Canada: Personal Tax Credits And All-Inclusive Resorts

Last Updated: November 26 2014
Article by Kim G.C. Moody

If you have met me, you'll know I am a tax geek with the uncanny ability to find parallels between everyday life events, tax practice and policy. I'm fresh back from an all-inclusive Mexican resort vacation and, naturally, the experience reminded me of tax.

So what does tax and all-inclusive resorts have in common? While away, it got me thinking how some of the recent personal tax credits announced by the Conservative Government resemble certain characteristics of an all-inclusive resort. All-inclusive resorts are a people-watching mecca but more famously are known for their numerous all you can eat buffets and unlimited alcohol (good, bad and ugly). To parallel the two, while there are certainly good sides to the recent amendments to the Children's Fitness Tax Credit, the Universal Child Care Benefit ("UCCB"), Child Care Expense Deduction and the new "Family Tax Cut" credit, there are many distasteful aspects as well.

Let me first preface my comments by reminding the reader that these are my views and may not be popular amongst the mainstream or non-tax practitioners (or the committed all-inclusive jet setters). Let me start by saying that I'm not a fan of personal tax credits – period. The Income Tax Act is more than just a set of tax rules... it is a horrifically complex body of law that encompasses a collection of social policy objectives. Every time the Income Tax Act is used as the instrument to carry out a social policy objective, the Act becomes more complex and more difficult to administer. I have long questioned whether the Income Tax Act should be the statute that is the "go to" body to carry out election promises or "feel good" social policies.

I won't spend a lot of time writing about the recent amendments. Many commentators and mainstream media have already "reported the news" and therefore you can easily find it. Here is a very brief summary:

1. On October 9, 2014, the federal government announced that the Children's Fitness Tax Credit, which was first introduced in 2007 as a $500 non-refundable tax credit under section 118.03 of the Income Tax Act (the "Act"), was to be doubled to $1,000 for the 2014 and later taxation years. For the 2015 and subsequent tax years, such a credit will be refundable (meaning that such a credit may result in a tax refund – or increased tax refund as the case may be – whereas the existing non-refundable tax credit simply reduces taxes owing). The doubling of this credit was promised in the Conservative Party's 2011 election platform and ultimately this promise will now be fulfilled. Making the tax credit refundable was a 2008 Conservative Party election promise and thus this promise will also be fulfilled.

In 2011, the Conservative Party also promised to introduce an Adult Fitness Tax Credit but the October 9, 2014 announcement did not contain any amendments to introduce this.

2. On October 30, 2014, the federal government announced a multitude of changes including:

  • The new "Family Tax Cut" credit under proposed section 119.1, that will enable certain income to be shifted from a higher income spouse / common law partner to a lower income spouse / common law partner. Such income shift can be to a maximum of $50,000 but the tax savings will have a ceiling of $2,000 for couples with children under the age of 18. This new non-refundable tax credit will have effect for the 2014 and later taxation years.
  • The UCCB will increase from $100/mo for each child under the age of 6 to $160 /mo effective January 1, 2015.
  • The UCCB will be expanded to include children between the age of 6-17. Parents of such children will now receive $60/mo effective January 1, 2015.
  • The Child Care Expense Deduction limits, as set out in subsection 63(3) of the Act, will be increased by $1,000 per eligible child effective for the 2015 calendar year.
  • The existing Child Tax Credit, under paragraph 118(1)(b.1) of the Act, is to be repealed effective for the 2015 calendar year. The 2014 Child Tax Credit is $2,255.

So what's the "good" about the introduction of the new personal tax credits (and miscellaneous other amendments)? People who can obviously benefit from the modest tax savings set out above, then it is hard to argue against such a benefit. For example, the increase in the UCCB from $100 to $160 is good for lower income families who rely on the income to allow their households to run. The increase in the Child Care Expense Deduction limits is also an improvement and hard to criticize.

So what's the "bad and ugly"?

Many personal credits are "small dollar" in nature. For example, let's look at the Children's Fitness Tax Credit. Currently, the non-refundable credit is $500. The Federal tax credit is 15%. Accordingly, the maximum reduction in federal taxes payable for a family is $75 ($500 x 15%). While I appreciate that $75 is certainly better than zero, I have never met a single person, regardless of income level, who will enroll their children into fitness activities simply because they can receive a tax credit. And isn't that supposed be the underlying social policy... to encourage parents to enroll their children into fitness activities? Am I surprised by my anecdotal evidence? Nope. In my view, the Income Tax Act as a motivator of personal behavior has its limits. I often say to my clients: "Don't let the tax tail wag the dog". In other words, tax savings as a reason to behave is usually misguided.

Using the Department of Finance's statistics provided in its October 9, 2014 release, the existing Children's Fitness Tax Credit currently costs the federal government $115 million per year. The proposed changes to the Children's Fitness Credit will cost the Federal government an additional $35 million per year for a total cost of $150 million per year. While that number may sound large to the average person, it is tiny as a line item in the federal Budget.

Do all of the provinces grant equivalent personal tax credits every time the federal government introduces a new credit? No... it's a mixed bag thus adding an additional level of complexity.

What about the administration of such personal tax credits? Is it easy? The answer is an emphatic "no". Again, using the Children's Fitness Tax Credit as an example, the October 9, 2014 announcement was accompanied by a 5 page Notice of Ways and Means Motion to Amend the Income Tax Act and the Income Tax Regulations. Good luck to the average person trying to understand such a document. This is reserved for tax professionals, like me, and believe me, trying to piece such material together is very challenging.

The preparation of personal income tax returns to claim such a credit is challenging. I honestly don't think many people today can correctly prepare their own returns using the old fashioned method of pen and paper. Personal tax software or professional preparation is almost a necessity these days. I challenge you to find one professional tax preparer who thinks that the addition of personal tax credits is a good thing. It often involves the professional wading through the numerous receipts to determine eligibility and make the ultimate claim. The Canada Revenue Agency will often review such claims after the filing of the returns thus adding an additional layer of complexity and time to the tax preparation process. In a world where software and the internet has made professional tax preparation a commodity rather than a value added service, it makes it more and more difficult for professional tax preparers to profit from their services where price is often the only motivator for the client to retain their services.

Here's a list of personal tax credits that have been introduced in the last decade or so:

  1. Child Tax Credit – paragraph 118(1)(b.1) – to be repealed for 2015 forward as earlier discussed;
  2. Canada Employment Credit – subsection 118(10);
  3. Adoption Expense Credit – section 118.01;
  4. Transit Pass Credit – section 118.02;
  5. Children's Fitness Credit – section 118.03;
  6. Children's Art Credit – section 118.031;
  7. Home Renovation Credit (for 2009 only) – section 118.04;
  8. First Time Home Buyer's Credit – section 118.05;
  9. Volunteer Firefighter Credit – subsection 118.06(2);
  10. Search and Rescue Credit – subsection 118.07(2);

While all of the above are crowd pleasers, the credits come with the negative implications that I have laid out above. In my view, if the federal government truly wants to motivate certain behavior, then the Income Tax Act should not resemble a buffet restaurant that exists at an all-inclusive resort. While it is tempting to continue to add "new dishes" to the buffet, personal tax credits should not serve as those – instead, I believe that the federal government could implement small dollar social policy objectives or election promises with direct investments perhaps by way of subsidies. I realize that is easier said than done and alternative investments carry with them negative implications as well. It is time to shrink the buffet line by eliminating the excess "side dishes" at the all-inclusive resort known as the Income Tax Act.

Moodys Gartner Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Kim G.C. Moody
Events from this Firm
20 Oct 2018, Seminar, Vancouver, Canada

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad.

27 Oct 2018, Seminar, London, UK

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad.

1 Nov 2018, Seminar, Doha, Qatar

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad. Many US residents will see an immediate benefit on their 2018 tax return, but for US expats and green card holders living abroad, things may have changed for the worse.

Similar Articles
Relevancy Powered by MondaqAI
Crowe MacKay LLP
Crowe Soberman LLP
Crowe MacKay LLP
Minden Gross LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Crowe MacKay LLP
Crowe Soberman LLP
Crowe MacKay LLP
Minden Gross LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions