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A fine Canadian compromise

22 Feb 2007

The mandate of the Panel was to consider and provide advice to the Government of Canada on the allocation of equalization among the provinces and TFF among the territories, mechanisms to ensure payments are stable and predictable, evidence- based aggregate measures of fiscal disparities, and whether a permanent, independent body should be established to advise the Minister on Equalization and TFF. [...] Drummond compares (with appropriate caveats) the cost of the Panel’s proposal with the costs associated with proposal of the Council of the Federation’s panel (CoF). [...] Smart focuses attention on three features of the recommendations that he believes serve to reduce the incentive to tax natural resource revenue in receiving provinces: the 50 percent inclusion of NRR in the calculation of fiscal capacity, the use of actual resource revenues as the base, and the cap that limits total equalization to the fiscal capacity of the lowest non-recipient province. [...] The second source of discrepancy between the cost estimates of the Expert Panel and the Council is the Panel’s recommendation of a fiscal capacity cap. [...] The Panel’s proposals are a bid for a return to a formulary basis for Equalization3, while pragmatically attempting to ensure that no province’s entitlements are much reduced relative to the status quo and to limit the overall fiscal cost of the program, and paying heed to the pronouncements of elected officials about the appropriate treatment of resource revenues.
health government politics economics economy insurance taxation tax system canada intergovernmental fiscal relations income tax tax rate fiscal capacity taxes tax bases capital (economics) equalization tax base equalization payments transfer payments dividend revenue sharing market value
Pages
100
Published in
Canada

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