Federal Fiscal Balances and Redistribution in Canada, 1992 ... · inces through the intermediation of federal spending and taxation. The federal government can generate different

626 (2000), Vol. 48, No. 3 / no 3

Federal Fiscal Balances andRedistribution in Canada,1992-1997

G.C. Ruggeri and Weiqiu Yu*

PRÉCIS

Cet article traite des principales questions méthodologiques relatives au calcul dessoldes budgétaires fédéraux par province. En nous servant de données provenantdes Comptes économiques provinciaux (CEP) et des Comptes du revenu national,nous avons recouru à différentes hypothèses pour calculer quatre séries de soldesbudgétaires pour la période de 1992 à 1997, soit: (1) les soldes budgétaires de base;(2) les soldes budgétaires primaires; (3) les soldes de budget équilibré via uneaugmentation des impôts; et (4) les soldes de budget équilibré via une diminutiondes dépenses. Aux fins de comparaison, nous présentons également les soldesbudgétaires fédéraux enregistrés dans les CEP selon la méthode du flux detrésorerie (ou cash-flow.) Nos résultats mettent en évidence le fait que les soldesbudgétaires fédéraux par province diffèrent significativement d’une méthode àune autre. En particulier, les gains (pertes) des provinces qui sont des bénéficiaires(contributrices) nettes du système fiscal fédéral sont moindres selon notre méthodede calcul des soldes budgétaires de base que selon la méthode de calcul du fluxde trésorerie. Nos résultats montrent également que l’élimination des intérêts surla dette publique ou du déficit fédéral augmente les contributions des provincesles mieux nanties et diminue les gains des provinces bénéficiaires nettes. Enfin,nous avons calculé certains indices de redistribution entre les provinces créée parle système fiscal fédéral et avons constaté que le degré de redistribution est plutôtmodeste et ce, quelle que soit la méthode de calcul utilisée.

ABSTRACT

This article identifies the major methodological issues involved in calculating federalfiscal balances by province. Using data from the Provincial Economic Accounts (PEA)and National Income Accounts, we calculate four sets of balances for the period1992-1997—basic balances, primary balances, balanced-budget balances with

* Of the Department of Economics, University of New Brunswick. We would like to thank JeffKing for excellent research assistance and Vaughan Dickson, Derek Hermanutz, FinnPoschmann, Carole Vincent, and an anonymous referee for helpful comments.

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FEDERAL FISCAL BALANCES AND REDISTRIBUTION IN CANADA 627

tax increases, and balanced budget balances with spending cuts—under differentassumptions. For comparison purposes, we also include federal fiscal balancescontained in the PEA based on the cash flow approach. The results show thatfederal fiscal balances by province vary significantly from one method to another.In particular, the basic balances calculated using our approach yield substantiallylower gains to the net beneficiary provinces and lower costs to the net contributorprovinces than balances based on the cash flow approach. Eliminating the intereston the public debt or the federal deficit increases the contributions by the “better off”provinces and reduces the gains to the net beneficiary provinces. We also calculatesome indices of redistribution among provinces generated by the federal fisc andfind that the degree of redistribution was modest under all methods of calculation.

INTRODUCTION

Canada was founded as and remains a federation with interdependent fiscalsystems. Under this type of constitutional and administrative arrangement, thefederal government affects the economic well-being of the residents of differentregions through three main fiscal channels: (1) the expenditures it makes di-rectly for the benefit of all Canadians, (2) the grants it provides to provincial andlocal governments, and (3) the revenues it raises to finance its direct spendingand intergovernmental grants. The extent of federal fiscal redistribution amongprovinces is usually measured by calculating federal fiscal balances by prov-ince.1 These balances allocate to each province a portion of the revenues raisedand the expenditures made by the federal government. These calculations involvea variety of assumptions that often differ depending on the authors.

This article expands on this body of literature and serves three main pur-poses. First, it identifies the major methodological issues involved in calculatingfederal fiscal balances. Second, it estimates federal balances under four differentsets of assumptions in order to determine the sensitivity of the results. Finally, itestimates the degree of fiscal redistribution among provinces generated by thefederal government. Since federal balances for a single year may be affected by

1 Examples of these calculations for past years are found in Irene Banks, The ProvincialDistribution of Federal Government Expenditures: 1972-73, 1973-74 and 1974-75, Discus-sion Paper no. 81 (Ottawa: Economic Council of Canada, February 1977); A. Glynn, “TheNet Provincial Expenditures Associated with Federal Government Expenditures, and FiscalAutonomy,” in The Political Economy of Confederation (Kingston, Ont.: Queen’s University,Institute of Intergovernmental Relations, and the Economic Council of Canada, 1979), 63-95;Michael C. McCracken, The Distribution of Federal Spending and Revenue by Province:Implications for Ontario and Other Provinces (Toronto: Ontario Ministry of Intergovernmen-tal Affairs, 1993); Isabella D. Horry and Michael Walker, Government Spending Facts 2(Vancouver: Fraser Institute, 1994); and Robert Mansell and Ronald Schlenker, “The ProvincialDistribution of Federal Fiscal Balances” (Winter 1995), 3 Canadian Business Economics 3-19.

628 CANADIAN TAX JOURNAL / REVUE FISCALE CANADIENNE

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transitory components, our calculations are based on the average over 1992-1997, a period that includes the latest years for which data are available.

Our findings show that federal balances differ depending on the method ofcalculation. In particular, when taxes are allocated to those who bear theirburden, and federal purchases are allocated to the province where factor incomeis generated rather than where consumption takes place, the net gains to thepoorer provinces are substantially lower than those shown in the balances pro-vided annually by Statistics Canada. Our findings also show that, under allapproaches, the degree of redistribution among provinces is fairly modest. Theseresults suggest that, in the debate about reforming intergovernmental fiscalrelations, we should keep in mind that we start with a system that deliverslimited redistribution.

The article is organized as follows. We discuss the methodological issues,and we present the fiscal balances calculated under different assumptions. Thenwe present some indices of federal redistribution among provinces. Finally, weprovide some concluding comments.

METHODOLOGICAL ISSUES

Limitations of Balance SheetsFederal fiscal balances involve accounting exercises that describe how federalrevenues and expenditures are distributed by province. They provide a snapshotof only one aspect of the economic dimensions of the federation. Because oftheir limited scope, these balances cannot be used to draw general conclusionsabout winners and losers in the Canadian federation. Their main purpose is toprovide an indication of the extent to which income is transferred among prov-inces through the intermediation of federal spending and taxation.

The federal government can generate different economic gains or losses byprovince through a variety of non-fiscal activities, such as regulatory policy,competition policy, environmental regulation, and monetary policy. Trade poli-cies, for example, may have both interregional and international effects becausethe potential effects of these policies depend on a province’s economic structureand the pattern of its trade flows. Federal policies toward the energy and resourcesectors may also have important interregional effects because these resources arenot distributed evenly among provinces. Direct federal expenditures, as well asindirect subsidies through special tax breaks (tax expenditures), are fully cap-tured in the balance sheets. However, the interregional effects of policies aimedat controlling the price of those resources, as was done under the national energyprogram, are not directly captured in those balances. Differential economiceffects may also be generated by interregional trade barriers. These barriers mayproduce economic costs, which may not be distributed equally among prov-inces, by impeding the free flow of labour and capital and by distorting prices ofinputs and outputs. Differential economic effects may also result from monetarypolicy, which has increasingly been used as the primary instrument of economic


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stabilization. For example, the economies of the various provinces may havedifferent sensitivities to changes in credit conditions, and business cycles maynot be fully synchronized across the country. Therefore, a given change inmonetary policy will not affect all provinces in the same manner. Also, policydecisions by the Bank of Canada may be influenced by the relative size ofprovincial economies. For example, overheating of the New Brunswick economywill unlikely raise concerns at the national level. Overheating of the Ontarioeconomy, on the other hand, may elicit a monetary policy response.

The quantitative effect of the non-fiscal effects of federal policies is difficultto measure and may vary over time. In a general equilibrium analysis of theseeffects, Whalley and Trela2 found that in the early 1980s the interregional effectsof tariffs were quantitatively small. These effects are likely to be even smallerafter the rounds of tariff reductions that have been introduced since 1981.Whalley and Trela, however, found strong interregional effects for federal poli-cies toward the energy and resource sectors, primarily because of the nationalenergy program. Those effects no longer exist, since the program has beenterminated. Although it seems that major elements of the non-fiscal dimensionsof federal policies may have small interregional effects, it is worth emphasizingthat not all non-fiscal aspects of federal activity are measurable.

Even within the framework of fiscal transactions, a number of issues are notaddressed in the calculation of federal balances. The first involves the excessburden of taxation. As compulsory payments, taxes impose on society a cost inexcess of the revenue they generate because they distort private choices. Thisexcess burden is not captured in the estimates of federal balances because onlythe revenue collected is allocated among provinces. Similarly, the fiscal bal-ances do not include any gains or losses of consumer or producer surpluses fromgovernment spending. The relative balances by province, however, are affectedonly by the relative size of the excess burden and changes in consumer-producersurpluses by province, and not by their total magnitude. Therefore, only differ-entials in those values will affect the degree of redistribution among provinces.Second, these balances are based on annual records of revenues and expendi-tures and do not capture their intergenerational effects. For example, financingcapital expenditures entirely through current taxation in a given year will under-estimate the benefits of federal spending in future years. Conversely, financingcurrent expenditures through borrowing will underestimate the current costsbecause only the revenue collected is allocated in a given year. Third, confiningthe analysis to the federal government fails to capture the possibility of taxexporting by provinces through the federal fiscal system. For example, thedeductibility of payroll taxes provides a benefit to the residents of provinces that

2 John Whalley and Irene Trela, Regional Aspects of Confederation, Collected Research Stud-ies of the Royal Commission on the Economic Union and Development Prospects for Canada,vol. 68 (Toronto: University of Toronto Press, 1986).


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make use of these revenue sources. In the federal balances, these residents areimplicitly assigned a share of the federal tax increase needed to offset therevenue loss from payroll tax deductibility, but are not assigned the benefit fromthe lower effective provincial payroll taxes that they end up paying. Similarly,there is no accounting of the spillovers of provincial expenditures that are partlyfinanced through federal grants. To the extent that there is a “brain drain” frompoorer to richer provinces, part of the benefits of the federal transfers for post-secondary education to the former accrue to the latter. All these issues serve as areminder that we should be careful in interpreting federal fiscal balances asindicators of the amount of gain or loss from the federal system.

Approaches to MeasurementTwo basic approaches have been used in calculating federal fiscal balances: thebenefit and the cash flow approaches.3 The benefit approach focuses on the resi-dence of those who receive the benefits of government services and makecontributions for their financing. Revenues and expenditures are allocated to theprovince where residents bear the costs of federal revenues and benefit fromfederal expenditures. The cash flow approach focuses on the location whererevenues are collected and disbursements are made. The difference between thetwo approaches can be illustrated by the following example. Suppose the federalgovernment collects $10 million of customs duties in province A (where thecollection facilities are located) and uses the funds to purchase equipment pro-duced in province B for use in province A to monitor air quality as part of anational program. The benefit approach allocates the revenues to all Canadianson the basis of some measure of personal consumption, and allocates the expend-itures also to all Canadians, perhaps on a per capita basis. The cash flowapproach assigns the revenues to province A and the expenditures to province B.In practice, different allocations apply to only a portion of the federal budget.On the revenue side, all taxes for which the taxpayer also bears the burden areallocated in the same manner under both approaches. These revenue sourcesinclude personal income taxes, direct taxes on consumers (such as the goods andservices tax [GST]), and social insurance levies. These revenues represent over80 percent of federal tax revenues during the 1992-1997 period. Differences inthe allocation of revenue are confined to corporate income and capital taxes andindirect taxes. On the expenditure side, intergovernmental transfers and trans-fers to persons, other than interest on the debt, are allocated in the same mannerunder both approaches. These federal expenditures represent over half of thetotal. Different allocations apply to transfers to business, interest on the debt,and purchases of goods and services.

3 A detailed comparison of these two approaches and its application to the federal balances inQuebec is found in C.D. Howe Institute, Why Do the Balances Differ on Federal Receipts andExpenditures in Quebec? (Toronto: C.D. Howe Institute, September 1977).


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The cash flow approach has served as the basis for the federal balancespublished annually by Statistics Canada in the Provincial Economic Accounts(PEA)4 and has also been used, with minor modifications, in studies byMcCracken5 and by Mansell and Schlenker.6 The latter also included the im-plicit transfers imposed by energy price regulation during the energy crisis, anadjustment that in their results generated substantial interprovincial redistribu-tion. The benefit approach has been used by Horry and Walker.7 For the purposeof this study we used the PEA balances as an example of the cash flow approach.As alternatives, we recalculated federal balances under four different sets ofassumptions, all involving a variation of the benefit and the cash flow ap-proaches that we call the aggregate transfer approach. This alternative approachfocuses on measuring the contribution that a province makes to the federal coffersthrough the tax burden borne by its residents and the contribution that federalexpenditures make to the economic position of that province. On the revenueside, the aggregate transfer approach is equivalent to the standard benefit ap-proach. Expenditures, on the other hand, are assigned to the province wherefederal spending generates factor income. Therefore, federal wages and salariesare allocated on the basis of location of employment (as in the PEA), but the non-wage component of federal purchases is allocated to the province of production(where factor income is generated) rather than to the province of consumption,as in the PEA. A summary comparison of the allocations under the above threeapproaches is contained in appendix table A1. In our view, the aggregate transferapproach has a number of advantages over the other two approaches. First, itfocuses on Canadian residents, thus excluding transactions of non-residents,which are not relevant to the measurement of horizontal redistribution. Second,it incorporates the methodology used in the analysis of tax and spending inci-dence. Finally, it concentrates on jurisdictions instead of on individuals, sincethe purpose of the exercise is to compare the effect of the federal fisc on therelative economic position of different regions.

In our calculations, we started with the PEA data and made a number ofadjustments.8 On the revenue side, adjustments were made to corporate incometax (CIT) and indirect tax revenue. CIT revenue was allocated 25 percent toconsumers and 75 percent to owners of capital. A portion of the latter wasassigned to non-residents according to the share of dividends they received.From the portion assigned to Canadian residents we subtracted the dividend tax

4 Statistics Canada, Provincial Economic Accounts, catalogue no. 13-213.

5 McCracken, supra footnote 1.

6 Mansell and Schlenker, supra footnote 1.

7 Horry and Walker, supra footnote 1.

8 Details of the allocations under the aggregate transfer approach and the differences from thePEA cash flow approach are found in appendix A.


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credit, a tax expenditure aimed at reducing the CIT liability on dividends fromCanadian corporations. The dividend tax credit was then added to personalincome tax (PIT) revenue. Indirect taxes were allocated on the basis of con-sumption. Specifically, customs import duties were allocated according to theprovincial share of personal consumption expenditures. Excise duties are leviedon alcoholic beverages and tobacco products, so they were allocated on the basisof the provincial share of these products. Excise taxes are imposed on gasolineand other motor fuels and were allocated to the provincial consumers of refinedpetroleum products used in transportation. Miscellaneous indirect taxes are lev-ied partly on tobacco products, partly on alcoholic beverages, and partly on amix of goods. Accordingly, they were allocated partly to consumers of tobaccoproducts, partly to consumers of alcoholic beverages, and partly to personalconsumption expenditures.

On the spending side, we used PEA data for all major components exceptwages and salaries, for which we used Statistics Canada’s estimates of govern-ment labour income; this is in contrast to equating shares of wages and salarieswith shares of employment; as is done in the PEA. We used a different allocationin the case of non-wage current purchases and the interest on the federal debt.The interest on the debt was allocated on the basis of interest received ratherthan on a per capita basis, as is done in the PEA. The non-wage component offederal purchases was allocated according to each province’s share of privateoutput, measured by national income at factor cost minus total governmentwage and salary payments.

Balanced Budget and Primary BalancesThe federal budget was not balanced during the 1992-1997 period, on average,so some of the federal expenditures that were allocated to the provinces andterritories were financed through borrowing. As a result, one may end up withbalances that show all provinces to be net beneficiaries from federal fiscalactivity. There may still be redistribution among provinces, but this redistribu-tion depends on relative gains rather than on a comparison of gains by someprovinces and losses by others. According to some studies,9 the deficit should beexcluded from the calculation of federal balances. Balanced-budget balances arean attempt to bypass the intergenerational issues created by deficit financing. Indoing so, however, they require the use of arbitrary assumptions about the waythe deficit is eliminated. For example, McCracken10 and Mansell and Schlenker11

assume that the federal budget is balanced through tax increases. Since federal

9 For example, McCracken, supra footnote 1.

10 Ibid.

11 Supra footnote 1.


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tax revenues represent a higher proportion of income in richer than in poorerprovinces, this approach tends to magnify the losses to the former and the gainsto the latter, thus artificially inflating the degree of redistribution among prov-inces that is generated by the federal fisc. Different results will be obtained if thedeficit is eliminated through reductions in all federal spending or in selectedcomponents. In order to provide an indication of the sensitivity of the calcula-tions to different assumptions for eliminating the federal deficit, we calculatedfederal balances under the assumption of a proportional increase in tax revenueand a proportional reduction in federal spending net of interest payments.

Allocating the interest on the debt raises more complex issues. Some authors(for example, McCracken12) have argued that federal balances should be calcu-lated only for primary balances—that is, excluding the interest on the debt—because these federal payments do not bestow benefits on the recipients. Theseagents would have purchased private securities if government bonds were notavailable; therefore, they receive no special benefits from the federal debt. Inour view, this argument is unconvincing. The cost of servicing the federal debtin a given period is paid by taxpayers through tax payments that are allocated byprovince. The amounts paid must also be allocated. The debt accumulates becausetaxpayers, through their elected representatives, decide to receive a certain levelof public services in a given year but postpone the full payment to future years,perhaps in the hope of shifting the burden to future generations. The interest onthe debt may be viewed as a measure of the benefit of consuming public goodsbefore they are fully paid. In theory, these payments should be assigned to thebeneficiaries of the public services financed through borrowing. Identifyingthese beneficiaries, however, is not an easy task, because borrowing financesboth current public consumption and current public investment. The latter expend-itures benefit future generations, and the postponed tax payments do not involvean intergenerational shift in tax burdens.

In the absence of a reliable method of allocating the interest on the debt to itsbeneficiaries, approximations such as those employed by the PEA or in thisarticle have been used. Alternatively, one can follow McCracken’s argument byexcluding the interest on the debt from the balances. In this article, in addition tothe basic balances, we have calculated balanced-budget balances as well asprimary balances to determine how these are affected by the elimination ofinterest payments.

We present five sets of federal balances for the average of the 1992-1997 period:(1) PEA balances under the cash flow approach, (2) basic balances under theaggregate transfer approach, and three variations of the latter: (3) a primary balanceapproach, (4) a balanced-budget approach financed through proportional tax

12 Ibid.


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increases, and (5) a balanced-budget approach financed through proportionalspending cuts.13 Basic balances are the balances derived by applying the aggre-gate transfer approach to the federal revenues and expenditures assigned toCanadian residents. Primary balances are calculated as basic balances net of theinterest on the debt. The other two sets of balances are derived by adjustingbasic balances for the elimination of the deficit through either proportional taxincreases or proportional spending cuts.

FEDERAL FISCAL BALANCES

The estimated federal balances for the average of the 1992-1997 period areshown in table 1. In order to explore different dimensions of these balances, wealso present them on a per capita basis (table 2), as a percentage of personalincome (table 3), and as a percentage of gross domestic product (GDP) (table 4).The differences in the estimates of federal balances are discussed below.

Basic Balances Versus PEA BalancesThe differences between basic and PEA balances are shown in tables 1 and 5.Starting with the total amounts in table 5, we notice a systematic pattern in thedifferences between the two estimates: basic balances under the aggregate trans-fer approach are lower than PEA balances for “have not” provinces, with theexception of Saskatchewan, and higher for “have” provinces. The biggest differ-ence between the two balances occurs in the Atlantic provinces. Their net gain isreduced by a total of $3.3 billion, or 28 percent of the gains under the PEAapproach, as shown in table 1. For “have” provinces, a net loss of $9.8 billion istransformed into a gain of $120 million. In the case of Ontario, a loss of $5.8billion under the PEA is transformed into a gain of nearly $900 million under thebasic aggregate transfer approach. However, under both approaches the netcontribution by “have” provinces is a small fraction of the net gains by “havenot” provinces. These results suggest that, during the 1992-1997 period, federalfiscal redistribution among provinces was financed largely through borrowing.Table 6 breaks down these differences into their main components. For theAtlantic provinces, the difference between the basic and the PEA balances isexplained almost entirely by changes in federal purchases and transfers to per-sons. The differences on the revenue side are negligible. This result suggeststhat in calculating federal fiscal balances for the Atlantic region, special atten-tion must be paid to the spending side. In Quebec, there are fairly large butoffsetting differences in revenues and transfers to persons, resulting in a smalloverall change in balances. In Ontario, the difference between the two balancesis due overwhelmingly to changes in the revenue component. The differences in

13 Although we show the balances for the territories, our discussion will be limited to theprovinces because the territories have very different fiscal arrangements with the federalgovernment.


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Table 1 Average Balances by Province Under AlternativeApproaches, 1992-1997

Aggregate transfer approach

Balanced budget

PEA Basic Primary Tax increases Spending cuts

$ millionsNfld. . . . . . . . . . . −3,430 −2,762 −2,410 −2,407 −1,911PEI . . . . . . . . . . . −673 −588 −460 −493 −386NS . . . . . . . . . . . . −4,512 −2,726 −1,859 −2,003 −1,463NB . . . . . . . . . . . −3,013 −2,257 −1,635 −1,708 −1,301Que. . . . . . . . . . . −10,408 −10,213 −1,506 −5,355 −4,685Ont. . . . . . . . . . . . 5,754 −880 17,119 10,078 8,238Man. . . . . . . . . . . −3,235 −3,015 −1,487 −2,128 −1,715Sask. . . . . . . . . . . −2,700 −2,843 −1,347 −2,100 −1,739Alta. . . . . . . . . . . 2,572 873 5,124 3,659 2,985BC . . . . . . . . . . . . 1,432 −113 6,224 3,617 2,916Terr. . . . . . . . . . . . −1,425 −1,270 −1,179 −1,160 −937

Total . . . . . . . . . . −19,639 −25,793 16,583 0 0

Sources: Statistics Canada, Provincial Economic Accounts, catalogue no. 13-213; RevenueCanada, Taxation Statistics (Ottawa: Public Works and Government Services, various years); andStatistics Canada, Public Sector Employment and Wages and Salaries, catalogue no. 72-209.

Table 2 Average Balances by Province Under Alternative Approaches,Per Capita, 1992-1997


Balanced budget


$ thousandsNfld. . . . . . . . . . . −6,021 −4,849 −4,231 −4,226 −3,355PEI . . . . . . . . . . . −5,020 −4,379 −3,431 −3,678 −2,879NS . . . . . . . . . . . . −4,866 −2,940 −2,005 −2,160 −1,578NB . . . . . . . . . . . −4,010 −3,004 −2,176 −2,273 −1,732Que. . . . . . . . . . . −1,442 −1,415 −209 −742 −649Ont. . . . . . . . . . . . 528 −81 1,570 924 756Man. . . . . . . . . . . −2,873 −2,678 −1,321 −1,891 −1,523Sask. . . . . . . . . . . −2,666 −2,807 −1,331 −2,074 −1,718Alta. . . . . . . . . . . 943 320 1,878 1,341 1,094BC . . . . . . . . . . . . 384 −30 1,671 971 783Terr. . . . . . . . . . . . −14,740 −13,134 −12,195 −11,996 −9,688

Average . . . . . . . . −673 −884 568 0 0

Sources: Statistics Canada, Provincial Economic Accounts, catalogue no. 13-213; RevenueCanada, Taxation Statistics (Ottawa: Public Works and Government Services, various years); andtable 1.


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the other provinces are relatively small and are explained by changes in eitherrevenues (Alberta) or expenditures (Manitoba and British Columbia).

In terms of per capita values (tables 2 and 5), within Atlantic Canada the netgains (from basic balances) vary from $4,849 in Newfoundland to $2,940 in

Table 3 Average Balances by Province Under Alternative Approaches as aPercentage of Personal Income, 1992-1997


Balanced budget


Nfld. . . . . . . . . . . −34.97 −28.16 −24.57 −24.54 −19.49PEI . . . . . . . . . . . −27.57 −24.05 −18.85 −20.20 −15.81NS . . . . . . . . . . . . −25.28 −15.27 −10.42 −11.22 −8.20NB . . . . . . . . . . . −21.33 −15.97 −11.57 −12.09 −9.21Que. . . . . . . . . . . −6.89 −6.76 −1.00 −3.54 −3.10Ont. . . . . . . . . . . . 2.17 −0.33 6.45 3.80 3.10Man. . . . . . . . . . . −13.95 −13.01 −6.42 −9.18 −7.40Sask. . . . . . . . . . . −13.93 −14.66 −6.95 −10.83 −8.97Alta. . . . . . . . . . . 4.02 1.37 8.01 5.72 4.67BC . . . . . . . . . . . . 1.66 −0.13 7.20 4.18 3.37Terr. . . . . . . . . . . . −59.69 −53.19 −49.38 −48.58 −39.23

Average . . . . . . . . −2.99 −3.93 2.53 0.00 0.00

Sources: Same as table 2.

Table 4 Average Balances by Province Under Alternative Approaches as aPercentage of GDP, 1992-1997


Balanced budget


Nfld. . . . . . . . . . . −35.92 −28.93 −25.24 −25.21 −20.01PEI . . . . . . . . . . . −28.89 −25.21 −19.75 −21.17 −16.57NS . . . . . . . . . . . . −24.97 −15.08 −10.29 −11.08 −8.10NB . . . . . . . . . . . −21.48 −16.09 −11.65 −12.17 −9.27Que. . . . . . . . . . . −6.57 −6.45 −0.95 −3.38 −2.96Ont. . . . . . . . . . . . 2.02 −0.31 6.00 3.54 2.89Man. . . . . . . . . . . −13.25 −12.35 −6.09 −8.72 −7.02Sask. . . . . . . . . . . −12.80 −13.47 −6.38 −9.95 −8.24Alta. . . . . . . . . . . 3.44 1.17 6.86 4.90 3.99BC . . . . . . . . . . . . 1.64 −0.13 7.15 4.15 3.35Terr. . . . . . . . . . . . −42.20 −37.61 −34.92 −34.35 −27.74

Average . . . . . . . . −2.81 −3.69 2.38 0.00 0.00



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Nova Scotia (an average of $3,498 for the region). The average net gain forManitoba and Saskatchewan is about $2,700, slightly lower than the averagefor New Brunswick and Nova Scotia. For Quebec, Ontario, and British Colum-bia, the net gains are $1,415, $81, and $30, respectively. Only Alberta is a netcontributor, with a per capita amount of $320. The per capita gains and lossesare quite different under the PEA approach. Table 5 shows that the net gains arehigher by 40 percent ($1,384) in the Atlantic region, 6 percent ($195) in Mani-toba, and 0.2 percent ($27) in Quebec, and are lower by 5 percent ($141) inSaskatchewan. The net contributions by “have” provinces are higher under the

Table 6 Differences Between Average Components of Federal Revenuesand Expenditures, Basic Minus PEA, 1992-1997

Revenues Interest on the debt Purchases

$ millionsNfld. . . . . . . . . . . . . . . . . . . . . . . . . . . −5 −474 −199PEI . . . . . . . . . . . . . . . . . . . . . . . . . . . −37 −68 −55NS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 −479 −1,260NB . . . . . . . . . . . . . . . . . . . . . . . . . . . −39 −468 −327Que. . . . . . . . . . . . . . . . . . . . . . . . . . . −1,805 −1,767 233Ont. . . . . . . . . . . . . . . . . . . . . . . . . . . . −3,646 2,171 816Man. . . . . . . . . . . . . . . . . . . . . . . . . . . −65 −106 −179Sask. . . . . . . . . . . . . . . . . . . . . . . . . . . −52 25 65Alta. . . . . . . . . . . . . . . . . . . . . . . . . . . −652 290 756BC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 924 765Terr. . . . . . . . . . . . . . . . . . . . . . . . . . . . −43 −48 −150

Sources: Table 1 and authors’ calculations.

Table 5 Differences Between Average Federal Balances:Basic Minus PEA, 1992-1997

Total balances Per capita Percentage of Percentage($ millions) ($) personal income of GDP

Nfld. . . . . . . . . . . . . . . . . . . . . . . −668 −1,172 −6.81 −6.99PEI . . . . . . . . . . . . . . . . . . . . . . . −86 −641 −3.52 −3.69NS . . . . . . . . . . . . . . . . . . . . . . . . −1,786 −1,927 −10.01 −9.89NB . . . . . . . . . . . . . . . . . . . . . . . −756 −1,006 −5.35 −5.39Que. . . . . . . . . . . . . . . . . . . . . . . −195 −27 −0.13 −0.12Ont. . . . . . . . . . . . . . . . . . . . . . . . 6,635 609 2.50 2.33Man. . . . . . . . . . . . . . . . . . . . . . . −220 −195 −0.95 −0.90Sask. . . . . . . . . . . . . . . . . . . . . . . 142 141 0.73 0.67Alta. . . . . . . . . . . . . . . . . . . . . . . 1,698 623 2.66 2.27BC . . . . . . . . . . . . . . . . . . . . . . . . 1,545 415 1.79 1.77Terr. . . . . . . . . . . . . . . . . . . . . . . . −155 −1,606 −6.50 −4.60

Average . . . . . . . . . . . . . . . . . . . . 6,154 211 0.94 0.88

Sources: Tables 1 to 4 and authors’ calculations.


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PEA approach. The difference varies from $623 in Alberta to $609 in Ontarioand $415 in British Columbia.

The ratios of federal balances to personal income are shown in tables 3 and 5.Basic balances under the aggregate transfer approach vary from 28 percent inNewfoundland to 24 percent in PEI and 16 percent in New Brunswick; 13-15percent in Nova Scotia, Saskatchewan, and Manitoba; and 7 percent in Quebec.Small gains of 0.33 percent and 0.13 percent were recorded for Ontario andBritish Columbia, respectively. Alberta was the only net contributor, with anamount equal to about 1.4 percent of personal income. These ratios are differentunder the PEA approach. In particular, also from table 5, the net gain of theAtlantic provinces increases by about 8 percentage points on average, whilethe small gains by Ontario and British Columbia turn into losses of about 2percent. The net contribution by Alberta increases under the PEA by 2.6 percent-age points, to 4 percent. The ratios for Quebec, Manitoba, and Saskatchewan arenot greatly affected.

Finally, the average balances as a percentage of GDP are shown in tables 4and 5. The patterns are similar to those for the ratios to personal income,although the values are slightly lower. According to PEA balances, during the1992-1997 period, the fiscal activity of the federal government produced atransfer of about 1 percent of GDP from the three “have” provinces to the rest ofthe country. Under the aggregate transfer approach, a net contribution was madeonly by Alberta and amounted to about 1 percent of GDP.

Basic Balances Versus Primary BalancesIn this section we evaluate the implications of eliminating the interest on thepublic debt from the calculation of federal balances. In table 1, the first effect isa shift from a deficit of about $26 billion to a surplus of nearly $17 billion.Instead of $26 billion of unpaid federal expenditures, we now have $17 billionof revenues that do not finance allocable expenditures. All provinces are madeworse off by this change, because a major component of federal expenditureshas been eliminated, but not to the same degree. Table 1 shows that the primarybalances present a more marked demarcation between “have” and “have not”provinces. The former make a net contribution of nearly $28 billion, while thelatter receive collectively a net gain of nearly $12 billion. The major shift occursin Ontario, which becomes a large net contributor ($17.1 billion) instead of a netgainer of $880 million. The net contributions by Alberta increase by $4.3 bil-lion. While “have” provinces appear to be much worse off under the primarybalances, “have not” provinces appear to receive smaller gains, with the nettransfers in their favour dropping by $13.7 billion. Nearly two-thirds of thatdrop is recorded for Quebec.

Table 7 shows that primary balances reduce the per capita net gain by $827on average for the Atlantic provinces, by $1,206 for Quebec, and by about $1,50 for Manitoba and Saskatchewan. At the same time, they increase the net loss


(2000), Vol. 48, No. 3 / no 3

y $1,651 for Ontario, $1,558 for Alberta, and $1,701 for British Columbia. Thechanges in federal balances as a ratio of personal income shown in table 3 arefairly uniform among provinces. As shown in table 7, they range from 7.7percentage points in Saskatchewan to 3.6 points in Newfoundland (4.4 points inthe Atlantic provinces). There is a similar pattern for the ratios to GDP in table 4.The changes in those ratios, as shown in table 7, range from about 7 percentagepoints in British Columbia and Saskatchewan to 3.7 points in Newfoundland.

Basic Balances Versus Balanced Budget BalancesBalanced-budget balances are an intermediate case between basic and primarybalances, since they eliminate both the deficit in the former and the surplus inthe latter. We calculated two polar sets of balanced-budget balances: budgetbalancing through proportional increases in tax revenues and through propor-tional reductions in total spending, net of the interest on the debt.

Proportional Tax IncreasesEliminating the federal deficit through tax increases produces major shifts in thefederal balances by province: it reduces the gains by recipient provinces andincreases the losses to contributing provinces. This result is determined by thedominance of the personal income tax in the federal tax mix and its progressivepattern of effective rates. Table 8 shows that the biggest change occurs inOntario, with a swing of nearly $11 billion. The contributions by Alberta andBritish Columbia also increase substantially, rising by $2.8 billion in the formerand $3.7 billion in the latter. The net gain is cut in half (a reduction of $4.9billion) in Quebec, drops by a quarter in Manitoba and Saskatchewan (an aver-age loss of $800 million), and falls by a fifth (about $1.7 billion) in the Atlanticprovinces. The per capita increases in contributions by “have” provinces arealmost identical at close to $1,000. The reduction in net gains by “have not”provinces are also very similar, ranging from $623 in Newfoundland to nearly$800 in Nova Scotia and Manitoba. The pattern of changes in federal balancesas a percentage of personal income and of GDP is even more uniform than thatof the per capita balances. The changes in gains or losses range between 4.6 and3.2 percentage points for the ratios to personal income, and between 4.3 and 3.0for the ratios to GDP.

Proportional Spending CutsThe changes in the federal balances due to spending cuts are quite different fromthose under the tax increases. As table 9 shows, the biggest change still takesplace in Ontario, with an increase of $9.1 billion in net contribution, nearly $2billion lower than under the tax increase. The change in the contributions byAlberta and British Columbia, at $5.1 billion combined, is $1.4 billion less thanthat under the tax increase. The gains by recipient provinces are also lower. Com-pared with the tax increases shown in table 8, the net gains are $1.6 billion lower


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in the Atlantic provinces, about $700 million lower in Quebec, and about $800million lower in Manitoba and Saskatchewan combined. On a per capita basis,the net losses are higher under the spending cuts for “have not” provinces andlower for “have” provinces. For the former they increase by about $700 for theAtlantic provinces, $500 for Manitoba and Saskatchewan, and $100 for Quebec.For the latter, they fall by about $200. The changes are also more pronouncedwhen expressed as a percentage of personal income and GDP. For the Atlantic

Table 7 Differences Between Basic and Primary Balances,Averages for 1992-1997

Total balances Per capita Percentage of Percentage($ millions) ($) personal Income of GDP

Nfld. . . . . . . . . . . . . . . . . . . . . . . 352 618 3.59 3.69PEI . . . . . . . . . . . . . . . . . . . . . . . 127 948 5.20 5.45NS . . . . . . . . . . . . . . . . . . . . . . . . 866 934 4.85 4.79NB . . . . . . . . . . . . . . . . . . . . . . . 622 828 4.40 4.43Que. . . . . . . . . . . . . . . . . . . . . . . 8,708 1,206 5.76 5.50Ont. . . . . . . . . . . . . . . . . . . . . . . . 18,000 1,651 6.78 6.31Man. . . . . . . . . . . . . . . . . . . . . . . 1,528 1,357 6.59 6.26Sask. . . . . . . . . . . . . . . . . . . . . . . 1,495 1,476 7.71 7.09Alta. . . . . . . . . . . . . . . . . . . . . . . 4,251 1,558 6.65 5.69BC . . . . . . . . . . . . . . . . . . . . . . . . 6,337 1,701 7.33 7.28Terr. . . . . . . . . . . . . . . . . . . . . . . . 91 939 3.80 2.69

Average . . . . . . . . . . . . . . . . . . . . 42,377 1,452 6.46 6.07

Sources: Tables 1 to 4 and authors’ calculations.

Table 8 Differences Between Basic and Balanced-Budget Balances withTax Increases, Averages for 1992-1997


Nfld. . . . . . . . . . . . . . . . . . . . . . . 355 623 3.62 3.72PEI . . . . . . . . . . . . . . . . . . . . . . . 94 701 3.85 4.04NS . . . . . . . . . . . . . . . . . . . . . . . . 723 780 4.05 4.00NB . . . . . . . . . . . . . . . . . . . . . . . 549 731 3.89 3.91Que. . . . . . . . . . . . . . . . . . . . . . . 4,858 673 3.21 3.07Ont. . . . . . . . . . . . . . . . . . . . . . . . 10,959 1,005 4.13 3.84Man. . . . . . . . . . . . . . . . . . . . . . . 887 788 3.83 3.63Sask. . . . . . . . . . . . . . . . . . . . . . . 742 733 3.83 3.52Alta. . . . . . . . . . . . . . . . . . . . . . . 2,786 1,021 4.36 3.73BC . . . . . . . . . . . . . . . . . . . . . . . . 3,730 1,001 4.31 4.28Terr. . . . . . . . . . . . . . . . . . . . . . . . 110 1,138 4.61 3.26

Average . . . . . . . . . . . . . . . . . . . . 25,793 884 3.93 3.69



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provinces, the loss from balancing the budget through spending cuts is nearlydouble (3.5 percentage points) the loss under the tax increases. For Manitobaand Saskatchewan, the difference is about one-half (1.8 percentage points), whilein Quebec the difference is quite small (about 0.5 percentage points). Similardifferences are noticed for the ratios to GDP.

Summary of ResultsThe results presented in the preceding sections show that the distribution offederal balances among provinces is sensitive to the approach used in the meas-urement. When we focus on the actual flows of revenues and expenditures,including deficit financing and interest payments on the debt, the aggregatefederal balances for the averages during the 1992-1997 period are slightly lowerunder the PEA approach and the aggregate transfer approach (table A2), but thedistribution among provinces is quite different. According to the PEA balances(table 1), all provinces and territories except Ontario, Alberta, and British Colum-bia received net gains totalling $30 billion, while the three “have” provincescontributed a total of $10 billion. The basic balances under the aggregate trans-fer approach (table 1) show that the net gain of “have not” provinces and theterritories is reduced to $23 billion, Ontario and British Columbia become smallnet gainers, and the three “have” provinces make no contribution at all. One mayconclude that the net gains by “have not” provinces and territories were financedthrough borrowed funds and not through contributions by “have” provinces.Under the PEA calculation, these contributions were relatively small and repre-sented approximately 1 percent of GDP for the three “have” provinces. Accord-ing to the aggregate transfer approach, only Alberta was a net contributor onaverage during 1992-1997, and its contribution amounted to 1.5 percent of GDP.

The above results change dramatically when we exclude interest paymentson the federal debt. In this case, there is a large change in the aggregate balance(table 1), which turns from a deficit to a surplus: instead of having $26 billion ofallocable benefits not financed with current revenues, there are now $16 billionof extra revenue that does not produce allocable benefits. The first major effect ofusing primary balances is a major reduction in the net gains by “have not”provinces and territories to a total of $12 billion, less than half the value underthe PEA approach. The second effect is an increase in the contributions of the“have” provinces, which rise to $28 billion. The province most affected by thechange in approach is Ontario, whose net contribution increases by $11 billionfrom the PEA balance and $18 billion from the basic balance.

Imposing a balanced budget on the federal government represents an inter-mediate case between actual balances and primary balances. This approacheliminates the deficit but prevents the creation of a surplus. All revenues areused to generate allocable benefits, but all current expenditures are assumed tobe paid in the year they are made or are reduced to the level that can be financedthrough current revenues. When the deficit is eliminated through proportional


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tax increases, the aggregate contribution by Ontario, Alberta, and British Colum-bia amounts to $17.4 billion (table 1) and is used entirely to finance the net gainto the other regions. This contribution represents an average of about 4 percentof GDP. When the deficit is eliminated through proportional spending cuts, thenet contribution by the three “have” provinces is reduced to $14 billion, whichrepresents an average of 3 percent of GDP (table 1).

FEDERAL FISCAL BALANCES AND REDISTRIBUTION

The previous section provided some evidence that, during the 1992-1997 pe-riod, on average, federal fiscal activity shifted a certain amount of income fromricher to poorer provinces, although the amount of the shift varied considerablydepending on the approach used. The results suggest that federal fiscal activitytends to reduce income disparities among regions. In this section we providesome estimates of this redistribution by using two different indices to compare ameasure of provincial income that includes the redistributional impact of thefederal fisc (called actual base income) with a measure that assumes fiscalneutrality by the federal government (called neutral-fisc base income). Detailedestimates of these two concepts of income are found in appendix table B1.

The first index is the Gini coefficient, a widely used global index for measur-ing changes in the concentration of income resulting from selected policy meas-ures. This index is based on the relationship between the cumulative shares ofpopulation by province, where provinces are placed in ascending order of percapita income, and the respective shares of income. This index takes the valueof 1 for perfect inequality and 0 for perfect equality, where each province’sshare of income is equal to its share of the population. By comparing the Gini

Table 9 Differences Between Basic and Balanced with BudgetSpending Cuts, Averages for 1992-1997


Nfld. . . . . . . . . . . . . . . . . . . . . . . 851 1,494 8.68 8.91PEI . . . . . . . . . . . . . . . . . . . . . . . 201 1,500 8.24 8.63NS . . . . . . . . . . . . . . . . . . . . . . . . 1,262 1,361 7.07 6.99NB . . . . . . . . . . . . . . . . . . . . . . . 956 1,272 6.76 6.81Que. . . . . . . . . . . . . . . . . . . . . . . 5,528 766 3.66 3.49Ont. . . . . . . . . . . . . . . . . . . . . . . . 9,118 836 3.44 3.20Man. . . . . . . . . . . . . . . . . . . . . . . 1,300 1,155 5.61 5.33Sask. . . . . . . . . . . . . . . . . . . . . . . 1,103 1,089 5.69 5.23Alta. . . . . . . . . . . . . . . . . . . . . . . 2,111 774 3.30 2.82BC . . . . . . . . . . . . . . . . . . . . . . . . 3,029 813 3.50 3.48Terr. . . . . . . . . . . . . . . . . . . . . . . . 333 3,446 13.95 9.87

Average . . . . . . . . . . . . . . . . . . . . 25,792 884 3.93 3.69



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coefficient calculated from actual base income with the coefficient calculatedfrom neutral-fisc base income, we can determine the redistributional effect ofthe federal fisc among provinces.

The estimated Gini coefficients for the two concepts of income are shown intable 10. Three general observations arise from this table. First, the room forfiscal redistribution among provinces is limited because average incomes amongprovinces are not highly concentrated. The estimated Gini coefficient for neutral-fisc base income is about 0.07, which represents only 7 percent of the maximumdegree of concentration. Second, federal fiscal redistribution reduced the degreeof income concentration by roughly one-half. Third, the estimated degree offederal redistribution differs depending on the approach used for calculatingfederal balances. For the full balances, which include both deficit financing andinterest payments on the federal debt, the reduction in the concentration ofincome is higher under the PEA than under the basic aggregate transfer approachbecause, as shown earlier, the former records larger gains to “have not” prov-inces and larger contributions by “have” provinces.

Among the variants of the aggregate transfer approach, the higher degree ofredistribution is obtained under the primary balances. In this case, all provincesare made worse off because a large share of allocable federal expenditures—theinterest on the public debt—is eliminated from the calculations. However, the lossis relatively larger for richer than for poorer provinces because this componentwas allocated on the basis of a proxy for interest received.

The balanced-budget experiments also make all provinces worse off, but notas much as the primary balances, because the balanced-budget balances eliminatethe immediate gains from deficit financing. When the deficit is eliminated throughproportional tax increases, richer provinces are made relatively worse off andthe degree of redistribution among provinces increases moderately. When bal-anced budgets are achieved through proportional cuts in federal spending, “havenot” provinces are made relatively worse off and the degree of redistributionfalls moderately. Overall, however, the differences in the degree of redistribu-tion through the federal fisc, as measured by the Gini coefficient, are not large.

As an alternative measure, we also derived a disaggregated index, based onthe approach used by Mansell and Schlenker,14 called the relative share index(RSI), in order to evaluate the relative degree of redistribution among provinces.The calculation of this index involves the following steps for province i: (1)calculation of per capita federal revenues by province (Ri) relative to the nationalaverage (R); (2) calculation of per capita federal expenditures by province (Ei)relative to the national average (E); and (3) calculation of per capita neutral-fiscbase income by province (Yi) relative to the national average (Y). The index iscalculated as the ratio of (1) divided by (2) to (3) as follows:



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RSIR R E E

Y Yii i

i= ×( ) ( )

( ),100 (1)

where RSIi stands for relative share index for province i. A value of 100 indicatesthat the province’s contribution to the financing of federal expenditures is com-mensurate with its share of neutral-fisc base income. Therefore, it incorporates adegree of redistribution associated with the proportional relationship betweenthe share of federal expenditures paid by a province and its share of income. TheRSI assigns a value of 100 to a province that has average income equal to 90percent of the national average and contributes 90 percent to the financing of thefederal expenditures assigned to it; the same value is assigned to a province withaverage income 10 percent greater than the national average and a ratio offederal revenues to expenditures equal to 110. A value greater than 100 indicatesthat a province contributes to the federal fisc more than the “standard” amountassociated with the above relationship; a value less than 100 indicates that aprovince receives a net gain greater than the “standard” amount.

The estimated values of the relative share index are shown in table 11.Although the results differ under the different approaches, it is possible to makesome general comments. First, by this measure all three “have” provinces werenet contributors above the “standard” amount under any of the approaches used.The apparent paradox for Ontario under the basic aggregate transfer approach,where a net gain in absolute terms is transformed into a net contribution, high-lights the relative nature of this index. During the 1992-1997 period, the federalgovernment financed a portion of its expenditures through borrowing, a policychoice that benefited all provinces and produced a small excess of expendituresallocated to Ontario over the corresponding revenues. The value of the relativeindex of 105 for Ontario for the same period indicates that Ontario did notreceive a share of deficit-financed expenditures commensurate with its share ofincome. Under all approaches, the larger relative contribution was made byBritish Columbia, followed by Alberta and Ontario. All other provinces were net

Table 10 Gini Coefficients for Federal Redistribution by Province,Averages for 1992-1997


Balanced budget

Tax SpendingPEA Basic Primary increases cuts

Neutral-fisc base income . . . . . . . 0.069 0.070 0.069 0.069 0.069Actual base income . . . . . . . . . . . 0.027 0.039 0.036 0.037 0.044

Difference . . . . . . . . . . . . . . . . . . . 0.042 0.031 0.033 0.032 0.025

Sources: Same as table 2 and authors’ calculations.


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beneficiaries under all approaches, with the exception of Nova Scotia. Thisprovince is a clear net beneficiary only under the PEA and the primary balance.According to the other approaches, the federal fisc delivers less than the “stand-ard” net gain to this province. The provinces with the largest relative gains areNewfoundland and Saskatchewan, followed by Manitoba, PEI, Quebec, andNew Brunswick.

CONCLUSIONS

This article identified the major issues in the calculation of federal fiscal balancesby province, provided average estimates of those balances for the 1992-1997period, and measured the degree of redistribution by province generated byfederal fiscal activity. The results show that the magnitude of these balances isstrongly affected by the method used in the calculations. We found that, in thecase of actual balances, which include deficit financing and interest paymentson the federal debt, there were large gains by “have not” provinces but onlymodest contributions by “have” provinces.

These results suggest that during the 1992-1997 period, the gains to “havenot” provinces were largely financed through borrowing rather than throughtransfers from “have” provinces. We also found that balances calculated usingthe aggregate transfer approach yield substantially lower gains to “have not”provinces and lower contributions by “have” provinces than balances based onthe cash flow approach. Eliminating the interest on the public debt or the federaldeficit increases substantially the contributions by “have” provinces and reducesthe gains by “have not” provinces.

Table 11 Relative Share Index Under Different Approaches,Average, 1992-1997


Balanced budget


Nfld. . . . . . . . . . . . 71.50 84.26 69.33 83.91 87.29PEI . . . . . . . . . . . . 83.72 90.55 77.42 89.37 93.19NS . . . . . . . . . . . . . 79.72 102.55 88.50 100.85 105.39NB . . . . . . . . . . . . 81.06 94.85 81.34 94.05 97.55Que. . . . . . . . . . . . 90.82 93.44 92.12 93.80 93.56Ont. . . . . . . . . . . . . 110.87 104.59 109.19 104.55 103.77Man. . . . . . . . . . . . 82.30 87.39 81.47 87.03 88.55Sask. . . . . . . . . . . . 83.84 85.16 81.65 84.92 85.93Alta. . . . . . . . . . . . 112.05 104.60 110.13 105.09 104.02BC . . . . . . . . . . . . . 112.79 109.27 116.04 109.34 108.37

Sources: Same as table 2 and authors’ calculations.


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Finally, we calculated two indices of redistribution among provinces that aregenerated by the federal fisc. We found that federal fiscal activity did redistrib-ute income from richer to poorer provinces, but the degree of redistribution wasmodest under all approaches, primarily because the concentration of incomeamong provinces under a distributionally neutral federal fisc is rather small. Inthe debate about reforming Canada’s intergovernmental transfers, it may be helpfulto keep in mind that the current arrangements deliver only a modest degree ofincome redistribution among provinces.

APPENDIX AThis appendix provides details of the allocation of federal revenues and expend-itures under the aggregate transfer approach and compares this approach withthe cash flow approach used in Statistics Canada’s Provincial Economic Accounts(PEA).15 As a first step, however, it is useful to deal with two issues: thetreatment of non-residents, and the special fiscal situation of Quebec.

The federal government collects revenue from non-residents and makes ex-penditures that benefit non-residents directly or indirectly. The PEA balancesdifferentiate two groups of transactions with non-residents. They recognize aseparate jurisdiction called “outside Canada” and assign to it the taxes paiddirectly by non-residents, as well as the transfer payments received by non-residents. Withholding taxes, however, are treated as revenue from domesticsources and are allocated to the various provinces. The PEA balances also assignto Canadians the portion of corporate taxes that may be borne by them. In ourview, federal balances should include only transactions with residents, measuredas strictly as allowed by the data. The main purpose of calculating federalbalances is to determine the degree of redistribution among provinces that isproduced by federal spending and taxation. For that purpose, the appropriateapproach is the one that limits the analysis to Canadian residents only. Taxespaid by non-residents do not impose a burden on the residents of a province.Similarly, payments to foreigners do not produce benefits to the residents of aprovince. Accordingly, under the aggregate transfer approach we excluded fromthe calculations withholding taxes on non-residents and the share of corporatetaxes borne by non-residents.

Two major issues arise with respect to Quebec: (1) the special abatement ofpersonal income taxes and (2) the replacement of the Canada Pension Plan(CPP) with the Quebec Pension Plan (QPP). In estimating federal balances, twoapproaches can be applied to these two programs. Under one approach, the abate-ment can be treated as a transfer payment, and the revenues and expendituresunder the QPP can be treated as elements of the CPP. Under the alternativeapproach, the abatement is treated as a federal tax reduction, and the QPP is treated



(2000), Vol. 48, No. 3 / no 3

as a provincial program. In this case the federal revenues and expendituresassigned to Quebec will be less than those under the first approach, but theoverall balances will be left unchanged. In our view, the second approach is acloser representation of the facts and recognizes the different choices made bythe Quebec government. It will be used in our calculations, as it is in the PEA.

In our calculations we started with the PEA data and made a variety ofadjustments, as explained below. The federal government receives revenue fromtwo major sources: taxes and investment income. The former contains personalincome taxes (PITs), corporate taxes (income and capital), contributions to pub-lic service pensions, employment insurance (EI) contributions, CPP contribu-tions, the GST, the air transportation tax, customs import duties, excise duties,excise taxes, and miscellaneous indirect taxes, including fees. Investment incomeoriginates from four sources: investment income of public service pension plans,interest and other investment income, remittances from government businessenterprises, and CPP investment income.

We allocated PIT revenue on the basis of a taxpayer’s residence. In the PEA, aswell as in Revenue Canada’s Taxation Statistics,16 federal PIT revenue is recordednet of the dividend tax credit. However, this credit is effectively a partial refundof the corporate income tax (CIT) paid by the recipients of dividends distributedby Canadian corporations. In our view, it is more appropriate to deduct thedividend tax credit from the CIT and restore PIT revenue by adding that amount.This adjustment provides more realistic information on the relative amounts offederal PIT and CIT revenue paid by the residents of different provinces. Therevenue from the three social insurance programs—contributions to public servicepensions, EI and CPP—was allocated, as is done in the PEA accounts, on the basisof the province of employment as determined for income tax purposes. The GSTand the air transportation tax are direct consumption taxes and were allocated onthe basis of the place of consumption, as is done in the PEA accounts.

The rest of the tax revenue was allocated in a manner different from that ofthe PEA. In the PEA, direct taxes on corporations and government businessenterprises are allocated according to the distribution of taxable income byindustry. The location of economic activity, however, has little connection tothose who bear the burden of corporate taxation: in different proportions, own-ers of capital (corporate or total capital), consumers, and workers. In tax inci-dence studies,17 CIT revenue is usually allocated partly to consumers and partly

16 Canada Customs and Revenue Agency (herein referred to as “Revenue Canada”), TaxationStatistics, analyzing the returns of individuals up to and including the 1992 taxation year, andTax Statistics on Individuals, analyzing the returns of individuals for years after 1992 (Ot-tawa: Public Works and Government Services, various years).

17 See, for example, G.C. Ruggeri, D. Van Wart, and R. Howard, The Government as RobinHood: Exploring the Myth (Kingston, Ont.: Queen’s University, School of Policy Studies,


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to owners of corporate capital, although researchers differ on the proportionsassigned to each. We used a compromise approach and allocated 25 percent ofthe revenue to the provincial share of personal consumption expenditures. Theremaining 75 percent is distributed between residents and non-residents basedon the ratio of dividends paid to residents and non-residents (approximatelytwo-thirds to residents) as recorded in Statistics Canada’s National Income andExpenditure Accounts.18 The value of the dividend tax credit (as reported inRevenue Canada’s Taxation Statistics) is subtracted from the portion allocatedto residents. The resulting amount is distributed among provinces on the basis ofthe provincial distribution of cash dividends and realized capital gains (as reportedin Taxation Statistics, adjusted from taxable to cash amounts).

In the PEA, indirect tax revenue is allocated based on where taxes are col-lected or where taxed goods are produced. However, the burden of these taxesfalls largely on those who consume the taxed goods. We followed the generalpractice in tax incidence studies and allocated these taxes entirely to consumers.Specifically, customs import duties are distributed according to the provincialshare of personal consumption expenditures. Excise duties are levied on alco-holic beverages and tobacco products and, therefore, are distributed accordingto the provincial share of the consumption of these products. Excise taxes areimposed on gasoline and other motor fuels and are allocated to provincialconsumers of refined petroleum products used in transportation. Miscellaneousindirect taxes are allocated partly to consumers of tobacco products, partly toconsumers of alcoholic beverages, and partly to personal consumption expendi-tures because they are levied on a variety of products.

For the four components of investment income we used the PEA distribution,which is based on the provincial distribution of federal wages and salaries forinterest on the various public superannuation funds or the location of the use ofthe funds for those who pay interest on loans and advances.

Federal spending contains three main categories: intergovernmental transfers,transfer payments, and purchases of goods and services. The first category includesthe federal grants provided to provincial, territorial, and local governments. Thetwo major grants are the Canada Health and Social Transfer (CHST), which isprovided to all provinces and replaces existing transfers for social assistance,health care, and post-secondary education; and equalization grants providedonly to “have not” provinces. The jurisdictions benefiting from these grants canbe easily identified, so we used the distribution contained in the PEA accounts.

The second category contains three main components: transfers to persons,transfers to businesses, and interest on the public debt. In the PEA, the allocation

1996) and Frank Vermaeten, W. Irwin Gillespie, and Arndt Vermaeten, “Tax Incidence inCanada” (1994), vol. 42, no. 2 Canadian Tax Journal 348-416.

18 Statistics Canada, National Income and Expenditure Accounts, catalogue no. 13-201.


(2000), Vol. 48, No. 3 / no 3

of transfers to persons is based on the province of residence of the recipients.Hence, we used the PEA data in our calculations. Federal transfers to businessesinclude subsidies and capital assistance. Subsidies are provided mostly for agri-culture, transportation, housing, and the Canadian Broadcasting Corporation.Capital assistance is offered in a variety of areas, such as railways and industrialdevelopment. In the PEA, transfers to businesses are allocated by program on thebasis of the province of residence of the recipients or on where the assisted capitalformation takes place. We also used the PEA distribution in our calculations.

Our allocation of the interest on the public debt is different from that in thePEA. In the PEA, this item is allocated among provinces on a per capita basis, anapproach that, in our view, has two major shortcomings. First, a portion of theinterest is received by non-residents. Since this payment yields no benefits toCanadians aside from the benefits of the federal spending it financed, which arecaptured on the federal spending side, it should be excluded from the calculationof federal balances. However, the data on this component of the interest on thedebt may not be very reliable. Given the methodological difficulties in allocat-ing the interest on the debt, we decided not to add further complications andallocated the full amount of the interest recorded in the national accounts.According to Statistics Canada’s data on the ownership of federal bonds, usingthe gross amount of interest on the debt overestimates the allocated benefits toCanadian residents by about $6 billion. Second, the per capita allocation used inthe PEA effectively treats interest on the debt as a public good. We do notconsider this approach appropriate because the payment is made only to thosewho hold government bonds. In the calculations under the aggregate benefitapproach, we allocated the interest on the debt to those who receive it. Werecognize that federal bonds may be held in both tax-sheltered and unshelteredform. Since the interest on the first component is not recorded as long as thesaving is tax-sheltered, we used as an approximation of the provincial distribu-tion of this tax-free interest the provincial distribution of registered retirementsavings plan (RRSP) contributions. Our allocation was then based on the simpleaverage of the provincial shares of interest income and the provincial shares ofRRSP contributions, as recorded in Taxation Statistics.

The provincial distribution of federal purchases raises a variety of complexissues. Since this component accounts for 20 percent of federal spending, differ-ent approaches to its allocation may have a significant impact on the estimatedfederal balances by province. Federal purchases of goods and services are al-most entirely in the form of general expenditures; therefore, beneficiaries cannotbe directly identified as in the case of transfers to persons. In the PEA, purchasesof goods and services are divided into two major categories: (1) wages andsalaries, and (2) purchases of goods. The first component is allocated accordingto the location of employment, so that a province is assigned a share of wagesand salaries equal to its share of federal employment. The second component isdistributed on the basis of where the goods are consumed. In our view, the PEA


(2000), Vol. 48, No. 3 / no 3

balances do not use a consistent principle in allocating federal purchases. If aprovince benefits from federal employment through the wages paid to federalemployees, then the same province will benefit from federal purchases throughthe factor income that federal purchases generate. Alternatively, if a provincebenefits from federal purchases through the goods consumed, then it also ben-efits from the consumption of the programs for which federal wages and salariesare paid. We can apply either approach in a consistent manner, but it is notappropriate to mix the two.

Under our aggregate transfer approach, federal expenditures on goods andservices are allocated according to where the goods and services are producedrather than where they are consumed. In particular, the wage component offederal purchases is allocated to the provinces and territories according to Statis-tics Canada’s estimates of “public sector employment and wages and salaries.”19

The goods component is allocated on the basis of each province’s share ofprivate output, measured by national income at factor cost minus total govern-ment wage and salary payments.

A summary of the allocation procedures used in the cash flow (PEA), aggre-gate transfer, and benefit approaches is provided in table A1. Note that, in thecase of the benefit approach, only the general procedures are listed because weare not referring to a specific study. The aggregate values of the main compo-nents of federal revenues and expenditures used in the PEA and the aggregatebenefit approach, averaged for the period 1992-1997, are shown in table A2.

As expected, the values under the aggregate transfer approach, called basicbalances, are lower because a portion of some items was assigned to non-residents. However, the differences are fairly small and are confined to therevenue side, where they represent approximately 4 percent of the total. Moresignificant differences are found in the approach to the provincial distribution offederal revenues and expenditures, identified by the asterisk next to the relevantitems. For the same period, the allocation under the aggregate transfer approachdiffers from the PEA on average for 15 percent of revenues and 41 percent ofexpenditures.

19 Statistics Canada, Public Sector Employment and Wages and Salaries, catalogue no. 72-209.


(2000), Vol. 48, No. 3 / no 3

Table A1 Summary of Allocations Under Alternative Approaches

Cash flow approach Aggregate transfer(PEA) approach Benefit approach

RevenuesPersonal income tax

Dividend tax credit

Corporate taxes

Social insurance taxes

GST and airtransportation taxes

Indirect taxes

Investment income

ExpendituresTransfers to persons

Transfers to business

Interest on the debttransfers to othergovernments

Wages and salaries

Non-wage purchases

Investment

Residence of taxpayer

Already netted out ofPIT revenue

Distribution of taxableincome by industry

Location ofemployment

Consumers

Where taxes arecollected

Location ofemployment orlocation of use offunds

Residence ofrecipients

Residence of therecipients or placewhere capitalformation occursper capita

Recipient jurisdictions

Location ofemployment

Locations wheregoods and servicesare consumed

Locations ofinvestment

As in PEA

Added to PIT amountin PEA

Tax incidence,excludes revenueassigned to non-residents

As in PEA

As in PEA

General or specificconsumers

As in PEA

As in PEA

As in PEA

Interest incomeAs in PEA

Wages paid byprovince

Private output

As in PEA

As in PEA

As in PEA

Tax incidence

As in PEA

As in PEA

General or specificconsumers

As in PEA

As in PEA

Benefit incidence

Benefit incidenceAs in PEA

Wage and non-wagecomponents allocatedon the basis of benefitincidence

Benefit incidence

Benefit incidence


(2000), Vol. 48, No. 3 / no 3

Table A2 Federal Revenues and Expenditures, 1992-1997,PEA Versus Basic

PEA Basic Difference

$ billionsRevenuesPersonal income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.45 64.69 −1.24Corporate income taxa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.75 8.47 5.28Direct tax on non-residents . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12 0.00 2.12Contributions to public service pension . . . . . . . . . . . . . . . . 2.66 2.66 0.00Employment insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.16 19.16 0.00Canada Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.52 10.52 0.00GST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.53 19.53 0.00Air transport tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.66 0.66 0.00Custom import dutiesa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.28 3.28 0.00Excise dutiesa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14 2.14 0.00Excise taxesa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.37 5.37 0.00Misc. indirect taxes and other transfers from personsa . . . . 0.90 0.90 0.00Subtotal of tax revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.54 137.38 6.16

Investment income of public service pension plans . . . . . . . 10.09 10.09 0.00Interest and other investment income . . . . . . . . . . . . . . . . . . 1.98 1.98 0.00Remittances from government business enterprises . . . . . . 2.76 2.76 0.00CPP investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.32 4.32 0.00Subtotal of investment revenue . . . . . . . . . . . . . . . . . . . . . . 19.15 19.15 0.00Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162.69 156.53 6.16

ExpendituresTransfers to persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.50 69.50 0.00Interest on the public debta . . . . . . . . . . . . . . . . . . . . . . . . . . 42.38 42.38 0.00Transfers to business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.68 4.68 0.00Net intergovernmental transfers . . . . . . . . . . . . . . . . . . . . . . 29.94 29.94 0.00Current expenditures on goods and services . . . . . . . . . . . . 32.78 32.78 0.00Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.07 3.07 0.00Total expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.35 182.35 0.00

a Indicates the items that were allocated in a different manner from PEA.

Sources: Statistics Canada, Provincial Economic Accounts, catalogue no. 13-213; RevenueCanada, Taxation Statistics (Ottawa: Public Works and Government Services, various years).


(2000), Vol. 48, No. 3 / no 3


APPENDIX BIn our analysis of the redistributional effect of federal fiscal activity, we derived,as a first step, the concept of income that represents the economic status of eachprovince under the assumption that federal spending and taxation do not redis-tribute income among provinces. The first part of this income concept includesonly private components of income. We started with the income side of nationalincome at factor cost: wages, salaries, and supplementary labour income net ofthe federal, provincial, and local government components; accrued income of farmoperators; net income of non-farm unincorporated business; interest and miscel-laneous investment income; corporate profits retained in Canada; and currenttransfers from corporations. Then we added a number of income sources that arereceived by persons but are not generated from current production. For thefollowing income components, we used the data from Revenue Canada’s TaxationStatistics:20 superannuation pensions, RRSP withdrawals, and realized capitalgains (grossed up from the taxable values). Finally, we added the amount oftaxes assigned to factor income—namely, the corporate taxes allocated to capi-tal income and the employer portion of contributions to various social insuranceprograms. We call the sum of these income items private income. The incomeconcept associated with a distributionally neutral federal fisc among provinceswas derived from provincial and local fiscal components and from the allocationof federal revenues and expenditures to each province in proportion to its shareof private income. We call this item neutral-fisc base income. When we add toprivate income the actual federal balances we end up with actual base income.As an illustration, table B1 contains the calculations of these income measuresfor 1997 under the basic aggregate transfer approach.


(2000), Vol. 48, No. 3 / no 3

Tab

le B

1C

alcu

lati

on o

f B

ase

Inco

me

by P

rovi

nce

in 1

997

Nfl

d.PE

IN

SN

BQ

ue.

Ont

.M

an.

Sask

.A

lta.

BC

Tota

l

$ m

illi

ons

Wag

es, s

alar

ies,

and

sup

plem

enta

ryla

bour

inco

me

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.5,

599

1,40

011

,009

9,07

010

0,63

018

6,81

015

,020

12,2

4249

,521

60,4

1745

1,71

8G

over

nmen

t com

pone

nts

. . .

. . .

. . .

. . .

. . .

. . .

. . .

1,77

146

13,

081

2,37

122

,219

33,3

513,

548

2,94

07,

612

11,5

9388

,947

Priv

ate

wag

es a

nd s

alar

ies

. . .

. . .

. . .

. . .

. . .

. . .

. .

3,82

893

97,

928

6,69

978

,411

153,

459

11,4

729,

302

41,9

0948

,824

362,

771

Acc

rued

inco

me

of f

arm

ope

rato

rs .

. . .

. . .

. . .

. . .

.11

2325

1763

230

324

885

460

103

1,90

7N

et in

com

e of

non

-far

m u

ninc

orpo

rate

d bu

sine

ss .

. .74

223

21,

582

1,04

410

,833

21,8

271,

959

1,69

35,

339

7,54

552

,796

Inte

rest

and

mis

cella

neou

s in

vest

men

t inc

ome

. . .

.69

912

81,

037

1,18

012

,397

17,0

672,

405

2,43

69,

121

8,18

854

,658

Prof

its r

etai

ned

in C

anad

a .

. . .

. . .

. . .

. . .

. . .

. . .

.34

312

760

659

27,

537

17,7

9884

61,

716

7,37

43,

305

40,2

44C

urre

nt tr

ansf

ers

from

cor

pora

tions

. . .

. . .

. . .

. . .

.16

426

2120

531

432

2979

111

837

Subt

otal

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .

5,63

91,

453

11,2

049,

553

110,

015

210,

768

16,9

6215

,261

64,2

8268

,076

513,

213

Supe

rann

uatio

n .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.43

313

61,

223

734

7,18

214

,205

1,24

61,

036

2,47

84,

442

33,1

15R

RSP

with

draw

als

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .

106

3427

418

51,

963

4,11

238

131

898

71,

348

9,70

8R

ealiz

ed c

apita

l gai

ns .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .80

4428

413

92,

232

5,57

850

469

62,

632

2,88

415

,073

CIT

ass

igne

d to

cap

ital i

ncom

e .

. . .

. . .

. . .

. . .

. . .

3723

147

871,

300

2,71

020

526

11,

124

1,32

17,

214

Em

ploy

er p

ortio

n of

pay

roll

taxe

s .

. . .

. . .

. . .

. . .

.44

298

765

560

8,92

212

,478

1,00

371

42,

398

3,77

931

,159

Priv

ate

inco

me

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .

6,73

71,

788

13,8

9711

,258

131,

614

249,

851

20,3

0118

,286

73,9

0181

,850

609,

482

(The

tabl

e is

con

clud

ed o

n th

e ne

xt p

age.

)


(2000), Vol. 48, No. 3 / no 3

Tab

le B

1C

oncl

uded

Nfl

d.PE

IN

SN

BQ

ue.

Ont

.M

an.

Sask

.A

lta.

BC

Tota

l

$ m

illi

ons

Fede

ral e

xpen

ditu

res

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.4,

659

1,22

47,

683

5,74

537

,186

66,4

608,

633

7,04

615

,372

23,0

1617

7,02

4Fe

dera

l rev

enue

s .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

2,33

770

75,

472

3,88

631

,831

74,9

646,

253

5,32

219

,605

25,6

0717

5,98

4

Net

fed

eral

bal

ance

s .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

2,32

251

72,

211

1,85

95,

355

−8,5

042,

380

1,72

5−4

,233

−2,5

911,

040

Prov

inci

al e

xpen

ditu

res

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.3,

827

826

5,06

95,

152

55,9

2062

,482

7,08

36,

092

15,3

4724

,936

186,

734

Prov

inci

al r

even

ues

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.3,

585

799

5,08

84,

734

51,8

8457

,063

7,29

46,

365

18,6

5924

,499

179,

970

Net

pro

vinc

ial b

alan

ces

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.24

227

−19

418

4,03

65,

419

−211

−273

−3,3

1243

76,

764

Loc

al e

xpen

ditu

res

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .

993

165

1,63

353

016

,509

29,9

092,

547

2,07

56,

646

8,55

369

,560

Loc

al r

even

ues

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. .

866

150

1,57

847

213

,772

29,1

682,

315

1,89

35,

945

7,07

263

,231

Net

loca

l bal

ance

s . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.12

715

5558

2,73

774

123

218

270

11,

481

6,32

9

Act

ual b

ase

inco

me

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.9,

428

2,34

716

,144

13,5

9314

3,74

224

7,50

722

,702

19,9

1967

,057

81,1

7762

3,61

6

Act

ual b

ase

inco

me

per

capi

ta (

$) .

. . .

. . .

. . .

. . .

.17

,018

17,1

3417

,266

18,0

2719

,669

21,9

7519

,984

19,4

9023

,628

20,4

9420

,851

Fede

ral b

alan

ces

allo

cate

d to

pri

vate

inco

me

. . .

. . .

123

2419

225

427

3531

126

140

1,04

1N

eutr

al b

ase

inco

me

. . .

. . .

. . .

. . .

. . .

. . .

. . .

. . .

.7,

117

1,83

313

,956

11,7

5313

8,61

225

6,43

720

,357

18,2

2671

,416

83,9

0862

3,61

6N

eutr

al b

ase

inco

me

per

capi

ta (

$) .

. . .

. . .

. . .

. . .

.12

,847

13,3

7914

,927

15,5

8818

,967

22,7

6817

,920

17,8

3425

,164

21,1

8320

,851

Sou

rces

: R

even

ue C

anad

a, T

axat

ion

Stat

isti

cs (

Ott

awa:

Pub

lic

Wor

ks a

nd G

over

nmen

t S

ervi

ces,

var

ious

yea

rs);

and

Sta

tist

ics

Can

ada,

Pro

vinc

ial

Eco

nom

icA

ccou

nts,

cat

alog

ue n

o. 1

3-21

3.

Documents

Federal Fiscal Balances and Redistribution in Canada, 1992 ... · inces through the intermediation of federal spending and taxation. The federal government can generate different