Popular, and heavily promoted, tax expenditures such as the children's fitness tax credit and the first-time home buyers' tax credit don't get the kind of routine evaluation and public oversight required "to determine if these tax measures are relevant and performing as intended.'
Moreover, auditor general Michael Ferguson found the Finance Department doesn't provide future cost projections for the tax breaks, which MPs should take into account when they debate budgets and public spending.
The report, released Tuesday, bluntly states that "overall we concluded that the department fell short on managing tax-based expenditures."
The Conservative government has made an art of using boutique tax measures — as opposed to broad-based tax cuts, direct subsidies or rebates — to curry favour with targeted groups of voters, all the while accusing its opponents of "tax and spend" policies.
The Conservative approach was on display Tuesday in the House of Commons, where NDP Leader Tom Mulcair reproached the government for its lax oversight of tax giveaways.
Prime Minister Stephen Harper shot back that New Democrats believe "that somehow giving people more of their own money is taking something away from Canadians."
"This is people's own money," said Harper. "We want to make sure more of it stays in their pockets and creates jobs and economic growth."
The prime minister said the government will start providing cost projections for tax measures for an additional two years.
Mulcair responded that 85 per cent of Canadians don't benefit — an apparent reference to one specific tax measure, income splitting for families with children up to age 18.
"Conservatives have introduced dozens of loopholes and boutique tax credits that help the wealthiest few," Mulcair charged.
"But they refuse to give even basic information about precisely who benefits and how much the benefits costs."
The latter point is essentially the auditor general's critique.
While MPs, at least in theory, get a chance every year to assess and vote on program spending through the budget process, as many as 140 tax measures largely escape scrutiny once they're set in place.
"Even though they are things that are being deducted from the revenue side of the ledger, many of them need to be thought of as similar to direct spending programs," Ferguson said at a news conference. "And they need to have that same type of oversight."
The measures add up to "tens of billions of dollars annually," according to the audit report.
Finance does publish, separate from the budget, a tax expenditure and evaluation report, but Ferguson found it does not include valuable information that may be available in publications from other departments, such as the Canada Revenue Agency.
The Finance report doesn't spell out the number of beneficiaries for each tax expenditure, nor detail the objective or purpose of each measure.
The audit looked at eight programs and found that four — the mineral exploration tax credit, age credit, textbook tax credit and first-time home buyers credit — had not been evaluated for their "ongoing relevance and overall performance."
The audit also cited the children's fitness tax credit, which did undergo an evaluation after an expert panel warned the program design might leave some parents unable to pay the upfront cost of membership fees and camps. The evaluation was never made public, said the auditor general.
Finance Canada officially "agreed" with all the audit's recommendations, while simultaneously rejecting the central premise of Ferguson's report.
"Tax expenditures differ from spending programs," the department responds in the audit report.
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