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Fiscal Policies and Regional Development in Canada

Canada TABLE 1 Key Demographic, Economic and Geographic Features of Canada’ Canada TABLE 2 Provincial and Territorial Governments, Revenues and Expendi Spending % by Type for Each Level of Government and by Level Fiscal policies-Federal Table 9 Federal Economic Development Main Features of Provincial Taxes in Canada, 2003 Belem , 31 de agosto 2005 Fiscal Policies and Regional Development in Canada* by François Vaillancourt** ________________________________________________________________ *Presentation prepared for the Competição Fiscal e Desigualdades Regionais conference. We thank the Forum of Federations for inviting us to participate in this conference and Fabio Borjoquez for research assistance.Thispresentation draws on two papers with Richard Bird: Changing with the Times:Success,Failure and Inertia in Canadian Federal Arrangements,1945-2001 Federalism in a Global Environment conference, CREDPR ,Stanford University, June 2002 The Interregional Incidence of Public Budgets in Federations: Measurement Issues, Evidence from Canada, and Policy Relevance Conference on the Spatial Aspects of Federative Systems, Speyer, Germany, February 2005 ** Professor, sciences économiques, Université de Montréal The presentation follows the following order: • Brief presentation of Canada ; • Fiscal policies-Federal o Overall transfers o Specific transfers to provinces o Specific transfers to individuals o Specific transfers to businesses o Tax expenditures transfers-individuals o Price control transfers o Taxation policy • Fiscal policies-Provincial o Taxation policy o Specific transfers to businesses Canada TABLE 1 Key Demographic, Economic and Geographic Features of Canada’s Provinces and Territories, 2003 Canada NFD PEI NS NB QUÉ ONTMANSASKALTABCYUNWTNUArea (Km²) 9984670 405212 5660552847290815420561076395647797 65103666184894473548244313461062093190 Population (‘000) 31630520138936751748712238116399531544147314229Density – population3,21,3 24,416,910,34,911,41,81,54,84,40,10,00,0% population anglophone 2001 59.398.493.99364.7871.675.885.781.874. population francophone 2001 ($000 000) 12146011801538832881322358254263493416380783677817063114241813103332916GDP per capita 3840034644281383078329771339614031832741369635410034342422587933331586% Area 100 4,1 0,1 0,6 0,7 15,4 10,8 6,5 6,5 6,6 9,5 4,8 13,5 21,0 % Population 1001. GDP1001. Authors using Statistics Canada data (Cansim II 384 0013) Census 2001, Statistics Canada, “Mother Tongue, 2001, Counts for Both Sexes for Canada, Provinces and Territories”Area is from NFD: Newfoundland; PEI: Prince Edward Island; NS: Nova Scotia; QUÉ: Québec; ONT: Ontario; MAN: Manitoba; SASK: Saskatchewan; ALTA: Alberta; BC: British Columbia.Canada TABLE 2 Provincial and Territorial Governments, Revenues and Expenditures, Canada, 2003 Canada NFDPEINSNBQUÉONTMANSASKALTABCYUNWTNUProvinces territories Total revenues247470476111297531623666702811549681853328402309996679691024% revenues from own sources82.6162.1964.4869.8367.9683.7185.7371.9982.6188.3186.4919.791.249.86Personal income taxes % of own sources 25.524.822.726.922.531.226.925.417.718.618.626.5716.728.7Corporate income taxes % of own sources sales taxes % of own sources 14.921.123.518.718.813.920.516.312. taxes % of own sources taxes % of own sources taxes % of own sources 0.00.0Deficit/surplus-10517 -368 -94181-110-2 727-6 943-277 -3392 949-2 501-18-220-49Sources : Authors using Statistics Canada data (Cansim II 385 0001). Total revenues, expenses and surplus – deficits are in $000 000. GDP: Department of Finance Canada, Fiscal Reference Tables 2003, Various Tables. Canada TABLE 3 Spending % by Type for Each Level of Government and by Level for Each Type, Canada, 2003 General Services Protection of Persons & Property Transport. & Communication.HealthSocial ServicesEducationTransfers to Other GovernmentsDebt Charges OtherTotal $000 000 % Type for Each Level All governments % Level for Each Type % Federal 46.1 56.2 11.2 6.761.87.095.947.546.850027% Provincial 26.5 24.2 48.7 Local 28.7 22.3 41.3 1.1 2.2 10.9 _ 5.8 28.0 51 395 Source: Authors using Statistics Canada data (Cansim II 385 0001) Fiscal policies-Federal Table 4:Federal revenues, expenses and surplus/deficit Canadian provinces, 2001, current dollars (millions) Expenses Revenues GrossNet position Deficit corrected Net position Revenue corrected Net position Expenditure corrected Net position Debt corrected Net position Gross Net position per capita Deficit corrected Net position per capita Revenue corrected Net position per capita Expenditure corrected Net position per capita Debt corrected Net position per capita Canada 179558189322-97640-9535-15166-14963—–Newfoundland 492221132809291826522554257453815590508148934931Prince Edward Island 141468373176670254669853495605513639955107Nova Scotia 894544674478470842572438421048035049456626154515New Brunswick 644033623078325128562445281141054335380932603749Quebec 427503902837225735377632462382503775510439322Ontario 5897683552 -24576-20267-23087-23942-22179-2066-1703-1940-2012-1864Manitoba 862956163013330326832725270426172869233023672349Saskatchewan 693148472084233418562434180920842334185624341809Alberta 1419521785-7590-6466-7326-4939-6905-2483-2115-2397-1616-2259British Columbia 2013922734-2595-1423-3422-1538-3067-636-349-839-377-752Fiscal policies-Federal Table 5: Canada 2001, distribution between provinces of four federal transfers to governments and individuals and population, GDP and income shares Program shares Comparator share EqualizationCHSTEmploymentbenefits Old Age pension Population shares GDP shares Personal income shares Federal revenue Shares Newfoundland 10.41%1.94%7.09%2.08%1.72%1.28%1.35%1.12%PEI 2.52%0.48%1.59%0.54%0.45%0.32%0.36%0.35%Nova Scotia 12.85%3.32%5.51%3.55%3.03%2.30%2.68%2.40%New Brunswick 11.65%2.64%5.81%2.93%2.44%1.86%2.11%1.80%Quebec 45.74%26.94%30.97%26.80%23.84%21.06%22.25%20.53%Ontario 0,0%-33.03%24.87%35.24%38.20%40.55%41.18%44.00%Manitoba 11.70%4.01%2.97%4.23%3.70%3.23%3.44%3.10%Saskatchewan 3.86%3.43%2.40%4.09%3.27%3.05%2.77%2.70%Alberta 0,0%8.94%6.68%7.74%9.86%13.85%10.84%11.31%British Columbia 1.28%15.27%11.61%12.79%13.18%12.02%12.62%12.29%Fiscal policies-Federal Table 6Provincial distribution and per capita amounts of five federal tax expenditures, Canada, 2001 ProvinceChildtaxbenefits Registered Pension Plan Registered Retirement Savings Plan Combined Pension benefits Child tax benefits, Per capita $ Combined Pension benefits, Per capita$ Newfoundland 1.9%0.8%1.6%1.0%257398Prince Edward Island 0.5%0.2%0.4%0.3%266400Nova Scotia 3.2%1.7%2.8%2.0%243475New Brunswick 2.6%1.2%2.2%1.4%246407Quebec 23.5%20.7%21.7%21.1%223618Ontario 35.3%45.2%37.6%43.2%208785Manitoba 4.7%2.6%4.1%3.0%285556Saskatchewan 4.4%2.2%3.9%2.6%310553Alberta 10.4%12.6%11.3%12.4%239880British Columbia 12.9%12.8%12.4%13.1%223694Fiscal policies-Federal Table 7. Provincial Aspects of Milk Policy in Canada, 2001-2002 %MSQ %Milk Consumption Payment by consumer($million)Amounts received by producers Newfoundland 0,1 0.4102,5Prince Edward Island 1,9 1.33347,5Nova Scotia 1,2 2.35830New Brunswick 1,3 1.84532,5Quebec 46,6 38.39581165Ontario 31,5 33.3833787,5Manitoba 3,5 3.99887,5Saskatchewan 2,7 2.87067,5Alberta 6,1 8.1203152,5BritishColumbia5,17.8195127,5Fiscal policies-Federal Table 8 Federal transfers to businesses, Canada, 2001 Province $ per capita % federal spending in province % GDP $ total (000) Newfoundland and Labrador 1902,00%0,70%99Prince Edward Island577 5,52%2,30%79Nova Scotia1731,80%0,62%161New Brunswick1151,34%0,42%86Quebec711,25%0,23%526Ontario992,01%0,26%1180Manitoba2303,06%0,75%265Saskatchewan5377,52%1,61%537Alberta1463,05%0,30%447British Columbia821,67%0,25%334Canada1202,07%0,34%3719 Fiscal policies-Federal Table 9 Federal Economic Development Agencies Expeditures† for 2000-2002 (thousands of dollars) Agency Fiscal year 2001-2002 Atlantic Canada Opportunities Agency 318 005 Economic Development Agency of Canada for the Regions of Quebec 260 758 Enterprise Cape Breton Corporation 37 608 Federal Economic Development Iniciative for Northern and Rural Ontario * 56 600 Western Economic Diversification251587Technology Partnerships Canada * 319 657 * . Fiscal policies-Federal BRIEF DESCRIPTION of FEDERAL ECONOMIC DEVELOPMENT AGENCIES Atlantic Canada Opportunities Agency:ACOA was created by the Government of Canada in 1987 as a full-fledged federal government department, totally focused on the economic development of Atlantic Canada. Thus, this federal agency is intended to support and promote new opportunities for economic development in Atlantic Canada, with particular emphasis on small- and medium-sized enterprises, through policy, program and project development and implementation, and through advocating the interests of Atlantic Canada in national economic policy, program and project development and implementation. Economic Development Agency of Canada for the Regions of Quebec:The Economic Development Agency of Canada for the Regions of Quebec(EDACRQ) was operational only in 1997. EDACRQ objective is the Promotion of the economic development of the regions of Quebec, this activity includes in particular: the design and implementation of federal policies and programs, participation in the implementation of national economic development priorities in order to maximize the benefits for every region of Quebec, harmonization of federal activities in the province, establishment of cooperative relations with other public and private socio-economic stakeholders to better serve Quebec regions and SMEs, advocacy whithin the machinery of the Canadian government, promotion of federal programs and services. Enterprise Cape Breton Corporation and the Cape Breton Growth Fund (CBGF) : Enterprise Cape Breton Corporation (ECBC) is the principal federal Government of Canada organization for economic development in Cape Breton and Mulgrave. The objects of the Corporation are to promote and assist the financing and development of industry on Cape Breton Island to provide employment outside the coal producing industry and to broaden the base of the economy of Cape Breton Island. Federal Economic Development Iniciative for Northern and Rural Ontario (FedNor):Launched in 1987, FedNor is an initiative of the Government of Canada aiming to address the economic development needs of Northern Ontario. FedNor was designed to promote economic growth, diversification, job creation and sustainable, self-reliant communities in northern and rural Ontario, by working with community partners and other organizations to improve small business access to capital, information & markets. While FedNor typically does not provide financing for private businesses, it administers the Community Futures Program , which is comprised of locally operated Community Futures Development Corporations (CFDCs) throughout Ontario.. Technology Partnerships Canada,:Technology Partnerships Canada (TPC) is a Special Operating Agency of Industry Canada, established in 1996 to contribute to economic growth, jobs and wealth creation, and to support sustainable development. TPC has advanced and supported government initiatives by investing strategically in research, development and innovation. Investments made by TPC are designed to encourage private sector investment and work to maintain and grow the technological capabilities of Canadian industry and our research and technology base.. Through two key programs — Research & Development (R&D) investment and the Hydrogen Early Adopters (h2EA) program — TPC invests in critical technology sectors, stimulating innovation, developing opportunity and supporting economic growth across Canadian industry, thereby benefiting Canada. Western Economic Diversification A department of the Government of Canada, Western Economic Diversification Canada (WD) was established in 1987 under the provision of the Western Economic diversification Act to promote economic diversification in western Canada in a manner that provides added influence for the West in national policy and decision-making, that improves client services in the West and that facilitates federal-provincial coordination. Fiscal policies-Provincial TABLE 10 Main Features of Provincial Taxes in Canada, 2003 Provinces Personal Income Tax1Corporate IncomeTax2 Sales Taxes3PayrollTax5 Capital Taxes6 Federal and Provincial (Manufacturing) $10000$200 000ProvincialTotalRateType4 Newfoundland26.5748.64527.128HST2¯Prince Edward Island 25.80 47.37 7.50 29.62 10 Prov. ¯ ¯ Nova Scotia16.0047.341638.128HST¯0.25/0.50New Brunswick16.0046.841335.128HST¯0.30Québec13.3648.228.9331.027.50GST+4.260.60Ontario16.0046.411133.128Prov.1.950.30Manitoba27.9046.401638.127Prov.2.150.30/0.50Saskatchewan27.0044.001032.126Prov.¯0.60Alberta16.0039.0013/12.5035.12/34.620¯¯¯British Columbia 22.05 43.70 13.5035.627.50Prov.¯¯ Note : 1 PIT rates are for a single taxpayer with assessed income of either $10 000 or $200 , 4 Sales taxes : HST: Harmonized Sales Tax / GST+: Base similar to GST / Prov.: Provincial 6 Capital taxes are general/Bank rates Source: Finances of the Nation, 2003, Canadian Tax Foundation, Table 4.6 Fiscal policies-Provincial Table 11 Provincial transfers to businesses, Canada, 2001 Province $ per capita % provincial spending in province % GDP $ total (000) Newfoundland and Labrador 881,07%0,32%46Prince Edward Island 3284,44%1,31%45Nova Scotia610,98%0,22%57New Brunswick761,04%0,28%57Quebec5537,12%1,77%4092Ontario591,02%0,15%701Manitoba1822,44%0,60%210Saskatchewan5707,93%1,71%570Alberta1216 15,69%2,46%3716British Columbia1962,82%0,60%801 Canada3334,84%0,93%10316Fiscal policies-Provincial Table 12 Existing provincial tax incentives for business-Some Examples Program province N & L PEI NS NB Quebec OntarioManitobaSaskatchewanAlbertaBCFilm and television industry X X X X X X X X R&D tax credit X X X X X X X Labour sponsored venture capital X X X X X X XX X X Computer animation, interactive media X X X Employee investment tax credi X X No sales, payroll or capital taxes X Tax holiday for new business X X 2004-Ontario Automotive Investment Strategy (OAIS). The provincial program specifically targets auto-industry manufacturing projects that involve a capital investment of at least $245 million or create or retain at least 300 jobs + Federal matching funds