguson said that as a result, Parliament has no role in reviewing these credits.

"They're not providing as much as information to Parliament about these tax expenditure measures as Parliament receives on other spending measures," he said. "I think that's important."

NDP Leader Thomas Mulcair accused the government of trying to hide information about who benefits from these tax credits.

"The Auditor-General just slammed the Conservatives for failing to be transparent with Canadians about billions of dollars in tax giveaways," Mr. Mulcair told the House of Commons. "Conservatives have introduced dozens of loopholes and boutique tax credits that help the wealthiest few but they refuse to give even basic information about precisely who benefits and how much the giveaways cost."

Prime Minister Stephen Harper said the government will comply with the Auditor-General's request to provide more detailed information, but defended the tax breaks.

"What we don't accept is the premise of the NDP, that somehow giving people more of their own money is taking something away from Canadians," said Mr. Harper. "This is people's own money. We want to make sure more of it stays in their pockets and creates jobs and economic growth."

From a political point of view, there are several reasons credits are a popular option for governments. They allow the government to target benefits to specific segments of the population, including large groups such as families with young children as well as smaller, more specific groups such as volunteer firefighters.

An analysis released this week by the Fraser Institute found that the number of personal-income tax expenditures has increased by about 22 per cent since 2001.

Finance Canada does provide a report once a year on the cost of federal tax credits, including annual costs for the four preceding years and forecasts for the next two years.

The Auditor-General notes that this report does not include information such as the number of beneficiaries for each tax expenditure, the objectives of the tax break or future cost projections.

It also notes that in some cases, analysis is done but not released. The report said Finance Canada was aware of some issues related to the Children's Fitness Tax Credit before it launched in 2007. An expert panel struck by the department expressed concern that some parents may not be able to afford membership fees for sports or camps and therefore would not qualify for the credit. The report found the department evaluated these concerns in 2013 but did not make this information public.