“Final and Unalterable”—But Up for Negotiation: Federal-Provincial Transfers in Canada

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Paper Citation

Tombe, Trevor (2018), ““Final and Unalterable”—But Up for Negotiation: Federal-Provincial Transfers in Canada”, Canadian Tax Journal Vol. 66(4), 871-917.

Paper Abstract

For almost 60 years, the Canadian Tax Foundation published an annual monograph, Finances of the Nation, and its predecessor, The National Finances. In a change of format, the 2014 Canadian Tax Journal introduced a new “Finances of the Nation” feature, which presents annual surveys of provincial and territorial budgets, and topical articles on taxation and public expenditures in Canada.

In this article, Trevor Tombe explores the history of federal-provincial transfers in Canada. He compiles and analyzes uniquely detailed data from Confederation to the present showing that (1) explicit transfers to provincial governments are more equally distributed today than they have been throughout most of Canada’s history, and (2) while overall federal tax and spending activities currently redistribute just under 2 percent of Canada’s gross domestic product across provinces, this is the lowest level in the past six decades. Tombe proposes a uniform methodology to quantify and analyze explicit and implicit fiscal transfers, discusses the design of today’s transfer programs and the pressures that they must withstand, and suggests some changes that might be considered in future reforms.