Federal-Provincial Fiscal Arrangements Regulations, 2007 (SOR/2007-303)

17.1 For the purpose of calculating the national average rate of tax, as defined in subsection 4(1) of the Act, a reference to the territories in any of the definitions revenue base, revenue source and revenue to be equalized in that subsection shall be read as including the provinces.

Revenue Source

• 18 (1) For the purpose of calculating the national average rate of tax, as defined in subsection 4(1) of the Act, the provincial and territorial revenues that are derived from, or are deemed to be derived from, the revenue sources referred to in paragraphs (a) to (i) of the definition revenue source in that subsection are

  • (a) in the case of revenues relating to personal income referred to in paragraph (a) of that definition,

    • (i) taxes imposed by a province or territory on the income of individuals or unincorporated businesses, including a levy other than a universal pension plan levy, and

    • (ii) revenues derived from levies or premiums imposed by a province or territory specifically for the purpose of financing hospitalization insurance, medical care insurance or drug insurance, other than contributions to the Nova Scotia Seniors’ Pharmacare Program or the Alberta supplementary health benefits plans;

  • (b) in the case of revenues relating to corporate income and government business enterprises referred to in paragraph (b) of that definition,

    • (i) taxes imposed by a province or territory on the income of corporations,

    • (ii) remittances to a provincial or territorial government of profits of business enterprises of the province or territory, other than remittances by

      • (A) a liquor board, commission or authority of the province or territory,

      • (A.1) a cannabis board, commission or authority of the province or territory,

      • (B) an enterprise engaged, entirely or primarily, in the marketing of oil or natural gas, and

      • (C) an enterprise, board, commission or authority engaged in the administration of a provincial or territorial lottery,

    • (iii) taxes imposed by a province or territory on the paid-up capital of corporations, and

    • (iv) fines and penalties imposed on businesses by a province, territory or local government;

  • (c) in the case of revenues derived from tobacco referred to in paragraph (c) of that definition, revenues derived by means of a specific tax imposed by a province or territory on final purchasers of tobacco and tobacco products;

  • (d) in the case of revenues derived from motive fuel taxes from the sale of gasoline referred to in paragraph (d) of that definition, revenues derived from taxes imposed by a province or territory on final purchasers of gasoline used in an internal combustion engine, including aviation fuel, other than taxes on the sale of liquefied petroleum gas;

  • (e) in the case of revenues derived from motive fuel taxes from the sale of diesel fuel referred to in paragraph (e) of that definition, revenues derived from taxes imposed by a province or territory on final purchasers of diesel fuel used in an internal combustion engine, including railway fuel, other than taxes on the sale of liquefied petroleum gas;

  • (f) in the case of revenues derived from the sale of alcoholic beverages referred to in paragraph (f) of that definition, revenues derived from

    • (i) remittances to a provincial or territorial government, by a liquor board, commission or authority of the province or territory, of profits arising from sales of alcoholic beverages,

    • (ii) a specific sales tax imposed by a province or territory on the sale of alcoholic beverages by a liquor board, commission or authority of the province or territory, and

    • (iii) fees for licences and permits for the privilege of distilling, brewing, making, purchasing or dispensing alcoholic beverages;

  • (g) in the case of revenues derived from payroll taxes referred to in paragraph (g) of that definition, taxes imposed by a province or territory on the payroll of employers;

  • (h) in the case of revenues derived from property taxes referred to in paragraph (h) of that definition,

    • (i) taxes imposed by a province, territory or local government on

      • (A) the owner of real or immovable property,

      • (B) the occupant of real or immovable property, if the owner is exempt from property taxes on that property, and

      • (C) a person occupying or using real or immovable property for the purpose of carrying on a business, if the taxes are calculated in relation to that occupation or use by the person,

    • (ii) grants received by a province, territory or local government from the federal government in lieu of the taxes described in subparagraph (i), and

    • (iii) taxes imposed by a provincial, territorial or local government on the sale price or value of real or immovable property when it is transferred; and

    • (iv) [Repealed, SOR/2023-230, s. 11]

    • (v) [Repealed, SOR/2023-230, s. 11]

    • (vi) [Repealed, SOR/2023-230, s. 11]

  • (i) in the case of revenues relating to consumption taxes, excluding revenues derived from excise taxes, referred to in paragraph (i) of that definition,

    • (i) sales taxes — including those on meals, hotel services, telecommunications and cable television, and amusement taxes — that are not described elsewhere in this subsection and that are imposed by a province, territory or local government on final purchasers or on users of goods and services,

    • (ii) amounts paid to a province or territory in accordance with a sales tax harmonization agreement,

    • (iii) revenues derived from taxes on the sale of liquefied petroleum gas,

    • (iv) revenues derived by a province or territory from fees for

      • (A) driver’s and chauffeur’s licences, and

      • (B) licences for, and registrations of, personal motor vehicles,

    • (v) revenues derived by a province or territory from fees for licences for, and registrations of, commercial motor vehicles, including

      • (A) fees for licences for, and registrations of, trucks, buses, trailers, tractors and passenger vehicles used for commercial purposes,

      • (B) public service and common carrier fees, and

      • (C) revenues derived under reciprocity agreements with other provinces or territories in respect of the licensing and registration of commercial motor vehicles,

    • (vi) taxes imposed by a province or territory on insurance premiums,

    • (vii) taxes imposed by a province or territory on amounts wagered in the province or territory on harness and running horse races,

    • (viii) profits derived from the operation of games of chance that are remitted to a provincial or territorial government by

      • (A) a business enterprise, commission, authority or board of the province or territory that manages games of chance in the province or territory,

      • (B) a business enterprise, commission, authority or board that is jointly owned by the province or territory and one or more other provinces or territories and that manages games of chance in the province or territory, or

      • (C) a business enterprise, commission, authority or board of another province or territory that manages games of chance in the province or territory,

    • (ix) revenues derived by a province or territory from a tax imposed on casino winnings or from any other similar direct or indirect tax that is imposed in relation to the operation or sale of games of chance,

    • (x) profits, other than those referred to in clause 18(1)(b)(ii)(C), that are derived from the sale of goods or services — including the sale of food, drink, lodging and parking space — and that are remitted to a provincial or territorial government by a casino that is owned or controlled by a province or territory or by a business enterprise, commission, authority or board of the province or territory,

    • (xi) the province or territory’s share of revenue from any revenue that is shared by Canada and the province or territory, other than the revenues referred to in subparagraph (i)(xiii),

    • (xii) a carbon levy or tax imposed by a province or territory, including a tax on fuel that is proportional to the greenhouse gas emissions that are generated by the burning of fuel, and revenues raised from auctioning carbon allowances, credits or permits under an emissions trading system, and

    • (xiii) revenues derived by a province or territory from

      • (A) remittances, to the provincial or territorial government, by a cannabis board, commission or authority of the province or territory, of profits arising from the sale of cannabis products,

      • (B) a specific sales tax imposed by the province or territory on cannabis products by a cannabis board, commission or authority of the province or territory,

      • (C) a specific sales tax imposed by the federal government on cannabis products that is shared with the province or territory, and

      • (D) fees for licences and permits for the privilege of making, purchasing, distributing or selling cannabis products.

• (2) [Repealed, SOR/2023-230, s. 11]

Revenue Base

• 19 (1) The definition revenue base in subsection 4(1) of the Act is, for all purposes in respect of a revenue source for a territory for a fiscal year and for the purpose of calculating the national average rate of tax as defined in that subsection in respect of a revenue source for a province for a fiscal year, more particularly defined to mean

  • (a) in the case of revenues relating to personal income, referred to in paragraph 18(1)(a), the sum of

    • (i) a fraction, expressed as a percentage,

      • (A) whose numerator is the simulated average revenue yield relating to provincial or territorial personal income for the province or territory for the taxation year that ends in the fiscal year, as determined in accordance with subsection 21(2), and

      • (B) whose denominator is the aggregate, over all provinces and territories, of the amounts referred to in clause (A), and

    • (ii) the amount by which the percentage in clause (B) exceeds that in clause (A):

      • (A) a fraction, expressed as a percentage,

        • (I) whose numerator is the aggregate, over all individuals — not including trusts — in the province or territory, of the federal income tax as determined by the micro-simulation model for the taxation year that ends in the fiscal year, and

        • (II) whose denominator is the aggregate, over all provinces and territories, of the amount referred to in subclause (I),

      • (B) a fraction, expressed as a percentage,

        • (I) whose numerator is the aggregate, over all individuals — including trusts — in the province or territory, of the federal income tax payable for the taxation year that ends in the fiscal year as determined for each individual, and

        • (II) whose denominator is the aggregate, over all provinces and territories, of the amount referred to in subclause (I);

  • (b) in the case of the revenues relating to corporate income and government business enterprises, referred to in paragraph 18(1)(b), the sum of

    • (i) the product of the portion of the aggregate of corporate profits in Canada, before the payment of income taxes and without any deduction of the aggregate of corporate losses in Canada, that is attributable to any of the provinces or territories for the calendar year that ends in the fiscal year, as determined by Statistics Canada for the purpose of its System of Macroeconomic Accounts, and a fraction

      • (A) whose numerator is the allocated corporation taxable income attributable to the province or territory for the fiscal year, and

      • (B) whose denominator is the aggregate, over all provinces and territories, of the amounts referred to in clause (A), and

    • (ii) the product, as determined on the basis of data prepared by Statistics Canada for the purpose of the Government Finance Statistics, of

      • (A) the aggregate, over all provinces and territories, of the total profits, before the distribution of dividends, that are attributable to each province or territory for the calendar year that ends in the fiscal year from business enterprises that have a profit in that calendar year and are owned 90% or more by that province or territory, or by that province or territory and one or more other provinces or territories, excluding the profits of

        • (I) a liquor board, commission or authority,

        • (I.1) a cannabis board, commission or authority,

        • (II) an enterprise engaged, entirely or primarily, in the marketing of oil or natural gas,

        • (III) an enterprise engaged in the administration of a provincial or territorial lottery, and

        • (IV) the Ontario Electricity Financial Corporation and the Nova Scotia Power Finance Corporation, and

      • (B) a fraction whose numerator is the amount of the total profits referred to in clause (A) that are attributable to the province or territory less the amount by which any losses that were accumulated in the seven calendar years before that calendar year by a business enterprise referred to in that clause exceed the portion of those losses subtracted under this clause for that business enterprise in relation to that period, but only to the extent that the amount is not more than the total profits for that calendar year of that business enterprise, and whose denominator is the aggregate, over all provinces and territories, of those numerators;

  • (c) in the case of revenues derived from tobacco, referred to in paragraph 18(1)(c), the number of cigarettes sold to final purchasers in the province or territory in the fiscal year, as determined by dividing the revenue derived from tobacco taxes by the province or territory in the fiscal year, as set out in the certificate, by the average annual tax levy per cigarette that applies in that province or territory for that fiscal year;

  • (d) in the case of revenues derived from motive fuel taxes derived from the sale of gasoline, referred to in paragraph 18(1)(d), the sum of

    • (i) the average tax rate in the calendar year that ends in the fiscal year multiplied by the adjusted number of litres of gasoline taxed at road-use rate in the province or territory in that year,

    • (ii) the average tax rate in the calendar year that ends in the fiscal year multiplied by the number of litres of aviation fuel sold in the province or territory in that year, as determined by Statistics Canada on the basis of data from its survey Gasoline and Other Petroleum Fuels Sold, and

    • (iii) the average tax rate in the calendar year that ends in the fiscal year multiplied by the number of litres of gasoline sold for use by farm trucks in the province or territory in that year;

  • (e) in the case of revenues derived from motive fuel taxes derived from the sale of diesel fuel, referred to in paragraph 18(1)(e), the sum of

    • (i) the average tax rate in the calendar year that ends in the fiscal year multiplied by the adjusted number of litres of diesel fuel taxed at road-use rate in the province or territory in that year,

    • (ii) the average tax rate in the calendar year that ends in the fiscal year multiplied by the number of litres of railway fuel sold in the province or territory in that year as determined,

      • (A) in the case where railway fuel is taxed in the province or territory throughout that year and data on the tax is complete and available, by Statistics Canada on the basis of data from its survey Gasoline and Other Petroleum Fuels Sold, and

      • (B) in any other case, by the Minister on the basis of data prepared by Statistics Canada for the purpose of its publication entitled Report on Energy Supply and Demand in Canada, and

    • (iii) the average tax rate in the calendar year that ends in the fiscal year multiplied by the number of litres of diesel fuel sold for use by farm trucks in the province or territory in that year;

  • (f) in the case of revenues derived from the sale of alcoholic beverages, referred to in paragraph 18(1)(f), the sum of

    • (i) the revenue derived by all provinces and territories from the sale of spirits in the fiscal year, as determined by the Minister on the basis of information provided by the provinces, the territories and Statistics Canada, multiplied by a fraction whose numerator is the volume of spirits sold in the province or territory in the fiscal year, as determined by Statistics Canada for the purpose of table 10-10-0011-01, Value of sales of alcoholic beverages of liquor authorities and other retail outlets, by beverage type (× 1,000), and whose denominator is the aggregate, over all provinces and territories, of those numerators,

    • (ii) the revenue derived by all provinces and territories from the sale of wine in the fiscal year, as determined by the Minister on the basis of information provided by the provinces, the territories and Statistics Canada, multiplied by a fraction whose numerator is the volume of wine sold in the province or territory in the fiscal year, as determined by Statistics Canada for the purpose of table 10-10-0011-01, Value of sales of alcoholic beverages of liquor authorities and other retail outlets, by beverage type (× 1,000), and whose denominator is the aggregate, over all provinces and territories, of those numerators, and

    • (iii) the revenue derived by all provinces and territories from the sale of beer in the fiscal year, as determined by the Minister on the basis of information provided by the provinces, the territories and Statistics Canada, multiplied by a fraction whose numerator is the volume of beer sold in the province or territory in the fiscal year, as determined by Statistics Canada for the purpose of table 10-10-0011-01, Value of sales of alcoholic beverages of liquor authorities and other retail outlets, by beverage type (× 1,000), and whose denominator is the aggregate, over all provinces and territories, of those numerators;

  • (g) in the case of revenues derived from payroll taxes, referred to in paragraph 18(1)(g), the aggregate, over all payroll tax systems, of the amount determined for each system by the formula

    A × (B/C)

    where

    A

    is the amount determined by the formula

    (D/E) × (F/G) + H

    where

    D

    is the estimated amount of payroll taxes that would be imposed on the employers in the province or territory under the payroll tax system for the calendar year that ends in the fiscal year as if the tax system applied to the employers in the province or territory, calculated on the basis of

    • (i) the statutory rates, thresholds and exemptions applicable under the tax system as of June 1 of the fiscal year, and

    • (ii) data on the gross payroll of employers in the province or territory — other than those referred to in subparagraphs (i) and (ii) of the description of G — for the calendar year that ends in the fiscal year, as determined by Statistics Canada on the basis of its Survey of Employment, Payrolls and Hours,

    E

    is the statutory tax rate applicable or, if there is more than one tax rate, the rate that would apply to payrolls in excess of the highest threshold, under the payroll tax system as of June 1 of the fiscal year, and

    F

    is the total wages and salaries excluding supplementary labour income, as determined by Statistics Canada for the purpose of its System of Macroeconomic Accounts, paid in the province or territory in the calendar year that ends in the fiscal year, other than the wages and salaries paid by

    • (i) the federal general government sector to employees in the defence industry, and

    • (ii) the provincial and territorial general government sector and the local general government sector to their employees,

    G

    is the gross dollar value, before deductions, of the payrolls of all employers in the province or territory for the calendar year that ends in the fiscal year, as determined by Statistics Canada on the basis of its Survey of Employment, Payrolls and Hours, other than the payrolls of

    • (i) employers not included in that survey, and

    • (ii) employers in the following industry classifications, as defined by the North American Industry Classification System:

      • (A) the elementary and secondary schools industry group,

      • (B) the hospitals subsector,

      • (C) the nursing and residential care facilities subsector,

      • (D) the provincial and territorial public administration subsector, and

      • (E) the local, municipal and regional public administration subsector, and

    H

    is military pay and allowances, excluding supplementary labour income, paid in the province or territory in the calendar year that ends in the fiscal year, as determined by Statistics Canada for the purpose of its System of Macroeconomic Accounts,

    B

    is the total revenue derived from the payroll tax system for the fiscal year, and

    C

    is the aggregate, over all provinces and territories, of the amounts calculated for A;

  • (h) in the case of revenues derived from property taxes, referred to in paragraph 18(1)(h), the weighted sum of three sub-bases, determined by the formula

    (B1 × 0.611) + (B2 × 0.378) + (B3 × 0.011)

    where

    B1

    is the market value residential sub-base, determined by the formula

    [(R × 1/R1) × 0.7] + [(P × 1/P1) × 0.3]

    where

    R

    is the assessed market value of residential property in the province or territory for the calendar year that ends in the fiscal year,

    R1

    is the aggregate, over all provinces and territories, of the amounts determined for R,

    P

    is the population of the province or territory for the fiscal year, as determined in accordance with section 27, and

    P1

    is the aggregate, over all provinces and territories, of the amounts determined for P,

    B2

    is the market value commercial-industrial sub-base as determined by the formula

    [(N × 1/N1) × 0.7] + [(P × 1/P1) × 0.3]

    where

    N

    is the assessed market value of commercial-industrial property in the province or territory for the calendar year that ends in the fiscal year,

    N1

    is the aggregate, over all provinces and territories, of the amounts determined for N,

    P

    is the population of the province or territory for the fiscal year, as determined in accordance with section 27, and

    P1

    is the aggregate, over all provinces and territories, of the amounts determined for P, and

    B3

    is the farm sub-base as determined by the formula

    F × 1/F1

    where

    F

    is the value of farm land and buildings in a province or territory, measured in current dollars, as determined by Statistics Canada for the purpose of its publication entitled Census of Agriculture, and adjusted to exclude farm residences, for the most recent calendar year available in the publication, and

    F1

    is the aggregate, over all provinces and territories, of the amounts determined for F; and

  • (i) in the case of revenues relating to consumption taxes, as described in paragraph 18(1)(i), the amount determined on the basis of data provided by Statistics Canada, for the calendar year that ends in the fiscal year by the formula

    A + B + C + D + E + F + G + H + I + J

    where

    A

    is the aggregate, over all household final consumption expenditure categories, of the household final consumption expenditures in the province or territory for each category multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures for that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces and territories,

    B

    is the aggregate, over all housing expenditure categories, of the housing expenditures in the province or territory for each category multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures for that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces and territories,

    C

    is the aggregate, over all business sector industries and all commodities, of the capital expenditures for machinery and equipment in the province or territory, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces and territories,

    D

    is the aggregate, over all business sector industries and all commodities, of the capital expenditures for non-residential structures in the province or territory, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures, by that industry for that commodity, in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures, by that industry for that commodity, in all of those provinces and territories,

    E

    is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for machinery and equipment in the province or territory by each category multiplied by

    • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and

    • (b) in the case of the non-profit entity category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces or territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories,

    F

    is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for non-residential structures in the province or territory by each category multiplied by

    • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and

    • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories,

    G

    is the aggregate, over all post-secondary education or non-profit industries and all intermediate inputs, of the intermediate input expenditures in the province or territory by each industry for each intermediate input multiplied by

    • (a) in the case of the post-secondary educational services industry, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories, multiplied by 50 per cent and

    • (b) in the case of the non-profit institutions serving households industry, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories,

    H

    is the aggregate, over all business sector industries and all intermediate inputs, of the intermediate input expenditures in the province or territory by each industry for each intermediate input, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories,

    I

    is the aggregate, over all business sector industries and all commodities, of capital expenditures for intellectual property products in the province or territory by each industry for each commodity multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces and territories, and

    J

    is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for intellectual property products in the province or territory by each category multiplied by

    • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and

    • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories.

• (2) For the purpose of paragraph 19(1)(e), if a territory has changed its method of accounting for a fiscal year so that the revenue referred to in that paragraph is derived during a period that is other than 12 months, the Minister may adjust the amount of that revenue for that fiscal year to offset any effect of that change.