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Fiscal transfer in Canada: Drawing comparisons and lessons

Author

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  • Rangarajan, C.

    (National Institute of Public Finance and Policy)

  • Srivastava, D.K.

    (National Institute of Public Finance and Policy)

Abstract

The Canadian system of fiscal transfers, which has been developed over a long period of time, has two central features: equalisation grants, which are constitutionally guaranteed, and the Canadian Health and Social Service Transfers (CHST). This paper examines the relevance and applicability of the Canadian system of intergovernmental transfers in the Indian case. Equalisation grants are meant to ensure that provinces have sufficient revenues to provide reasonably comparable levels of services at reasonably comparable levels of taxation. An elaborate `Representative Tax System' approach using individual revenue bases is used in Canada for determining the equalisation grants, although there has recently been a debate to use a more macro approach. The source by source approach is less practical in the Indian case for want of comparable and reliable information required for applying the method. A more practical alternative is the macro approach, which is adopted in India, but better indicators of fiscal capacity than those based on GSDP need to be used. In addition, the concept of ensuring that resources are available for maintaining the per capita expenditure of select basic services at certain levels among states, as attempted in Canada through the CHST transfers, is worth exploring.

Suggested Citation

  • Rangarajan, C. & Srivastava, D.K., 2004. "Fiscal transfer in Canada: Drawing comparisons and lessons," Working Papers 04/18, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:04/18
    Note: Working Paper 18, 2004
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    File URL: http://www.nipfp.org.in/working_paper/wp04_nipfp_018.pdf
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    References listed on IDEAS

    as
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    3. Bird,Richard M. & Vaillancourt,François (ed.), 1999. "Fiscal Decentralization in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521641432, January.
    4. Charles M. Tiebout, 1961. "An Economic Theory of Fiscal Decentralization," NBER Chapters, in: Public Finances: Needs, Sources, and Utilization, pages 79-96, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Richa Saraf & D.K.Srivastava, 2009. "Determining General and Specific Purpose Transfers : An Integrated Approach," Microeconomics Working Papers 22943, East Asian Bureau of Economic Research.
    2. Nithin K. & Roy, Rathin, 2014. "Finance Commission of India's Assessments: A Political Economy Contention between Expectations and Outcomes," Working Papers 14/141, National Institute of Public Finance and Policy.
    3. Richa Saraf & D K Srivastava, 2009. "Determining General And Specific Purpose Transfers: An Integrated Approach," Working Papers 2009-040, Madras School of Economics,Chennai,India.

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    Keywords

    Fiscal transfer ; Canada;

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