Description: If a government plans to spend money through grants or other expenditures, it is normally clearly disclosed as part of the budget process. But there is another class of “hidden” expenditures known as tax expenditures, a combination of various measures that don’t show up in the financial statements. This week the New Brunswick government took the rather important step of trying to estimate the combined effect of these important policy decisions. The various deals are costing the province up to $1.5 billion.
Date: November 6, 2019
1) Have you ever thought of a tax break in the same light as a government decision to spend money?
2) What part of the story surprised you the most?
3) On page 475 of Wiley’s Financial Accounting: Tools for Business Decision-Making, we read how the Canada Revenue Agency does not allow companies to deduct depreciation expense, but rather uses a system known as capital cast allowance. Would this type of treatment meet the definition of a tax expenditure? What other types of income tax deductions might meet this definition?