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Fixing the Fiscal Imbalance: Turning GST revenues over to the provinces in exchange for lower transfers

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  • Kenneth J. Boessenkool

    (The School of Public Policy, University of Calgary)

Abstract

The central argument of this paper is that Canada should better align provincial own-source revenues with provincial expenditures by turning over the GST to the provinces while simultaneously reducing federal transfers. The paper begins by broadly outlining of Canada's present fiscal arrangements and explains why a reduction of cash transfers and realignment of federal and provincial tax rates – in short, a transfer of tax points – would benefit the federation. It reviews past tax point transfers and then addresses the question of why transferring GST revenues is superior to other alternatives using the principles of tax assignment as the guide. It lays out two comprehensive proposals for transferring GST revenues, with the key difference being the way in which the GST transfer is equalized across provinces. It shows the impact on Ottawa and the provinces of these two proposals for the 2009-2010 fiscal year. It highlights the benefits of these changes from a federal, provincial and taxpayer perspective with a special focus on one of Canada's major expenditure challenges - what to do about public health spending.

Suggested Citation

  • Kenneth J. Boessenkool, 2010. "Fixing the Fiscal Imbalance: Turning GST revenues over to the provinces in exchange for lower transfers," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 3(10), December.
    • Handle: RePEc:clh:resear:v:3:y:2010:i:10
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    File URL: http://www.policyschool.ca/wp-content/uploads/2016/03/gst-boessenkool-online3.pdf
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    References listed on IDEAS

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    1. Andrew Sharpe, 2003. "Linkages Between Economic Growth and Inequality: Introduction and Overview," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 1-14, January.
    2. Winer, Stanley L, 1983. "Some Evidence on the Effect of the Separation of Spending and Taxing Decisions," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 126-140, February.
    3. Richard M. Bird & Eric M. Zolt, 2005. "Redistribution via Taxation: The Limited Role of the Personal Income Tax in Developing Countries (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0507, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    4. Maximilian Baylor & Louis Beauséjour, "undated". "Taxation and Economic Efficiency: Results from a Canadian CGE Model," Working Papers-Department of Finance Canada 2004-10, Department of Finance Canada.
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    Cited by:

    1. Bev Dahlby, 2012. "Reforming the Tax Mix in Canada," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 5(14), April.

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