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

General

Revenues to Be Equalized

• 20 (1) For the purpose of calculating the national average rate of tax, as defined in subsection 4(1) of the Act, the definition revenue to be equalized in that subsection is, in respect of a revenue source for a province or territory for a fiscal year, more particularly defined to

  • (a) include

    • (i) revenues of the provincial and territorial government sub-sector, the local government sub-sector and the school boards sub-sector, other than revenues of provincial, territorial or municipal housing authorities and revenues of local transit authorities and the Caisse de dépôt et placement du Québec, and

    • (ii) any grant in lieu of a tax, levy or fee referred to in subsection 18(1) that is paid to a province or territory by the Government of Canada for that fiscal year; and

  • (b) exclude

    • (i) revenues of the universities and colleges sub-sector and the health and social service institutions sub-sector,

    • (ii) any revenue that the province or territory receives from a local government or any revenue that a local government receives from the province or territory,

    • (iii) any revenue that the province or territory or a local government in the province or territory paid to itself,

    • (iv) any remittance received in respect of that year by any specified Yukon Aboriginal government under a personal income tax room sharing agreement between that government and the Government of Yukon,

    • (v) revenues, fees or tax bases referred to in any of clauses 7.30 to 7.34 of the Yukon Northern Affairs Program Devolution Transfer Agreement,

    • (vi) revenues that are Resource Revenues derived from Onshore lands, as those terms are defined in the Canada Yukon Oil and Gas Accord, and

    • (vii) Resource Revenues as defined in the Northwest Territories Lands and Resources Devolution Agreement.

• (2) In respect of the revenues described in paragraph 18(1)(g), the sum of the amounts referred to in subparagraphs (1)(b)(ii) and (iii) shall be the amount by which the product described in paragraph (a) exceeds the amount described in paragraph (b):

  • (a) the product of the payroll tax rate imposed by the province or territory in the fiscal year and the sum of the wages and salaries paid in the province or territory in the calendar year that ends in the fiscal year by the provincial and territorial general government sector and by the local general government sector to their employees, as determined by Statistics Canada for the purpose of its System of Macroeconomic Accounts;

  • (b) the amount of any payroll tax paid by the province or territory’s government departments that the Chief Statistician of Canada has excluded from the payroll tax revenue for the fiscal year for the province or territory, as set out in the certificate.

• (3) For the purpose of calculating the national average rate of tax, as defined in subsection 4(1) of the Act, the following constitute miscellaneous revenues for the purpose of paragraph (b) of the definition revenue to be equalized in that subsection:

  • (a) subject to subsection (4), any revenues derived by a province or territory that are not included as revenues under subsection 18(1), including

    • (i) those derived from fines and penalties imposed by the province or territory, other than those imposed on businesses, and

    • (ii) those that are included in the “Other taxes on use of goods and on permission to use goods or perform activities”, “Other taxes on goods and services n.e.c.”, “Other taxes”, “Voluntary transfers other than grants” and “Miscellaneous and unidentified revenue n.e.c.” revenue categories of the Government Finance Statistics, including those received for gaming licences or permits issued to charities or other organizations;

  • (b) subject to subsection (4), any revenues derived by a local government that are not included as revenues under subsection 18(1), including

    • (i) those derived from fines and penalties imposed by a local government, other than those imposed on businesses, and

    • (ii) those that are included in the “Other taxes on use of goods and on permission to use goods or perform activities,” “Other taxes on goods and services n.e.c.”, “Other taxes”, “Voluntary transfers other than grants” and “Miscellaneous and unidentified revenue n.e.c.” revenue categories of the Government Finance Statistics, including those received for gaming licences or permits issued to charities or other organizations; and

  • (c) territorial quarry revenues that are not included as resource revenues under the Yukon Northern Affairs Program Devolution Transfer Agreement and territorial forestry revenues that are not included as resource revenues under the Northwest Territories Lands and Resources Devolution Agreement.

• (4) The following revenues are excluded from paragraphs (3)(a) and (b), as applicable:

  • (a) revenues included in the “Sales of goods and services” revenue category of the Government Finance Statistics;

  • (b) revenues included in the “Social contributions” revenue category of the Government Finance Statistics;

  • (c) revenues included in the “Property income” revenue category of the Government Finance Statistics;

  • (d) any transfer payments received from other governments;

  • (e) payments to a province by the Government of Canada under section 99 of the Softwood Lumber Products Export Charge Act, 2006;

  • (f) personal and commercial auto insurance premiums; and

  • (g) agricultural insurance premiums.

Simulated Yield

• 21 (1) The following definitions apply in this section.

  personal taxes

  personal taxes means

  • (a) taxes imposed by a province or territory on the income of individuals, not including trusts, net of

    • (i) tax credits that can be simulated for individuals in all provinces and territories on the basis of information available within, or imputable to, the micro-simulation model, and

    • (ii) in respect of income taxes imposed by Quebec, the refundable Quebec abatement described in paragraph 2500(3)(e) of the Income Tax Regulations; and

  • (b) levies or premiums imposed by a province or territory on individuals specifically for the purpose of financing hospital insurance, medical care insurance or drug insurance, other than contributions to the Nova Scotia Seniors’ Pharmacare Program or the Alberta supplementary health benefits plans. (impôts des particuliers)

  provincial or territorial system

  provincial or territorial system means the set of rules relating to the imposition of personal taxes in a province or territory. (régime provincial ou territorial)

• (2) For the purpose of clause 19(1)(a)(i)(A), the simulated average revenue yield relating to provincial or territorial personal income for the province or territory for a taxation year ending in a fiscal year shall be determined by means of the micro-simulation model by

  • (a) simulating, in respect of each provincial or territorial system in turn, the total amount of personal taxes that would be derived from all individuals in the province or territory in the taxation year if that provincial or territorial system applied to those individuals;

  • (b) simulating, in respect of each provincial or territorial system in turn, the total amount of personal taxes that would be derived from all individuals in all provinces and territories in the taxation year if that provincial or territorial system applied to those individuals;

  • (c) dividing the amount simulated in respect of each provincial or territorial system under paragraph (a) by the amount simulated in respect of the same provincial or territorial system under paragraph (b);

  • (d) calculating the weight of each province or territory’s provincial or territorial system, which shall be equal to a fraction

    • (i) whose numerator is the revenues referred to in paragraph 18(1)(a) for the province or territory, as set out in the certificate for the fiscal year, and

    • (ii) whose denominator is the aggregate, over all provinces and territories, of the revenues referred to in subparagraph (i);

  • (e) multiplying each amount calculated under paragraph (c) by the respective weight calculated under paragraph (d); and

  • (f) calculating the sum of the 13 products calculated under paragraph (e).

Gross Expenditure Base

Population Adjusted Gross Expenditure Escalator

Calculation Accuracy

22 Every calculation used to determine the population adjusted gross expenditure escalator shall be made to five decimal places.

Population Adjustment Factor

• 23 (1) The population adjustment factor, defined in subsection 4(1) of the Act, for the fiscal year for which the territorial formula financing payment may be made is more particularly defined to be equal to the ratio

  1 + A : 1 + B

  where

  A

  is the three-year moving average of the rate of change of the population of the territory; and

  B

  is the three-year moving average of the rate of change of the population of Canada.

• (2) For the purpose of subsection (1), the three-year moving average is determined by the formula

  [(P4/P5 - 1) + (P3/P4 - 1) + (P2/P3 - 1)] /3

  where

  P2

  is the population of the territory or Canada, as the case may be, two fiscal years prior to the fiscal year for which the territorial formula financing payment may be made;

  P3

  is the population of the territory or Canada, as the case may be, three fiscal years prior to the fiscal year for which the territorial formula financing payment may be made;

  P4

  is the population of the territory or Canada, as the case may be, four fiscal years prior to the fiscal year for which the territorial formula financing payment may be made; and

  P5

  is the population of the territory or Canada, as the case may be, five fiscal years prior to the fiscal year for which the territorial formula financing payment may be made.

Provincial Local Government Expenditure Index

• 24 (1) The provincial local government expenditure index, defined in subsection 4(1) of the Act, is more particularly defined to be the amount determined by the formula

  1 + {[(P4/P5 - 1) + (P3/P4 - 1) + (P2/P3 - 1)] / 3}

  where

  P2

  is the amount of the provincial local government expenditures two fiscal years prior to the fiscal year for which the territorial formula financing payment may be made;

  P3

  is the amount of the provincial local government expenditures three fiscal years prior to the fiscal year for which the territorial formula financing payment may be made;

  P4

  is the amount of the provincial local government expenditures four fiscal years prior to the fiscal year for which the territorial formula financing payment may be made; and

  P5

  is the amount of the provincial local government expenditures five fiscal years prior to the fiscal year for which the territorial formula financing payment may be made.

• (2) For the purpose of subsection (1), the provincial local government expenditures for a fiscal year shall be calculated on a not seasonally adjusted basis and be based on the data from Statistics Canada’s publication entitled National Gross Domestic Product (GDP) by Income and by Expenditure Accounts that is available to the Minister at the time of the calculation referred to in section 4.3 of the Act. The expenditures shall be equal to the sum of

  • (a) the expenses of the provincial and territorial general government sector, as determined by the formula

    A - B - C - D + E

    where

    A

    is the gross outlay,

    B

    is the total of net capital transfers,

    C

    is the total of transfers to local governments,

    D

    is the total of capital consumption allowances, and

    E

    is the total investment in fixed capital, and

  • (b) the expenses of the local general government sector, as determined by the formula

    F - G - H - I + J

    where

    F

    is the gross outlay,

    G

    is the total of net capital transfers,

    H

    is the total of transfers to provincial and territorial governments,

    I

    is the total of capital consumption allowances, and

    J

    is the total investment in fixed capital.