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Nov 10, 2010

Canada’s Federal-Provincial Transfers “Barely Pass” According to a New Mowat Centre “Report Card”

November 10, 2010

New Mowat research on federal-provincial transfers.

Toronto – The Mowat Centre surveyed Canada’s leading experts on the federal-provincial fiscal transfer system and has recently released its “Report Card on Canada’s Fiscal Arrangements”. The researchers find that the federal transfer system suffers from significant problems, and that transparency, accountability and efficiency are three areas of particularly urgent concern.

The major agreements that underpin the $50 billion in federal transfers are set to be re-negotiated in 2014.

According to Josh Hjartarson, Mowat Centre Policy Director, “This gives the country just over three years to question, discuss, debate and build consensus toward a new set of arrangements that will help sustain the high-quality public services Canadians expect. Three years is not a long time. Historically, these discussions have been some of the most drawn out and contentious in Canadian politics.”

While the experts gave the transfer system a B+ on autonomy because the provinces are largely able to manage their own affairs, experts are also concerned about revenue adequacy. Many of the experts surveyed in the Mowat Study believe that federal and provincial governments should consider re-aligning the tax system.

Some suggested that provinces should consider vacating the corporate tax field altogether and allow the federal government to impose one uniform corporate tax rate across the country, and that the provinces should get GST revenues as compensation.

According to Hjartarson, “The deficits facing most provinces, combined with mounting health care costs, suggest that the provinces will push hard to address the revenue adequacy problem. This Report Card uncovers some potential solutions that need careful examination.”

According to Matthew Mendelsohn, “The Report Card demonstrates that we clearly need a different approach to federal fiscal transfers. It is a first step in starting a principles-based conversation that will lead us to strike the best balance for Canada,” he adds.

Read the full report