Cost Estimate for Bill C-394: An Act to amend the Income Tax Act (parenting tax credit)

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Cost Estimate for Bill C-394: An Act to amend the Income Tax Act (parenting tax credit).pdf

Summary
Bill C-394 would amend the Income Tax Act to "provide a tax credit that would offset any taxes owing on maternity and parental leave." 

Recipients of the Québec Parental Insurance Plan (QPIP) would be eligible to claim benefits equal to what they would have received in employment insurance (EI) benefits, had they been eligible. 

PBO estimates that this tax credit would result in forgone revenues of $607.6 million in 2018-19. Given that the tax credit is non-refundable, not all families will have sufficient income to claim their total eligible amount in 2018-19. As such, PBO also estimates a future fiscal liability of $261.0 million that could be claimed in future fiscal years.

The majority (72%) of the total parental tax credits will come from the third and fourth quintiles.  Existing statistics indicate that mothers predominantly claim EI parental benefits.  As a result, new mothers will comprise more of the direct recipients.

Budget 2018 introduces a new EI Parental Sharing Benefit, which provides additional weeks of parental benefits if both parents agree to share a minimum amount of weeks. PBO projects that Bill C-394 would increase the cost of this Budget 2018 proposal by $24.1 million in tax expenditures and $8.8 million in the maximum carryforward, starting in the 2019-20 fiscal year.

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