04/28/2015 14:22 EDT | Updated 06/28/2015 01:12 EDT

Auditor slams feds for not properly tracking impact of tax credits on treasury

OTTAWA - All those billions of dollars in targeted tax credits provided by the federal government are simply program spending by another name, says Canada's auditor general, yet they're not evaluated for efficiency or effectiveness.Michael Ferguson's spring report, released Tuesday, says the Finance Department does not provide future cost projections on a wide suite of tax benefits that MPs ought to be able to take into account when they debate budgets and public spending.Overall projections are available for voter-friendly measures such as the children's fitness tax credit, the first-time home buyers credit and the age credit, but that is not the same as tracking the actual amount of dollars being lost and whether these tax expenditures achieve their public policy goals, says Ferguson.Aside from public accountability, the issue is important because the Harper government is fond of using tax-based expenditures to curry favour with voters — as opposed to direct subsidies or rebates — while accusing its opponents of "tax and spend" policies."I think it's very much about making sure that parliamentarians understand that they need to look at the details of these tax types of measures," Ferguson said at a news conference."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. And they need to have that same type of oversight."In his report, Ferguson says "a properly designed tax expenditure report is critical" in order to provide MPs and Canadians with a comprehensive picture of federal tax revenue and what each measure is — or is not — accomplishing.Unlike direct program spending, which is detailed in an annual budget and a budget implementation bill, the auditor says ongoing tax credit measures do not require the annual approval of Parliament."These expenditures were not systematically evaluated and the information reported did not adequately support parliamentary oversight," said the report. "Important programs are delivered through the tax system, and the resulting tax-based expenditures could account for tens of billions of dollars annually. Furthermore, Parliament requires complete information on tax-based expenditures to exercise adequate oversight."Finance does publish, separate from the budget, a tax expenditure and evaluation report, but Ferguson says it does not include valuable information that may be available in publications from other departments, such as the Canada Revenue Agency.He says the finance report doesn't spell out the number of beneficiaries for each tax expenditure, nor lay out information about the objective or purpose of each measure.Perhaps most importantly, the auditor says finance officials don't publish future cost projections for each tax expenditure.The federal government used to provide those specific figures, but stopped doing so in 2008.The audit also questioned why Finance is not analysing some of the measures, including the mineral exploration tax credit, the age credit, the textbook tax credit, and the credit for first-time home buyers.In total, those credits are responsible for an estimated $3 billion per year in revenue the government has opted to forego.