Finances Nation 2009

Finances of the Nation 2009

A review of expenditures and revenues of the federal, provincial, and local governments of Canada

KARIN TREFF DEBORAH ORT Publishing History

Finances of the Nation, annual review of the expenditures and revenues of the federal, provincial, and local governments of Canada (1995 to 2009).

The National Finances, annual analysis of the revenues and expenditures of the government of Canada (1955-56 to 1988-89, 1990 to 1994).

Provincial and Municipal Finances, biennial review of the revenues and expenditures of the provincial and local governments of Canada (1971 to 1991).

Provincial Finances, biennial review of the revenues and expenditures of the provincial governments of Canada (1963 to 1969).

Tax Memo series. Periodic reviews of the revenues and expenditures of the local and provincial governments of Canada (pre-1963).

All publications listed above may be found in the Canadian Tax Foun dation’s library (contact the librarian, Judy Singh, at [email protected]), and many are available for sale at reduced prices (contact the Publications Distribution Department at [email protected]).

Issues of Finances of the Nation from 2002 to 2008 are also available online at www.ctf.ca.

Photocopying and Reprinting. Permission to photocopy any part of this publication for distribution or to reprint any part must be applied for in writing to Michael Gaughan, Permissions Editor, Canadian Tax Foundation, 595 Bay Street, Suite 1200, Toronto, Canada M5G 2N5 (Facsimile: (416) 599-9283; e-mail: [email protected]).

Disclaimer. The material contained in this publication is not intended to be advice on any particular matter. No subscriber or other reader should act on the basis of any matter contained in this publication without con- sidering appropriate professional advice. The publisher, and the authors and editors, expressly disclaim all and any liability to any person, whether a purchaser of this publication or not, in respect of anything and of the consequences of anything done or omitted to be done by any such person in reliance upon the contents of this publication.

The Canadian Tax Foundation’s annual series examining the tax and spending activities of Canada’s three levels of government continues with Finances of the Nation 2009. Finances of the Nation, which first appeared in 1995, amalgamated two previous Foundation publications, The National Finances and Provincial and Municipal Finances. The 2002 to 2005 editions were published both electronically and in hard copy. Since 2006, Finances of the Nation is published in hard copy only. The inclusive format of Finances of the Nation is designed to facilitate the reader’s understanding of the interrelationships between the three levels of government. We have used the most current information available at the time of writing. We wish to thank the many local, provincial, and federal government officials who provided the information that made the preparation of this publication possible. Thanks also to Diane Gula, who edited the manuscript for publication and prepared the index. As always, we welcome readers’ com- ments on this edition, as well as any suggestions for future editions.

Karin Treff and Deborah Ort December 2009 xxxxx Contents

Page Foreword ...... iii List of Tables ...... xv

1 The Structure of Canadian Government ...... 1:1 Organization of Canadian Governments ...... 1:1 Federal Government ...... 1:1 Provincial/Territorial Governments ...... 1:3 Local Governments...... 1:4 Newfoundland and Labrador ...... 1:5 Prince Edward Island...... 1:6 Nova Scotia ...... 1:6 New Brunswick ...... 1:7 Quebec...... 1:7 Ontario...... 1:8 Manitoba ...... 1:9 Saskatchewan...... 1:10 Alberta ...... 1:10 British Columbia ...... 1:11 Northwest Territories...... 1:12 Nunavut ...... 1:13 Yukon ...... 1:14

2 Summary of Budgets ...... 2:1 Federal Budgetary Position ...... 2:1 The January 27, 2009 Federal Budget ...... 2:1 Tax Changes...... 2:1 Provincial/Territorial Budgetary Positions ...... 2:6 Newfoundland and Labrador ...... 2:6 Tax Changes...... 2:6 Prince Edward Island ...... 2:7 Tax Changes...... 2:8 Nova Scotia...... 2:8 Tax Changes...... 2:9 New Brunswick...... 2:10 Tax Changes...... 2:10 Quebec...... 2:12 Tax Changes...... 2:12 Ontario...... 2:14 Tax Changes...... 2:15 Manitoba...... 2:18 Tax Changes...... 2:18 Saskatchewan ...... 2:20 Tax Changes...... 2:20 Alberta...... 2:21 Tax Changes...... 2:21 British Columbia ...... 2:22 Tax Changes...... 2:23 Northwest Territories ...... 2:25 Tax Changes...... 2:25 vi CONTENTS

Nunavut...... 2:25 Yukon ...... 2:26

3 Taxes on Individuals ...... 3:1 Personal Income Taxes...... 3:1 Number of Taxpayers and Taxes Paid ...... 3:1 Federal Personal Income Tax System...... 3:4 Types of Income...... 3:4 Tax Rates...... 3:6 Federal Tax Credits and Deductions...... 3:7 Alternative Minimum Tax...... 3:10 Indexation...... 3:10 Provincial/Territorial Personal Income Tax Systems...... 3:11 Newfoundland and Labrador ...... 3:11 Prince Edward Island...... 3:14 Nova Scotia ...... 3:14 New Brunswick ...... 3:16 Quebec...... 3:17 Ontario...... 3:19 Manitoba ...... 3:20 Saskatchewan...... 3:22 Alberta ...... 3:24 British Columbia ...... 3:24 Northwest Territories...... 3:26 Nunavut ...... 3:26 Yukon ...... 3:27 Combined Federal and Provincial Tax Rates...... 3:27 Succession Duties and Gift Taxes ...... 3:28 Health Insurance Premiums...... 3:28 Other Revenue ...... 3:29

4 Taxes on Business ...... 4:1 Corporate Income Taxes ...... 4:1 Federal Corporate Income Tax System...... 4:3 Tax Rates...... 4:3 Tax Credits...... 4:3 Provincial Corporate Income Tax Systems...... 4:3 Agreeing Provinces ...... 4:6 Quebec...... 4:10 Alberta ...... 4:11 Combined Federal and Provincial Rates...... 4:12 Non-Resident Tax ...... 4:12 Capital Taxes...... 4:12 Federal Capital Taxes...... 4:12 Provincial Capital Taxes...... 4:12 Payroll Taxes ...... 4:16

5 Sales and Other Taxes ...... 5:1 Sales Taxes...... 5:1 Federal Goods and Services Tax ...... 5:1 Zero-Rated Goods ...... 5:2 Exempt Goods ...... 5:3 GST Rebates...... 5:3 CONTENTS vii

Low-Income Tax Relief...... 5:4 Provincial/Territorial Retail Sales Taxes...... 5:4 Exempt Goods ...... 5:6 Services and Utilities ...... 5:8 Municipal Access to Sales Taxes...... 5:8 Federal and Provincial Sales Tax Harmonization...... 5:9 Excise Taxes and Duties ...... 5:9 Tobacco Taxes ...... 5:10 Federal ...... 5:10 Provincial/Territorial...... 5:12 Gasoline Taxes ...... 5:12 Federal ...... 5:12 Provincial/Territorial...... 5:12 Local Government...... 5:13 Alcohol Taxes ...... 5:14 Federal ...... 5:14 Provincial/Territorial...... 5:14 Other Taxes ...... 5:16 Federal...... 5:16 Tariffs...... 5:16 Provincial ...... 5:16 Fuels for Use Off Public Roads...... 5:16 Land Transfer Taxes ...... 5:16 Amusement Taxes ...... 5:17 Pari-Mutuel Betting Taxes...... 5:17 Local Government...... 5:17 Land Transfer Taxes ...... 5:17 Amusement Taxes ...... 5:17

6 Property and Related Taxes ...... 6:1 Real Property Taxes...... 6:1 Tax Base ...... 6:4 Assessment ...... 6:6 The Assessment Function ...... 6:10 Exemptions...... 6:10 Tax Rates...... 6:13 Property Tax Relief...... 6:16 Business Taxes...... 6:19 Special Assessment Levies ...... 6:20

7 Transfer Payments ...... 7:1 Federal Transfer Payments...... 7:1 General Purpose Cash Transfers...... 7:4 Equalization...... 7:4 Stabilization...... 7:7 Statutory Subsidies...... 7:7 Revenue Guarantee Payments...... 7:7 Reciprocal Taxation...... 7:8 Grants in Lieu of Property Taxes...... 7:8 Transfers to Territorial Governments ...... 7:9 Specific Purpose Cash Transfers...... 7:10 Canada Health Transfer and Canada Social Transfer ...... 7:10 Health Reform Transfer...... 7:11 viii CONTENTS

Wait Times Reduction Transfer...... 7:11 Opting-Out Arrangements...... 7:11 Other Specific Purpose Cash Transfers...... 7:12 Transfers to Local Governments ...... 7:12

8 Social Services ...... 8:1 Employment Insurance Program ...... 8:1 Employment Insurance Benefits...... 8:2 General Benefits...... 8:2 Fishers’ Benefits ...... 8:3 Special Benefits...... 8:3 Quebec Parental Insurance Plan...... 8:4 Rates ...... 8:4 Entrance Requirements...... 8:5 Income Security Programs...... 8:5 Old Age Pensions ...... 8:6 Eligibility ...... 8:6 Guaranteed Income Supplement ...... 8:7 Allowance...... 8:7 Child Care ...... 8:7 Child Tax Benefit ...... 8:8 National Child Benefit System...... 8:8 Social Welfare ...... 8:11 Canada Social Transfer...... 8:11 Welfare Reform...... 8:11 Federal ...... 8:12 Newfoundland and Labrador ...... 8:12 Prince Edward Island...... 8:12 Nova Scotia ...... 8:12 New Brunswick ...... 8:13 Quebec...... 8:13 Ontario...... 8:13 Manitoba ...... 8:14 Saskatchewan...... 8:15 Alberta ...... 8:15 British Columbia ...... 8:16 Northwest Territories...... 8:16 Nunavut ...... 8:16 Yukon ...... 8:17 Minimum Wage Rates...... 8:17 Labour Market Agreements for Persons with Disabilities ...... 8:17 Local Government Responsibilities ...... 8:17 Eligibility Requirements ...... 8:18 Other...... 8:18 Veterans Affairs ...... 8:19 Indians and Inuit...... 8:19 The Canada Pension Plan...... 8:20 Contributions...... 8:20 Benefits...... 8:21 Revenue and Expenditure...... 8:21

9 Education ...... 9:1 Provincial/Territorial Education Systems ...... 9:1 CONTENTS ix

Newfoundland and Labrador ...... 9:3 Prince Edward Island ...... 9:3 Nova Scotia...... 9:4 New Brunswick...... 9:5 Quebec...... 9:7 Ontario...... 9:8 Manitoba...... 9:10 Saskatchewan ...... 9:11 Alberta...... 9:13 British Columbia ...... 9:15 Northwest Territories ...... 9:17 Nunavut...... 9:18 Yukon ...... 9:18 Federal Programs...... 9:19 Assistance to Students...... 9:19 Canada Student Loans ...... 9:20 Canada Student Grants...... 9:21 Canada Education Savings Grant...... 9:22 The Canada Learning Bond...... 9:22 Education of Indians and Inuit ...... 9:22 Official Languages ...... 9:23 Social Sciences and Humanities Research Council ...... 9:23

10 Health ...... 10:1 Financing Health Care...... 10:2 Federal...... 10:2 Canada Health Transfer...... 10:2 Federal-Provincial/Territorial: 10-Year Plan on Health Care .... 10:4 Provincial/Territorial ...... 10:4 Ontario...... 10:4 British Columbia ...... 10:5 Provincial/Territorial Health-Care Systems...... 10:5 Newfoundland and Labrador ...... 10:6 Prince Edward Island ...... 10:6 Nova Scotia...... 10:7 New Brunswick...... 10:7 Quebec...... 10:8 Ontario...... 10:8 Manitoba...... 10:9 Saskatchewan ...... 10:10 Alberta...... 10:10 British Columbia ...... 10:10 Northwest Territories ...... 10:11 Nunavut...... 10:11 Yukon ...... 10:11 Federal Health Programs ...... 10:12 Indian and Northern Health Services ...... 10:12 Canadian Institutes of Health Research ...... 10:13 Canada Health Act...... 10:13 Hospital and Medical Care...... 10:14 Public and Community Health...... 10:15 Provincial ...... 10:15 Federal...... 10:15 x CONTENTS

Public Health ...... 10:15 Extended Care ...... 10:15

11 Transportation and Communications ...... 11:1 Provincial/Territorial Transportation Systems ...... 11:1 Newfoundland and Labrador ...... 11:1 Prince Edward Island ...... 11:3 Nova Scotia...... 11:4 New Brunswick...... 11:4 Quebec...... 11:5 Ontario...... 11:5 Manitoba...... 11:6 Saskatchewan ...... 11:7 Alberta...... 11:8 British Columbia ...... 11:9 Northwest Territories ...... 11:11 Nunavut...... 11:12 Yukon ...... 11:13 Federal Transportation Systems...... 11:13 Air...... 11:14 National Airports System...... 11:14 Water...... 11:15 National Ports System ...... 11:15 Ferry Services ...... 11:16 Pilotage Authorities ...... 11:16 Rail ...... 11:16 Roads...... 11:17 Federal Infrastructure Programs...... 11:17 Building Canada Program ...... 11:17 Infrastructure Stimulus Fund ...... 11:18 Communications...... 11:19

12 Protection and Defence ...... 12:1 Protection...... 12:1 Federal Protection of Persons and Property ...... 12:2 Public Safety and Emergency Preparedness ...... 12:2 Administration of Justice and the Court System...... 12:5 Market Regulation and Safety Standards...... 12:7 Provincial/Territorial-Local Protection Systems ...... 12:8 Newfoundland and Labrador ...... 12:9 Prince Edward Island...... 12:11 Nova Scotia ...... 12:11 New Brunswick ...... 12:12 Quebec...... 12:13 Ontario...... 12:14 Manitoba ...... 12:16 Saskatchewan...... 12:16 Alberta ...... 12:17 British Columbia ...... 12:19 Northwest Territories...... 12:20 Nunavut ...... 12:20 Yukon ...... 12:21 Defence...... 12:21 CONTENTS xi

International Policy Statement ...... 12:22 Protection of Canadian Sovereignty...... 12:23 Collective Defence ...... 12:23 Peacekeeping ...... 12:23 Assistance to Civil Authorities ...... 12:23 National Search and Rescue Program ...... 12:24 Department of National Defence ...... 12:24 Capital Expenditures ...... 12:24

13 Resource Conservation and Industrial Assistance ...... 13:1 Resource Conservation...... 13:1 Agriculture ...... 13:1 Growing Forward Policy ...... 13:1 Other Agriculture Programs...... 13:4 Canadian Dairy Commission...... 13:5 Energy and Mineral Resources...... 13:5 National Energy Board...... 13:6 Fisheries and Oceans ...... 13:6 Forestry...... 13:7 Forest Development Agreements...... 13:7 Environment ...... 13:8 Climate Change for Canada ...... 13:8 Environmental Protection Act...... 13:10 Water Distribution, Sewage Treatment, and Waste Disposal...... 13:11 Industrial Assistance ...... 13:12 Trade, Industrial and Regional Development, and Tourism ..... 13:13 Industry Canada ...... 13:13 Development Agencies...... 13:14 Atlantic Canada Opportunities Agency ...... 13:14 Enterprise Cape Breton Corporation...... 13:14 Western Economic Diversification ...... 13:14 Economic Development Agency: Quebec...... 13:14 Canadian International Development Agency...... 13:15 Other ...... 13:15 National Research Council ...... 13:15 Canada Small Business Financing Act ...... 13:15 Research Establishments ...... 13:15 National Research Council ...... 13:15 Natural Sciences and Engineering Research Council ...... 13:16 Canadian Space Agency ...... 13:16 Atomic Energy of Canada Limited ...... 13:16

14 Other Expenditures ...... 14:1 Foreign Affairs and International Assistance ...... 14:1 Canadian Interests Abroad ...... 14:1 United Nations...... 14:2 Foreign Aid...... 14:2 Canadian International Development Agency...... 14:2 International Development Research Centre ...... 14:3 International Joint Commission ...... 14:3 Citizenship and Immigration ...... 14:3 Department of Citizenship and Immigration ...... 14:5 xii CONTENTS

Immigration and Refugee Board of Canada ...... 14:5 Labour and Employment ...... 14:6 Employment Benefits and Support Measures ...... 14:6 Housing ...... 14:7 Canada Mortgage and Housing Corporation ...... 14:11 Mortgage Loan Insurance ...... 14:11 Social Housing Programs...... 14:12 Recreation and Culture...... 14:12 Canadian Heritage Program ...... 14:13 Canada Council for the Arts ...... 14:14 Telefilm Canada ...... 14:14 National Film Board ...... 14:14 Parks Canada...... 14:14

15 Public Debt ...... 15:1 Consolidated Public Debt...... 15:1 Federal Government Debt ...... 15:3 Public Accounts ...... 15:3 Assets and Liabilities ...... 15:3 Debt ...... 15:8 Debt Charges ...... 15:10 Cash Needs...... 15:10 Financial Management System...... 15:12 Debt Charges ...... 15:13 Provincial/Territorial Government Debt ...... 15:13 Public Accounts ...... 15:13 Newfoundland and Labrador ...... 15:14 Prince Edward Island...... 15:14 Nova Scotia ...... 15:15 New Brunswick ...... 15:15 Quebec...... 15:15 Ontario...... 15:16 Manitoba ...... 15:16 Saskatchewan...... 15:16 Alberta ...... 15:16 British Columbia ...... 15:17 Northwest Territories...... 15:17 Nunavut ...... 15:17 Yukon ...... 15:17 Financial Management System...... 15:17 Local Government Debt...... 15:18

16 Crown Corporations ...... 16:1 Federal Government Enterprises...... 16:1 Crown Corporations ...... 16:2 Agency Corporations...... 16:3 Proprietary Corporations...... 16:4 Exempt Corporations...... 16:4 Financial Implications...... 16:4 Employment in Crown Corporations...... 16:4 Departmental Corporations...... 16:7 Joint Enterprises ...... 16:7 Other Corporate Interests ...... 16:7 CONTENTS xiii

Provincial Government Enterprises...... 16:7 Newfoundland and Labrador ...... 16:8 Nova Scotia...... 16:8 New Brunswick...... 16:8 Quebec...... 16:9 Ontario...... 16:9 Manitoba...... 16:9 Saskatchewan ...... 16:10 Alberta...... 16:10 British Columbia ...... 16:10 Financial Summary...... 16:11 Local Government Enterprises...... 16:11

Appendix A: Financial Management System Perspective: All Governments ...... A:1 Consolidated Government Finances ...... A:1 Revenue Sources...... A:1 Expenditure Functions ...... A:3 Federal Nine-Year Review ...... A:3 Provincial/Territorial Nine-Year Review...... A:5 Local Government Nine-Year Review ...... A:8

Appendix B: Economic Perspective ...... B:1 The Scope of the National Accounts Budget ...... B:1 The Organization of the National Accounts Budget ...... B:1 The Nation as a Whole...... B:2 Provincial Comparisons...... B:6 International Comparisons...... B:6

Appendix C: Financial Results for Selected Municipalities ...... C:1 Montreal...... C:1 Toronto ...... C:2 Other Municipalities ...... C:2

Index ...... I:1 xxxxx List of Tables

A Note on the Tables In the tables presented throughout this book, the figures have been rounded to the nearest thousands or millions of dollars. As a result, some of the figures may not add up to the totals shown, but the differences will always be minor. The following symbols have been used in the tables. .. an amount too small to show in the table, — nil, na not applicable.

Table Page 1.1 Consolidated Federal, Provincial, Territorial, and Local Government Own-Source Revenue, Fiscal Years 2004-5 to 2008-9 ...... 1:2 1.2 Consolidated Federal, Provincial, Territorial, and Local Government Expenditure, Fiscal Years 2004-5 to 2008-9 .... 1:2 2.1 Summary of Federal Financial Position, 2007-8 to 2013-14 .... 2:1 2.2 Federal Revenues and Expenditures, 2007-8 to 2013-14 ...... 2:2 2.3 Financial Highlights—Newfoundland and Labrador ...... 2:7 2.4 Financial Highlights—Prince Edward Island...... 2:8 2.5 Financial Highlights—Nova Scotia ...... 2:9 2.6 Financial Highlights—New Brunswick...... 2:11 2.7 Financial Highlights—Quebec...... 2:12 2.8 Financial Highlights—Ontario...... 2:15 2.9 Financial Highlights—Manitoba ...... 2:18 2.10 Financial Highlights—Saskatchewan...... 2:21 2.11 Financial Highlights—Alberta...... 2:22 2.12 Financial Highlights—British Columbia ...... 2:23 2.13 Financial Highlights—Northwest Territories...... 2:25 2.14 Financial Highlights—Nunavut ...... 2:26 2.15 Financial Highlights—Yukon ...... 2:26 3.1 Number of Personal Income Tax Payers and Amount of Tax Collected by the Federal Government for Selected Taxation Years, 1934 to 2007 ...... 3:2 3.2 Taxpayers and Federal Tax Payable, by Income Class, 2007 Taxation Year ...... 3:2 3.3 Taxpayers and Personal Income Tax Payable, by Province and Territory, 2007 Taxation Year ...... 3:3 3.4 Federal Taxable Income Brackets, 2009 ...... 3:6 3.5 Combined Federal and Provincial Personal Income Marginal Tax Rates for Selected Years, 1949 to 2009 ...... 3:7 3.6 Federal Tax Credits, Selected Years, 1996 to 2009 ...... 3:8 3.7 Provincial and Territorial Personal Income Tax Brackets and Rates in Effect for 2009 ...... 3:12 3.8 Provincial/Territorial Personal Income Tax Credits, 2009 ..... 3:13 xvi LIST OF TABLES

Table Page 3.9 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial (Single Taxpayer—No Dependants) . . . 3:30 3.10 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial (Single Senior, Age 65—No Dependants)...... 3:31 3.11 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial (Single Taxpayer—One Dependant, Age 6)...... 3:32 3.12 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial (Married Taxpayer—Spouse and Two Dependent Children, Ages 6 and 12)...... 3:33 3.13 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial (Two-Income Family—Two Dependent Children, Ages 6 and 12)...... 3:34 3.14 Consolidated Other Revenue, All Levels of Government, Fiscal Years 2000-1 and 2008-9 ...... 3:35 3.15 Other Revenue, Federal Government, Fiscal Years 2000-1 and 2008-9 ...... 3:35 3.16 Other Revenue, Provincial and Territorial Governments, Fiscal Years 2000-1 and 2008-9 ...... 3:35 3.17 Other Revenue, Local Governments, Calendar Years 2000 and 2008 ...... 3:36 4.1 Federal Corporate Income Tax Rates, Effective July 1, Selected Years, 1987 to 2010 ...... 4:4 4.2 Provincial/Territorial Corporate Income Tax Rates on Small Businesses for 2009 ...... 4:5 4.3 Provincial/Territorial Corporate Income Tax Rates on Large Businesses for 2009 ...... 4:5 4.4 Structure of Federal and Provincial/Territorial Top Corporate Tax Rates for Selected Years, 1949 to 2009 ...... 4:13 4.5 Structure of Federal and Provincial/Territorial Corporate Tax Rates for Small Businesses, Selected Years, 1972 to 2009 .... 4:14 4.6 Combined (Federal and Provincial/Territorial) Corporate Income Tax Rates, 2009 ...... 4:15 4.7 Other Provincial Taxes Payable by Corporations, 2009 ...... 4:15 5.1 Gross and Net Collections of Goods and Services Tax for Fiscal Year 2007-8 ...... 5:2 5.2 Provincial and Territorial Government Consumption Tax Revenue, by Type of Tax, Fiscal Year 2008-9 ...... 5:5 5.3 Provincial and Territorial Government Revenue from Consumption Taxes, Fiscal Years 2004-5 to 2008-9 ...... 5:6 5.4 Federal Excise Tax and Duty Rates, Selected Years, 1976 to 2009 ...... 5:10 5.5 Federal Excise Duties, Selected Years, 1976 to 2009 ...... 5:11 5.6 Excise Tax and Excise Duty Revenue from Alcohol and Tobacco Products for Selected Fiscal Years Ending March 31, 1965 to 2008 ...... 5:11 5.7 Federal and Provincial/Territorial Cigarette Taxes, 2009 ...... 5:12 5.8 Provincial/Territorial Fuel Tax Rates, 2009 ...... 5:13 5.9 Provincial/Territorial Revenue from the Administration of Liquor Control, for the Fiscal Year Ending on March 31, 2008 ...... 5:15 LIST OF TABLES xvii

Table Page 6.1 Local Government Revenue and Percentage of Total Revenue from Property and Related Taxes, by Province and Territory, 2000 and 2008 ...... 6:2 6.2 Consolidated Provincial, Territorial, and Local Government Property and Related Tax Revenue, by Province and Territory, for Selected Fiscal Years, 2000-1 to 2008-9 ...... 6:2 6.3 Estimated Property Taxes for Selected Cities, 2009 ...... 6:3 7.1 Estimated Federal Payments to the Provinces, Territories, and Municipalities, 2009-10 ...... 7:2 7.2 Summary of Federal Contributions to the Provinces, Territories, and Municipalities, Selected Fiscal Years Ending on March 31, 2000 to 2010 ...... 7:2 7.3 Federal Transfers as a Percentage of Provincial/Territorial Revenue, Estimated Data for the Fiscal Year Ending on March 31, 2010 ...... 7:3 7.4 Transfers from the Federal and Provincial Governments to Local Governments, 2006 to 2008 ...... 7:13 8.1 Consolidated Provincial, Territorial, and Local Government Expenditures on Social Services, Fiscal Years 2004-5 to 2008-9 ...... 8:2 8.2 Employment Insurance Benefits, 2007 and 2008 ...... 8:3 8.3 Employee and Employer Annual Contributions to Employment Insurance and Maximum Annual Insurable Earnings, 1999 to 2009 ...... 8:4 8.4 Employment Insurance Account for Selected Fiscal Years Ending on March 31, 1942 to 2008 ...... 8:5 8.5 Maximum Monthly Pension Under Old Age Security Act, Selected Periods from Inception of Program to Present...... 8:6 8.6 Provincial and Territorial Annual Welfare Income Available, by Type of Household, 2007 ...... 8:11 8.7 Canada Pension Plan Monthly Contributions and Benefits for Selected Years from Inception of Program...... 8:21 9.1 Provincial/Territorial Expenditures on Education, by Province and Territory and Level of Education, Fiscal Year 2008-9 ...... 9:2 10.1 Provincial and Territorial Government Expenditure on Health, Fiscal Years 2004-5 to 2008-9 ...... 10:2 10.2 Consolidated Provincial, Territorial, and Local Government Expenditure on Health, Fiscal Years 2004-5 to 2008-9 ...... 10:3 10.3 Local Government Expenditure on Health, by Province and Territory, 2004 to 2008 ...... 10:3 11.1 Consolidated Provincial, Territorial, and Local Government Expenditures and Federal Expenditures on Transportation and Communications, Fiscal Years 2004-5 to 2008-9 ...... 11:2 11. 2 Provincial and Territorial Expenditure on Transportation and Communications, 2004-5 to 2008-9 ...... 11:2 11.3 Local Government Expenditures on Transportation and Communications, by Province and Territory, 2008 ...... 11:3 11.4 British Columbia Motor Vehicle Gasoline Taxes, 2009 ...... 11:10 11.5 Federal General Government Expenditures on Transportation, Fiscal Years 2004-5 to 2008-9 ...... 11:14 xviii LIST OF TABLES

Table Page 12.1 Federal Government Expenditure on Protection of Persons and Property, Fiscal Years 2004-5 to 2008-9 ...... 12:1 12.2 Provincial and Territorial Government Expenditure on Protection of Persons and Property, 2004-5 to 2008-9 ...... 12:9 12.3 Consolidated Provincial, Territorial, and Local Government Expenditure on Protection of Persons and Property, 2004-5 to 2008-9 ...... 12:9 12.4 Local Government Expenditure on Protection of Persons and Property, 2008 ...... 12:10 13.1 Federal Expenditure on Resource Conservation and Industrial Development and the Environment, 2004-5 to 2008-9 ...... 13:2 13.2 Consolidated Provincial, Territorial, and Local Government Expenditure on Resource Conservation and Industrial Development, 2004-5 to 2008-9 ...... 13:2 13.3 Local Government Expenditure on Resource Conservation and Industrial Development, 2005 to 2008 ...... 13:3 13.4 Federal and Provincial Government Expenditure on Agriculture, 2004-5 to 2008-9 ...... 13:4 13.5 Consolidated Provincial, Territorial, and Local Government Expenditure on the Environment, 2004-5 to 2008-9 ...... 13:9 13.6 Provincial and Territorial Expenditure on the Environment, by Province and Territory, 2004-5 to 2008-9 ...... 13:9 13.7 Local Government Expenditure on the Environment, by Province and Territory, 2008 ...... 13:10 14.1 Federal Expenditures on Other Functions, Fiscal Years 2004-5 to 2008-9 ...... 14:2 14.2 Provincial and Territorial Expenditures on Other Functions, Fiscal Year 2008-9 ...... 14:4 14.3 Local Government Expenditure on Housing, 2004 to 2008 ..... 14:7 14.4 Consolidated Provincial, Territorial, and Local Government Expenditure on Housing, Fiscal Years 2004-5 to 2008-9 ..... 14:8 14.5 Local Government Expenditure on Recreation and Culture, 2004 to 2008 ...... 14:13 14.6 Consolidated Provincial, Territorial, and Local Government Expenditure on Recreation and Culture, Fiscal Years 2004-5 to 2008-9 ...... 14:13 15.1 Federal, Provincial/Territorial, and Local Government Net Debt on an FMS Basis on March 31, 1987 to 2008 ...... 15:2 15.2 Consolidated General Government Balance Sheet on an FMS Basis on March 31, for Fiscal Years 2004 to 2007 ...... 15:3 15.3 Consolidated Provincial, Territorial, and Local General Govern- ment Balance Sheet on an FMS Basis on March 31, 2007 ..... 15:4 15.4 Consolidated Government Gross and Net Debt Charges on an FMS Basis, for Selected Fiscal Years 2005-6 to 2008-9 ...... 15:5 15.5 Summary of Assets and Liabilities of the Federal Government on March 31, 2006, 2007, and 2008 ...... 15:5 15.6 Summary of Contingent Liabilities of the Federal Government on March 31, 2006, 2007, and 2008 ...... 15:7 15.7 Liabilities of Enterprise Crown Corporations on March 31, 2008 ...... 15:8 15.8 Public Debt, Recorded Assets, and Net Debt on March 31, Selected Years, 1927 to 2008 ...... 15:9 LIST OF TABLES xix

Table Page 15.9 Interest and Other Debt Charges on Public Debt for Selected Fiscal Years, 1989-90 to 2007-8 ...... 15:11 15.10 Interest and Other Debt Charges as a Percentage of Economic and Fiscal Indicators for Selected Fiscal Years, 1949-50 to 2007-8 ...... 15:12 15.11 Net Public Debt Charges for Selected Fiscal Years, 1939-40 to 2009-10 ...... 15:13 15.12 Federal Government Balance Sheet on an FMS Basis on March 31, Fiscal Years 2005 to 2008 ...... 15:14 15.13 Federal Government Gross and Net Debt Charges on an FMS Basis, for Fiscal Years 2005-6 to 2008-9 ...... 15:14 15.14 Provincial/Territorial Debt on March 31, 2008 ...... 15:15 15.15 Consolidated Provincial, Territoral, and Local General Government Balance Sheet on March 31, Fiscal Years 2003-4 to 2006-7 ...... 15:19 15.16 Summary of Financial Assets and Liabilities of All Local Governments Combined on December 31, 2003 to 2006 ..... 15:19 15.17 Summary of Financial Assets and Liabilities of Local Governments on an FMS Basis on December 31, 2006 ...... 15:20 16.1 Loans to and Investments in Crown Corporations on March 31, 1998, 2007, and 2008 ...... 16:5 16.2 Return on Loans to and Investments in Enterprise Crown Corporations for Fiscal Years Ending on March 31, 1998, 2007, and 2008 ...... 16:5 16.3 Employment in and Federal Budgetary Funding for Crown Corporations...... 16:6 16.4 Provincial and Territorial Government Business Enterprises, Financial Statistics for Fiscal Year Ending Nearest to December 31, 2006 ...... 16:12 16.5 Local Government Business Enterprise Income and Expenses, by Industry, for Fiscal Year Ending Nearest to December 31, 2006 ...... 16:13 16.6 Local Government Business Enterprise Income and Expenses, by Province and Territory, for Fiscal Year Ending Nearest to December 31, 2006 ...... 16:14 A.1 Government Own-Source Revenue, All Levels, Fiscal Years Ending Nearest to March 31, 2001 and 2009 ...... A:2 A.2 Consolidated Government Revenue, All Levels, Fiscal Years Ending Nearest to March 31, 2001 to 2009 ...... A:4 A.3 Government Expenditure, All Levels, Fiscal Years Ending Nearest to March 31, 2001 and 2009 ...... A:5 A.4 Consolidated Government Expenditure, All Levels, Fiscal Years Ending Nearest to March 31, 2001 to 2009 ...... A:6 A.5 Summary of Federal Revenue and Expenditure on a Financial Management System Basis, Selected Fiscal Years, 2000-1 to 2008-9 ...... A:7 A.6 Summary of Provincial/Territorial Government Revenue and Expenditure on a Financial Management Basis, Fiscal Year 2000-1 ...... A:9 A.7 Summary of Provincial/Territorial Government Revenue and Expenditure on a Financial Management Basis, Fiscal Year 2008-9 ...... A:10 xx LIST OF TABLES

Table Page A.8 Summary of Local Government Revenue and Expenditure on a Financial Management Basis, 2000 ...... A:11 A.9 Summary of Local Government Revenue and Expenditure on a Financial Management Basis, 2008 ...... A:12 B.1 Revenue and Expenditure of All Levels of Government, Excluding Intergovernmental Grants, Calendar Year 2008 ...... B:2 B.2 Revenue and Expenditure of All Levels of Government, Excluding and Including Intergovernmental Grants, Calendar Year 2008 ...... B:3 B.3 Total Government Revenue Before and After Excluding Intergovernmental Grants from Revenue of Recipient Government, Selected Calendar Years, 1926 to 2008 ...... B:4 B.4 Tax Revenue of All Levels of Government, Selected Calendar Years, 1926 to 2008 ...... B:7 B.5 Total Government Expenditure Before and After Excluding Intergovernmental Grants from Revenue of Recipient Government, Selected Calendar Years, 1926 to 2008 ...... B:9 B.6 Surpluses or Deficits (–) Before and After Excluding Intergovernmental Grants, Selected Calendar Years, 1926 to 2008 ...... B:11 B.7 Revenue and Expenditure of All Levels of Government, Excluding Intergovernmental Grants, by Province, Calendar Year 2007 ...... B:13 B.8 Revenue and Expenditure of All Levels of Government as a Percentage of GDPP, by Province and Level of Government, Excluding Intergovernmental Grants, Calendar Year 2007 ...... B:14 B.9 Receipts, Outlays, and Financial Balances in G7 Countries, Selected Years, 1980 to 2008 ...... B:15 C.1 City of Montreal, 2007, Consolidated Revenue ...... C:2 C.2 City of Montreal, 2007, Consolidated Expenditure ...... C:2 C.3 City of Toronto, 2007, Consolidated Revenue ...... C:3 C.4 City of Toronto, 2007, Consolidated Expenditure ...... C:3 C.5 City of St. John's, 2007, Consolidated Revenue ...... C:4 C.6 City of St. John's, 2007, Consolidated Expenditure ...... C:5 C.7 Halifax Regional Municipality, Consolidated Revenue for Fiscal Year Ended March 31, 2007 ...... C:5 C.8 Halifax Regional Municipality, Consolidated Expenditure for Fiscal Year Ended March 31, 2007 ...... C:6 C.9 City of Saint John, 2007, Operating Fund Revenue ...... C:6 C.10 City of Saint John, 2007, General Fund Expenditure ...... C:6 C.11 Quebec City, 2007, General Fund Revenue ...... C:7 C.12 Quebec City, 2007, General Fund Expenditure ...... C:7 C.13 City of Winnipeg, 2007, Consolidated Revenue ...... C:7 C.14 City of Winnipeg, 2007, Consolidated Expenditure ...... C:8 C.15 City of Regina, 2007, Consolidated Revenue ...... C:8 C.16 City of Regina, 2007, Consolidated Expenditure ...... C:8 C.17 City of Calgary, 2007, Consolidated Revenue ...... C:9 C.18 City of Calgary, 2007, Consolidated Expenditure ...... C:9 C.19 City of Vancouver, 2007, Consolidated Revenue ...... C:10 LIST OF TABLES xxi

Table Page C.20 City of Vancouver, 2007, Consolidated Expenditure ...... C:10 C.21 Capital Regional District, 2007, General Revenue Fund and Consolidated Revenue ...... C:10 C.22 Capital Regional District, 2007, General Revenue Fund and Consolidated Expenditure...... C:11 C.23 City of Victoria, 2007, Consolidated Revenue ...... C:11 C.24 City of Victoria, 2007, Consolidated Expenditure ...... C:12 xxxxxxxxxxx 1 The Structure of Canadian Government

ORGANIZATION OF CANADIAN GOVERNMENTS

The myriad government services in Canada are provided by three levels of government: federal, provincial, and local. The federal government is a single, national government. The provincial level is made up of 10 provincial and three territorial governments. The local level of government includes municipalities and school boards, as well as special agencies, boards, and commissions. The powers and responsibilities of governments in Canada are circum- scribed both explicitly and implicitly by the Constitution Act, 1867 and have been refined and revised through judicial interpretation and constitutional amendment. Only the federal and provincial governments are recognized in the constitution; local governments are not. Section 91 of the Constitution Act, 1867 delineates the powers of the national Parliament; section 92, those of provincial legislatures. Sections 102 to 126 lay out the basic financial rela- tionships between the two levels of government. Local governments are said to be the creatures of the provinces because they have no innate powers and enjoy only those delegated to them by the province. The division of powers between provincial and local governments across Canada is therefore much more varied than the division of powers between the federal and provincial governments. Table 1.1 shows consolidated federal, provincial, territorial, and local government own-source revenue for fiscal years 2004-5 to 2008-9. Table 1.2 shows consolidated federal, provincial, territorial, and local government expenditure for the same period.

Federal Government The federal government is by far the largest single governmental organization in Canada. It directly governs Canada’s entire population, which is spread across an area of roughly 10 million square kilometres. Canada has a bicameral legislature composed of an elected House of Commons with 308 seats and an appointed Senate of 105 seats. The constitutional head of state is the queen, who is represented in Canada by the governor general. Federal costs relating to the governor general, Cabinet ministers, Privy Council, and members of the House of Commons and the Senate and their staffs are estimated at $664.9 million for 2009-10. 1:2 FINANCES OF THE NATION 2009

Table 1.1 Consolidateda Federal, Provincial, Territorial, and Local Government Own-Source Revenue, Fiscal Years 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Income taxes Personal income tax...... 155,136 167,276 179,869 193,525 189,222 Corporate income taxb ...... 46,928 50,966 58,131 67,642 50,277 Other...... 5,352 6,916 7,866 8,301 9,157 Consumption taxes Sales tax ...... 66,352 69,461 67,419 72,094 67,001 Alcoholic beverages and tobacco ...... 9,673 9,024 8,595 8,634 8,565 Gasoline and motive fuel...... 12,700 13,016 13,025 13,462 13,528 Other taxes ...... 18,018 18,917 20,489 21,129 21,807 Property and related taxes ...... 46,721 49,509 51,277 53,882 54,862 Health and drug insurance premiums ...... 3,206 3,258 3,268 3,457 3,390 Contributions to social security plans...... 31,995 32,768 34,280 34,448 35,404 Sales of goods and services ...... 41,275 43,376 45,310 50,113 53,625 Investment income...... 38,600 45,357 46,744 48,323 54,068 Other revenue from own sources .... 23,720 23,187 24,965 25,565 24,893 Total own-source revenue...... 499,676 533,031 561,238 600,575 585,799 a Does not include the Canada and Quebec Pension Plans. b Federal capital taxes included. Source: Statistics Canada, June 2009.

Table 1.2 Consolidateda Federal, Provincial, Territorial, and Local Government Expenditure, Fiscal Years 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars General government services ...... 18,792 20,074 20,857 21,505 22,822 Protection of persons and property ...... 41,096 43,299 46,396 50,689 50,790 Transportation and communications...... 21,172 24,838 26,280 29,966 32,197 Health ...... 94,497 99,531 107,497 114,245 121,577 Social services ...... 125,372 131,586 139,662 150,898 151,869 Education ...... 77,140 84,760 87,455 92,722 95,732 Resource conservation and industrial development ...... 18,652 19,760 21,078 21,360 19,975 Environment...... 11,903 13,158 14,420 15,516 16,933 Recreation and culture...... 13,476 14,268 15,008 15,809 16,306 Housing...... 3,880 4,527 4,942 5,544 6,120 Debt charges...... 47,686 46,969 47,566 47,383 45,384 Other ...... 13,699 13,899 14,372 15,285 14,889 Total expenditure ...... 487,365 516,669 545,533 580,922 594,594 a Does not include the Canada and Quebec Pension Plans. Source: Same as table 1.1. THE STRUCTURE OF CANADIAN GOVERNMENT 1:3

The prime minister, the head of the federal government, recommends to the governor general the appointment of ministers, Privy councillors, provincial lieutenant governors, speakers of the Senate, chief justices, senators, and deputy ministers in the public service. The Prime Minister’s Office and the Privy Council support the prime minister. Of the three levels of government, the federal government is the most autonomous and has the broadest powers in terms of taxation. It administers the personal and corporate income taxes, as well as the goods and services tax and excise taxes and duties. It also receives some mineral and resource revenue. Sources of federal revenue are discussed in chapters 3, 4, and 5. The federal government also has the greatest spending responsibilities. They are covered, in as much detail as possible, in the relevant chapters of this publication.

Provincial/Territorial Governments There are 13 governments at this level: 10 provincial and three territorial. The provinces range in size from Prince Edward Island with about 139,000 people spread over 5,680 square kilometres to Quebec with a population of over 7.6 million and 1.7 million square kilometres of land. Ontario, with the second largest land area, has the largest population—over 12 million people. The territories are distinguished from the provinces in that they have no constitutional standing and are under greater federal control. Territorial governments rely on the federal government to a much greater extent for their revenue. On April 1, 1999, two new territories came into being. The Northwest Territories was divided into the eastern territory, Nunavut (capital city Iqaluit), which encompasses about one-fifth of Canada’s total land mass, and the western territory, which retains the name Northwest Territories. Nunavut’s population of approximately 30,000 is 85 percent Inuit. The new territory is the result of the largest land claim agreement in Canadian history. The agreement between the federal government, the government of the Northwest Territories, and the Inuit provides the Inuit with title to 350,000 square kilometres of land in the eastern Arctic. It establishes the rules of ownership and control over land and resources and provides for payment of $1 billion by the federal government to the Inuit over a period of 14 years. All provincial legislatures are unicameral, consisting of a lieutenant governor and an elected assembly headed by the premier. In each province, the queen, as head of state, is represented by the lieutenant governor. In the territories, commissioners have similar roles and duties but report to the federal minister of Indian and northern affairs. The provinces derive revenue from the personal and corporate income taxes (see chapters 3 and 4) and property and related taxes (chapter 6). All provincial governments, except Alberta and the territories, levy retail sales taxes, outlined in chapter 5. 1:4 FINANCES OF THE NATION 2009

Under the Constitution Act, 1867, the provinces were given exclusive powers and responsibilities concerning such functions as education, health, and social services. Today’s reality is that the federal government shares considerable financial responsibility for these and other services. Provincial reliance on federal funds gives the federal government significant influence in most major policy areas and has acted as a source of uniformity in most basic social welfare functions.

Local Governments As noted above, local government is the most varied form of government in Canada. Unlike the other two levels, which are fairly uniform in structure, different types of government operate at the local level: municipal, school boards and various other boards, agencies, and commissions. The governments in cities, towns, villages, townships, counties, and improvement districts or special service areas can properly be considered municipal in that they are responsible for the usual functions of policing, roads, bylaw enforcement, tax collection, welfare and health in some instances (see chapters 8 and 10), sewers and water, parks, and garbage collection. Municipal governments are headed by elected representatives and serve under a mayor, reeve, chair, or warden. The executive consists of appointed officials responsible to the body of elected representatives as a whole or to a smaller executive committee, board of control, or similar subsection of the larger group. For the most part, school boards provide elementary and secondary education (see chapter 9). School authorities are generally independent from municipalities and are responsible to their own electorates for the standards, administration, and financing of education. In most cases, they do not collect taxes directly; instead they requisition funds from the municipalities that collect property taxes in their jurisdiction. The special boards, commissions, and agencies that are also considered part of local government are set up either to administer functions that are common to a number of separate municipalities or to provide special services usually considered outside the scope of ordinary city or town government. Because local governments vary so greatly in terms of form and function, it is almost impossible to paint a definitive picture of this level of government. Differences in the distribution of powers and functions of local governments across Canada make it difficult to compare financial data between provinces and over time. Most of the essential local services that were originally the responsibility of local communities can no longer be defined so precisely. Government action in response to increasing public demand for more government services and better standards of performance for existing ones has obscured the division of responsibility between governments, particularly at the local and provincial levels. As a result, financial responsibility for local services has become blurred by the need to get partial funding for many local services from provincial sources. Changes in the responsibility for performing all or part of a service have also contributed to the difficulty of clearly delineating the precise functions of local and provincial governments. THE STRUCTURE OF CANADIAN GOVERNMENT 1:5

This changing pattern of responsibility for the performance of a service is exemplified in the provision of health care and welfare. In some provinces, health units operate locally under provincial control and have almost entirely absorbed local responsibility for public health. In the welfare field, support for the aged in the form of old age pensions has evolved as a function of the federal government since 1927. The federal and provincial governments have gradually accepted greater responsibilities for other welfare services because public demand made it impossible for local authorities to provide an acceptable standard of service. Local governments are the least autonomous levels of government in Canada; they rely on provincial legislatures for their powers. Although this lack of autonomy is a weakness, it also provides local governments with their greatest strength. Provincial governments generally place fairly stringent balanced budget requirements on their local governments, set debt limits, and usually only allow borrowing on capital account. This means that, of the three levels of government, local government is usually considered the most financially prudent. Most provinces have municipal boards or commissions that are appointed by the provincial government to review certain aspects of the municipal governments’ actions, such as capital expenditure, public borrowing, community planning, and specified local bylaws. The following sections summarize local government structures in each province and territory.

Newfoundland and Labrador Newfoundland and Labrador has 465 incorporated municipal entities that encompass more than 90 percent of the province’s population but less than 1 percent of its land mass. The province has 283 municipalities consisting of three cities, 279 towns, and one regional council. There are also 182 local service districts. The cities of St. John’s, Corner Brook, and Mount Pearl are incorporated under their own respective city acts, while the towns, regional council, and local service districts are incorporated under the Municipalities Act, 1999. Unlike municipalities, which are empowered to provide a full range of municipal services and to impose various forms of municipal taxation, local service districts have no taxing authority and are limited to providing a maximum of five basic municipal services for which they can impose user fees. The province introduced a debt relief program in 1997. Since its inception, 185 municipalities have reduced and/or restructured their debt at a cost of approximately $54.2 million. Of the 185 municipalities, 150 were assisted through the debt relief program; the remaining 35 achieved their results on their own initiative. The latter were municipalities that did not qualify for debt assistance but instead took advantage of the program to restructure their debt and lower their interest rates. In excess of $125 million of government guaranteed debt has been refinanced in this manner. This initiative has resulted in considerable savings in the annual debt-servicing costs of municipalities. 1:6 FINANCES OF THE NATION 2009

The 2009 Newfoundland and Labrador budget announced that the province would provide over $103 million for municipal infrastructure projects in 2009-10.

Prince Edward Island Prince Edward Island has 75 incorporated municipalities, consisting of two cities, seven towns, and 66 communities, within which about 70 percent of the province’s population resides. Seventy-one municipalities are administered under the provisions of the Municipalities Act. The city of Charlotte- town and the towns of Stratford and Cornwall are administered under the provisions of the Charlottetown Area Municipalities Act, and the city of Summerside is administered under the provisions of the City of Summerside Act. Financial assistance is directed to municipalities through two programs: the municipal support grant and the comprehensive urban services agreement (CUSA). These programs assist municipalities to provide affordable local services. CUSA assists only the cities of Charlottetown and Summerside and the towns of Cornwall and Stratford.

The municipal support grant is directed toward a fair and affordable method of assisting municipalities that do not have a sufficient tax base to support local services. Three components make up the program: street maintenance, policing, and equalization. CUSA uses a tax-crediting system to deliver service.

Nova Scotia Nova Scotia is geographically divided into 18 counties. Within these counties are 55 municipal units, which include 21 rural municipalities, 31 incorporated towns, and three regional municipalities (the Cape Breton Regional Municipality, Halifax Regional Municipality, and the Region of Queens Municipality). Except in the case of joint expenditures, towns situated within the boundaries of the rural municipalities are politically and administra- tively independent. An elected council governs each of the 55 municipal units. A number of independent or semi-independent boards and commissions provide various municipal services throughout the rural municipalities. The Nova Scotia Utility and Review Board under the Municipal Govern- ment Act makes decisions on municipal incorporation after public consultation. All Nova Scotia municipalities must finance their capital requirements through the Nova Scotia Municipal Finance Corporation if the repayment term is 10 years or greater. For repayment terms of less than 10 years, municipalities may finance capital requirements through the Nova Scotia Municipal Finance Corporation or a commercial bank. School boards, hospitals, and district health authorities may finance their capital requirements through the Nova Scotia Municipal Finance Corporation. THE STRUCTURE OF CANADIAN GOVERNMENT 1:7

New Brunswick Under the Municipalities Act, three types of municipalities—cities, towns, and villages—can be incorporated, and unincorporated local service districts can be established. The act also allows for the establishment of rural communities (usually made up of a number of local service districts), which have authority to make local planning decisions for specific areas. There are 102 incorporated municipalities in New Brunswick: eight cities, 27 towns, and 66 villages. There are also 268 unincorporated local service districts and three rural communities. Local service districts or rural communities may be established by the lieutenant governor in council on the recommendation of the minister of local government. No administrative county governments exist in the province. Legislative amendments to the Municipalities Act in 2005 enhanced the rural community model of local government and provided more authority for rural communities to make local planning decisions and provide other local services, such as fire protection, street lighting, and recreation facilities. New Brunswick gives financial support to local governments through unconditional grants that help ensure adequate resources to provide local services, such as transportation and recreational and cultural services, at reasonable levels of taxation. In late 2004, the province announced a four- year funding mechanism to provide increased funding for all municipalities. Initially, increased funding was available only to the municipalities with below-average tax bases per capita. In the final two years, all municipalities received increased funding.

Quebec Quebec’s municipal system has undergone substantial change over the past few years, but provincial legislation continues to recognize two levels of municipal organization: local and regional. On January 1, 2006, the province was organized into 17 administrative regions, 103 regional county municipalities (RCMs) and equivalent territories, and 1,294 municipalities. Of this total, 200 towns fall under the jurisdiction of the Cities and Towns Act. Nine have populations over 100,000 and account for 52 percent of Quebec’s total population. The Municipal Code of Quebec governs the other local municipalities, variously designated as township, united township, parish, municipality, and village. The province also has 97 unorganized territories and 80 Amerindian territories. The regional level of municipal territorial organization includes the Montreal and Quebec City metropolitan communities, the RCMs, and the Kativik regional government. The metropolitan communities and RCMs are made up of local municipalities. RCMs may also include unorganized territories. The Kativik regional government administers the northern villages, the Naskapi village, and one unorganized territory. The Montreal and Quebec City metropolitan communities are responsible for land-use planning; economic development; international economic 1:8 FINANCES OF THE NATION 2009 development; artistic and cultural development; public transit; waste management planning; establishing a tax-base-sharing program; and determining and financing regional facilities, infrastructures, activities, and services. RCMs also meet regional needs, including land-use planning and the pooling of services. They also have some responsibility for economic development, public security, and the environment. The Kativik regional government is in charge of local administration, police, transport, communications, and labour-force training and use and may also set minimum standards for house and building construction. As a result of municipal reorganization, some local municipalities no longer belong to either a metropolitan community or a regional county municipality. These municipalities do, however, wield some of the same powers as RCMs, as do some cities situated within one of the metropolitan communities. Under municipal reform, nine cities were divided into bor- oughs that have consultative and decision-making powers, are responsible for delivering certain neighbourhood services, and are represented by an elected borough council.

Ontario Ontario has three basic municipal structures: upper-tier municipalities (regions, counties, and one district municipality), lower-tier municipalities (cities, towns, villages, and townships), and single-tier municipalities. Single- tier municipalities may be cities or towns that do not form part of their surrounding counties for municipal purposes, or they may be larger cities that have been restructured to cover the entire area of a former regional municipality or county. Since 1996, the province’s municipal structure has undergone considerable change. The number of regional municipalities has changed considerably. The number of regional municipalities was reduced from 13 to 6 as a result of restructuring that created the single-tier cities of Toronto, Greater Sudbury, Hamilton, and Ottawa and the single-tier counties of Haldimand, Norfolk, Brant, and Chatham-Kent. The new municipalities and the remaining 6 regions represent more than 65 percent of Ontario’s population. Significant consolidation also occurred outside the major cities with the amalgamation of many lower-tier municipalities within existing counties. In some cases, this resulted in the consolidation of entire counties into new single-tier municipalities. Overall, the number of municipalities in Ontario was reduced by more than 40 percent between 1996 and 2004, from 815 to 444 (at January 2009). Despite widespread consolidations into larger municipal units, about half of Ontario’s municipalities still have populations of less than 5,000, and much of the area of northern Ontario remains sparsely settled with no municipal organization. On June 12, 2006, The Stronger City of Toronto for a Stronger Ontario Act became law. The legislation gives the city broad new powers to pass bylaws on a wide range of matters, including authority to raise new taxes, establish municipal corporations, enter into agreements with the federal government, and manage its financial affairs. THE STRUCTURE OF CANADIAN GOVERNMENT 1:9

In the northern part of the province, district social services administration boards provide health and social services to municipalities and areas without municipal organization. Municipalities are responsible for providing other services. In southern Ontario, 37 specific upper-tier municipalities and cities have been designated to provide a range of social services and housing. The current Municipal Act came into effect on January 1, 2003 and gives municipalities the flexibility to deal with local circumstances and to react to local economic, environmental, and social changes. The act gives municipalities broad authority in 10 spheres of jurisdiction that generally encompass matters of local interest. The spheres of jurisdiction are public utilities; waste management; public highways; transportation systems; culture, parks, heritage, and recreation; drainage and flood control; parking; economic development services; structures, including fences and signs; and animals. Although municipalities have wide legislative and organizational authority, they remain subject to some specific statutory and regulatory requirements, particularly in the areas of finance and taxation. In 2004, Ontario created the Ministry of Public Infrastructure Renewal. The Ontario Strategic Infrastructure Financing Authority was created to support the province’s 10-year infrastructure plan. Funding for the authority will come from the sale of infrastructural renewal bonds.

Manitoba Under the Municipal Act, two types of municipalities may be formed in Manitoba: rural and urban. Urban municipalities include incorporated villages, towns, and cities (except Winnipeg, which has its own charter). Some rural municipalities contain local urban districts which, although not politically independent, develop service plans for the urbanized areas they represent. Including Winnipeg, there are currently 116 rural municipalities (with 68 local urban districts), 20 villages, 52 towns, nine cities, and two local government districts. The part of northern Manitoba that is not municipally organized falls under the jurisdiction of the Northern Affairs Act. The act provides for the incorporation of community councils. There are 50 northern affairs communities (47 unincorporated and three incorporated). Manitoba municipalities may also work together on a regional basis to address areas of common concern. Planning districts, for example, enable municipalities to work across boundaries to develop district development plans that guide municipal zoning bylaws and local land-use decisions. Legislation that came into effect in 2006 enables the development of a regional partnership among the 16 municipalities, including Winnipeg, in the capital region. The regional partnership facilitates cooperation on issues such as land use, planning, environmental protection, infrastructure development, and water quality and supply. Conservation districts enable municipalities to develop integrated resource management plans that guide locally delivered conservation programs. Manitoba has 18 conservation districts that contain 60 percent of the province’s agricultural land. 1:10 FINANCES OF THE NATION 2009

Manitoba provides annual funding to all municipalities. Municipalities are provided with a share of provincial fuel tax and income tax revenues to support priority services such as public safety, roads, and transit. Support is equal to 2 cents per litre of gasoline tax, 1 cent per litre of diesel fuel tax, and 4.15 percent of personal and corporate income taxes estimated for the year. Manitoba also provides municipalities with a 10 percent share of net video lottery terminal revenues and various other program-specific payments. The City of Winnipeg also receives a 10 percent share of casino revenues generated in Winnipeg in support of public safety initiatives, including additional police officers.

Saskatchewan Saskatchewan has three basic municipal structures: northern, rural, and urban. The Northern Municipalities Act established municipal government in the northern Saskatchewan administration district (NSAD). The NSAD is a geographically defined area in northern Saskatchewan of more than 250,000 square kilometres, or 44 percent of the province’s area. Under the act, two towns, 11 villages, and 12 hamlets are incorporated as local governments. In addition, there are 10 northern settlements and 14 recreational subdivisions designated as unorganized local communities within the NSAD. These areas, along with 8,000 northern dispositions, are under the administration of the Ministry of Municipal Affairs. The province provides northern revenue- sharing grants, as well as grants for capital works to a maximum of 90 percent of the cost of the project. In addition, communities may receive grants for upgrading water and sewer systems in an amount equal to the greater of the local cost less two mills on the current year’s assessment and 85 percent of the total cost of the project. Communities without sewer and water facilities may have facilities installed and be funded up to 100 percent. Of Saskatchewan’s 789 municipalities, 468 are considered urban and include 13 cities, 147 towns, 268 villages, and 40 resort villages. In southern Saskatchewan, there are 296 rural municipalities, which include 172 unincorporated organized hamlets. In northern Saskatchewan, there are 25 incorporated municipalities, which include two towns, 11 villages, and 12 hamlets. The cities are administered under the provisions of The Cities Act; all other municipalities are administered under The Municipalities Act.

Alberta The Municipal Government Act provides for urban (cities, towns, and villages) and rural (municipal districts and special areas) municipalities, as well as specialized municipalities, summer villages, and improvement districts. There are 16 cities, 111 towns, 100 villages, 64 municipal districts, three special areas, 51 summer villages, seven improvement districts, and four specialized municipalities. A municipal district is a government form in rural areas of the province. It includes farmlands as well as unincorporated communities such as hamlets and rural residential subdivisions. A municipal district may be formed by the lieutenant governor in council under an order that describes the boundaries, THE STRUCTURE OF CANADIAN GOVERNMENT 1:11 states the number of councillors that make up the council, and establishes the wards and their boundaries. The province is responsible for all local government functions in improvement districts, including the levy and collection of taxes. Residents of an improvement district elect representatives who are subsequently appointed by the province to an advisory council, which assists in the administration of each district. Six of the seven improvement districts are located in national parks. On the eastern boundary of the province, three areas are designated as special areas 2, 3, and 4. They were created in the 1930s from former municipal and improvement districts because of severe drought conditions. An incorporated board under the overall jurisdiction of the Ministry of Municipal Affairs manages these special areas. The minister of municipal affairs has the discretion to form a specialized municipality where the minister is satisfied that the existing municipal organization does not meet residents’ needs or for any other reason that the minister may consider appropriate. A town may gain city status if it has a population of 10,000 or more. A change in status also requires a request from the municipal council or a petition from a majority of the municipal electors. A village may be formed from an area in which the majority of buildings are on parcels of land smaller than 1,850 square metres and that has a population of 300 or more. A village may become a town if there is a population of 1,000 or more. Under the municipal sponsorship program, municipalities (including summer villages, subject to special conditions) with populations up to 20,000 are eligible to apply for a conditional grant for projects that improve municipal administration, services, service delivery, or intermunicipal cooperation. Alberta’s municipal sustainability initiative was created to provide municipalities with long-term funding to assist them in meeting growth- related challenges and enhancing their long-term sustainability. The program is available for the 10-year period from 2007 to 2017. In 2009-10, municipalities will receive a total of $600 million, rising to $1.4 billion annually thereafter. Funding provided under the initiative is in addition to other provincial grant funding to municipalities. Under the Municipal Government Act, no new summer villages may be formed. The legislation does not affect the status of any existing summer village, but does continue to govern summer village activities. Alberta is the only province in Canada that contains incorporated urban municipalities, the town of Banff and the specialized municipality of Jasper, within the boundaries of national parks. Alberta also contains eight Metis settlements that are undergoing the transition to local government.

British Columbia About 10.5 percent of British Columbia’s total area is incorporated municipally into cities, districts, towns, and villages. Currently, 49 cities, 48 1:12 FINANCES OF THE NATION 2009 districts, 15 towns, 42 villages, three townships, one island municipality, one resort municipality, one regional municipality, and the Sechelt Indian Gov- ernment District embrace close to 88 percent of the province’s population. There are 27 incorporated regional districts. Finally, there are 231 improvement districts. Regional districts are federations of municipalities and rural electoral areas. Cabinet, on the recommendation of the minister of community development, may incorporate regional districts. Currently, the 27 regional districts have three roles. 1) They act as a regional government and service provider for the region as a whole. 2) They provide governance, planning, and services to the unincorporated areas of the province. 3) They provide a political and administrative framework for joint service provision between municipalities or between municipalities and electoral areas. Regional districts are governed by boards composed of directors who represent unincorporated areas and appointed municipal council members who represent their constituent incorporated municipalities. Improvement districts are incorporated under the Local Government Act, mainly in the unincorporated areas of the province. These districts provide basic local services such as fire protection and water. Other services include dyking, street lighting, drainage, garbage and sewerage disposal, recreation, community halls, cemeteries, and mosquito control. The typical improvement district provides one or two such services. School districts incorporated under the BC School Act are described in chapter 9. The Local Government Act (2000) reformed the legislative framework for local government in British Columbia and, as a result, the distinctions between municipal classes were reduced. The powers of municipalities and regional districts were harmonized, although the regions continue to be unique because of their distinctive structure. The Community Charter gives municipal councils greater autonomy and authority, enhances accountability of councils to citizens, and establishes principles for provincial-local government relations. Specifically, the charter stipulates that provincial costs may not be offloaded to municipalities, mandates consultation in key areas, and prohibits forced amalgamation.

Northwest Territories There are 23 incorporated municipal corporations (one city, four towns, one village, three charter communities, four Tlicho community governments, and 10 hamlets), two settlement corporations, and eight unincorporated communities in the Northwest Territories. Settlement corporations are similar to municipal corporations, but they cannot make bylaws or own real property and are subject to other limitations as outlined in the Settlements Act. The THE STRUCTURE OF CANADIAN GOVERNMENT 1:13 mandates of charter communities are limited to the functions set out in their charters in accordance with the Charter Communities Act. All municipal corporations, settlements, and unincorporated communities receive grants from the territorial government to fund services for their residents. The grants are determined by a formula-based approach that determines each community’s proportionate share of the overall funding available. The Municipal Statutes Replacement Act (2004) brought the Cities, Towns and Villages Act, the Hamlets Act, and the Charter Communities Act in line with municipal legislation across Canada. Under the legislation, community governments have broader bylaw-making powers, less reliance on territorial government approval, and the authority to borrow money for infrastructure development. In 2009, the Canada-Northwest Territories gas tax fund was extended from 2010 to 2014. Under the program, Northwest Territories communities will receive $97.5 million between 2005 and 2014 for infrastructure projects such as water, wastewater, and solid waste improvements. The gas tax fund will become permanent in 2014. Under the Tlicho Land Claims and Self Government Agreement, four Northwest Territories communities became Tlicho community governments with expanded authorities and new governance structures under the Tlicho Community Government Act.

Nunavut Nunavut Territory was established on April 1, 1999 under the Nunavut Land Claims Agreement. The Legislative Assembly has 19 elected members and is a consensus-style government—that is, members of the Legislative Assembly operate on an individual, rather than a party, basis. There are 28 incorporated communities, each with an elected mayor and council. Iqaluit, the territorial capital, is a tax-based community. All other communities are currently non-tax-based and draw a large part of their funding directly from the territorial government. Funding to non-tax-based communities is delivered through the municipal funding program. The city of Iqaluit receives an equalization grant. The territorial government and the Nunavut Association of Municipalities have recently formed a partnership to plan and implement community infrastructure projects, drawing on territorial and federal funding for municipal infrastructure. Nunavut Territory is composed of three distinct regions—Qikiqtaaluk (Baffin), Kivalliq (Keewatin), and Kitikmeot—that span three time zones. The territory’s population of around 29,000 is one of the fastest growing in Canada. In order to share the economic benefits throughout the territory, the Nunavut government is decentralized, with government departments and 1:14 FINANCES OF THE NATION 2009 agencies set up in different communities throughout the territory. A number of departments have regional offices.

Yukon The Municipal Act (1999) introduced new options for local government and reorganized existing local government. Incorporated municipalities include cities and towns. A town may choose the designation of “village,” but this distinction has no effect on its powers or legal standing as a town. Local advisory areas include former hamlets and other advisory councils. These bodies are advisory only: they have no financial, service-delivery, or bylaw- making authority. Rural government structures are a new organizational option for communities that wish to incorporate and gradually assume municipal responsibilities as they move toward full municipal status. Local governments may enter into regional structures for the joint administration of a specific service. Yukon has one city, seven towns, and six local advisory areas. Effective April 1, 2003, the territory assumed control and management of Crown land. At this time, there are 11 self-governing First Nations in the territory. Ultimately, there will be 14 First Nations governments that will have the same powers over their land and citizens as does the territorial government. 2 Summary of Budgets

This chapter examines the current budgetary position of the federal, provincial, and territorial governments as presented in their 2009-10 budgets. The financial operations of individual municipalities are presented in appendix C. Although efforts have been made to put the budget figures on a comparable accounting basis, it should be noted that the budget figures are best used to examine the finances of individual governments within the context of their own organizations and systems of accounting. Appendix A contains the best available analyses from Statistics Canada of federal, provincial/territorial, and local finances on a fully comparable basis.

FEDERAL BUDGETARY POSITION The January 27, 2009 Federal Budget Minister of Finance Jim Flaherty brought down the federal government’s 2009-10 budget on January 27, 2009. The federal government’s revenue and expenditure picture for the fiscal year ended March 31, 2009, and its pro- jections for upcoming years are summarized in tables 2.1 and 2.2.

Tax Changes In the budget, the federal government moved to lower the tax burden on individual Canadians through both increases in personal income tax brackets

Table 2.1 Summary of Federal Financial Position, 2007-8 to 2013-14 Actual Projection 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 billions of dollars Budgetary revenues . . . 242.4 236.4 224.9 239.9 259.4 276.4 294.3 Program expenses..... 199.5 206.8 229.1 236.5 235.1 244.5 254.1 Public debt charges.... 33.3 30.7 29.5 33.3 37.2 39.2 39.6 Total expenses a ...... 232.8 237.4 258.6 269.7 272.3 283.7 293.7 Budgetary balance .... 9.6 !1.1 !33.7 !29.8 !13.0 !7.3 0.7 Federal debt...... 457.6 458.7 492.4 522.2 535.2 542.4 541.8 as a percentage of gross domestic product Budgetary revenues . . . 15.8 14.7 14.4 14.7 15.0 15.0 15.2 Program expenses..... 13.0 12.9 14.7 14.5 13.6 13.3 13.1 Public debt charges.... 2.2 1.9 1.9 2.0 2.1 2.1 2.0 Total expenses ...... 15.2 14.8 16.6 16.6 15.7 15.4 15.2 Federal debt...... 29.8 28.6 31.6 32.1 30.9 29.5 28.0 a Totals may not add due to rounding. Source: Canada, Department of Finance, 2009 Budget, Canada’s Economic Action Plan, Fiscal Outlook, January 27, 2009. 2:2 FINANCES OF THE NATION 2009 millions of dollars and Expenditures, 2007-8 to 2013-14 Actual Projection 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 113,063 117,085 110,275 117,865 125,840 136,075 145,950 159,384 154,810 141,540 154,440 167,480 178,880 192,470 203,591 195,690242,420 181,650 195,780 236,350 211,160 224,905 224,635 239,925 240,305 259,385 276,430 294,310 (Table 2.2 is concluded on the next page.) next on the concluded is 2.2 (Table Table 2.2 Federal Revenues ...... 44,207 40,880 40,115 41,340 43,680 45,755 47,835 a ...... 29,920 26,360 25,785 27,315 29,465 31,310 33,005 ...... a a ...... 58,147 60,870 66,350 68,075 67,960 70,270 72,565 a esnlicm a ...... tax ...... tax income income 40,628 tax...... Personal income Corporate 31,750 5,693 26,385Other 30,770Total income 35,385 tax 5,975 36,245 39,475 4,875 5,805 6,255 6,560 7,045 Goods and services tax Goods and services Customs import duties...... 10,384 import taxes/duties...... 3,903 10,340 excise Customs 10,175 4,185Other 9,655 4,150Total excise taxes/duties 9,710 4,365 9,775 4,505 9,865 4,670 4,970 Employment insurance benefits...... 14,298 benefits...... insurance 31,955 15,585 18,920 benefits Elderly 18,960 11,894 33,350Employment 16,740 35,160 16,785Children’s 36,595 11,935 16,945 38,420 12,270Total 40,525 12,520 42,630 12,800 12,960 12,990 Revenues Income tax Total tax revenues tax Total Excise taxes/duties mlyetisrnepeimrvne ...... revenues 16,558 premium 16,620 16,795 insurance 17,325 18,350 19,695 revenues...... Employment 22,271 20,370 Other 24,040 revenues budgetary Total 26,460 26,820Expenditures 29,875Major transfers to persons 32,095 33,630 SUMMARY OF BUDGETS 2:3

!3,940

!3,680

!3,425

!3,200 millions of dollars

!3,080 112,670 116,305 112,920 117,365 121,790

!3,155

!2,720 Actual Projection 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 199,498 206,760 229,085 236,490 235,125 244,510 254,060 Table 2.2 Concluded ...... 31,346 33,325 35,100 36,855 38,715 40,680 42,750 ...... 778 1,000 2,000 2,000 2,000 2,000 2,000 ...... 46,152 46,280 50,065 52,110 54,245 56,875 59,705 ...... a a Totals may not add due to rounding. add due to may not Totals Federal transfers in support of health and other programs and other health of support in transfers Federal Alternative payments for standing programs...... standing for 14,603 payments arrangements...... 15,110Fiscal 16,045Alternative 16,455 16,955 17,875 18,895 Source: Same as table 2.1. as table Same Source: a Canada's cities and communities ...... Other Total major transfers 2,145 Major transfers to other levels of government of levels other to transfers Major Direct program expenses...... 95,199 program 99,610 Direct expenses program Total 2:4 FINANCES OF THE NATION 2009 and in the amount used to calculate several personal, federal non-refundable tax credits. The following changes are effective from January 1, 2009: • the basic personal amount, the spousal and common-law partner amount, and the eligible dependant amount increased to $10,320 from $9,600 in 2008; • the upper limit of the first personal income tax bracket (15 percent income tax rate) increased to $40,726 in 2009 from $37,885 in 2008; and • the upper limit of the second personal income tax bracket (22 percent income tax rate) increased to $81,452 in 2009 from $75,769 in 2008. As well, the amount used to calculate the federal non-refundable age credit increased, effective January 1, 2009, from $5,408 to $6,408. The income limit at which the age credit begins to be phased out remains at $32,312, and the income level at which the credit is fully phased out increases to $75,032. As a consequence of the change to federal personal income tax brackets, the income level at which the phase-out of the federal Canada child tax benefit begins was increased to $40,726. The income level at which the phase-out of the national child benefit supplement begins was also increased, to $1,894, meaning that the supplement is fully phased out at an income level of $40,726 for most families. Both changes are effective for the 2009-10 benefit year, which runs from July 1, 2009 to June 30, 2010. Two new personal tax credits and a change to an existing program will provide some stimulus to the construction and real estate industries. The new home renovation tax credit will provide individuals with a 15 percent non- refundable tax credit for eligible expenditures of more than $1,000 and less than $10,000. Eligible expenditures, which must be made between January 27, 2009 and February 1, 2010 and claimed on the individual’s 2009 tax return, include renovations or alterations made to a principal residence that are of an enduring nature. Routine repairs and maintenance are not eligible, nor are expenditures for appliances and audio-visual electronics. Financing costs associated with the renovation also may not be claimed. The $10,000 limit is calculated on a per-family basis, and eligible renovations can be made to any dwelling that is a principal residence of a family member at any time during the eligibility period. First-time homebuyers who purchase a home after January 27, 2009 may claim a non-refundable tax credit of $5,000, to be known as the first-time home buyers’ tax credit. For purposes of the new credit, a homebuyer will qualify as a first-time homebuyer if neither that person nor his or her spouse has owned or lived in another home during the year of the purchase or any of the four previous calendar years. As well, the credit may be split between spouses in some circumstances. More liberal rules apply to taxpayers who are eligible to claim the federal disability tax credit, because such taxpayers may claim the credit if, after January 27, 2009, they acquire a home in order to enable them to live in a more accessible dwelling. Finally, the limit on permitted withdrawals from a registered retirement savings program (RRSP) under the federal home buyers’ plan is increased from $20,000 to $25,000. The change in the withdrawal limit is effective for 2009 and subsequent years, for withdrawals made after January 27, 2009. SUMMARY OF BUDGETS 2:5

The federal mineral exploration tax credit provides individuals who invest in flowthrough shares with a credit equal to 15 percent of specified mineral exploration expenses incurred in Canada and renounced to flowthrough share investors. The credit had been scheduled to expire on March 31, 2009, but has instead been extended to apply to flowthrough share agreements entered into on or before March 31, 2010. The usual “lookback” rule will permit funds raised with the credit during the first three months of 2010 to be used for eligible exploration up to the end of 2011. A technical change will be made to the rules governing losses incurred by an RRSP or a registered retirement income fund (RRIF) after the death of the planholder. On the death of a plan annuitant, the amount held in an RRSP or a RRIF at the time of death is generally included in the planholder’s income for the year of death. Where there is an increase in the value of plan assets after the date of the planholder’s death, such increase is required to be included in the income of the planholder’s beneficiaries. However, there is no corollary rule that addresses the treatment of losses incurred by a registered plan after the planholder’s death. Effective for distributions made from registered plans after 2008, a new rule will permit post-death decreases in the value of assets held in an RRSP or a RRIF to be carried back and deducted from the deceased’s RRSP/RRIF income inclusion for the year of death. On the business side, no changes were announced to general or small business corporate income tax rates. However, the federal small business limit was increased, as of January 1, 2009, from $400,000 to $500,000. Proration will be provided for non-calendar-year companies. The increase in the small business limit means a consequential change for the federal scientific research and experimental development (SR & ED) credit. Under that program, eligibility for the enhanced credit available to Canadian-controlled private corporations is reduced as corporate income increases from $400,000 to $700,000, and taxable capital of the previous year increases from $10 million to $50 million. Following the change in the small business limit, eligibility for the enhanced SR & ED credit rate will begin to be reduced at the proposed small business limit of $500,000 and will be fully eliminated where taxable income in the previous year is $800,000 or more, with the change applying where the previous taxation year ends after 2008. Changes will also be made to the capital cost allowance (CCA) system. In the 2008-9 federal budget, changes were made to provide accelerated CCA treatment in the form of a 50 percent straightline CCA rate for eligible machinery and equipment used primarily in manufacturing and processing (M & P) carried out in Canada. The accelerated treatment, which was to be available for qualifying acquisitions made before 2009, has been extended to apply to such acquisitions made before 2010. The 50 percent CCA rate will also be available for eligible acquisitions made in 2010 and 2011, and the amount of capital cost allowance claimable will be calculated on a straightline basis. Current rules provide that computers acquired after March 18, 2007 are eligible for a 55 percent declining balance CCA rate. In this year’s budget, the 2:6 FINANCES OF THE NATION 2009 federal government announced a temporary 100 percent CCA rate for eligible computers and software acquired after the budget date and before February 2011. In addition, acquisitions eligible for the 100 percent CCA rate will not be subject to the half-year rule. To be eligible for the enhanced rate, computer hardware or software acquired must be situated in Canada and must generally be acquired by the taxpayer for use in a business carried on in Canada. The budget also contained proposals for a number of administrative changes related to filing requirements imposed on corporations and the penalties that would apply where filing requirements are not met. Effective for corporate tax returns for taxation years ending after 2009, corporations that have annual gross revenues in excess of $1 million will generally be required to file their income tax returns for the year in electronic format. As well, the number of any particular type of income tax information returns that can be filed by a taxpayer before the filing of those returns in electronic format are required will be reduced from 500 to 50. This electronic filing requirement will apply to information returns that are required to be filed after 2009. A number of different penalties may be imposed where income tax or information returns are not filed or are not filed on a timely basis, and the budget proposes to change the penalties that may be applied in some circumstances. Where a corporation is subject to the new requirement to file an income tax return in electronic format, no penalty for failure to file in the correct format will be imposed for returns required to be filed before 2011. Thereafter, the penalty for taxation years that end in 2011 will be set at $250, increasing to $500 for taxation years ending in 2012 and to $1,000 for taxation years ending after 2012. As well, the penalty regime applied to taxpayers who fail to file an information return on time or in the correct format will be amended such that the applicable penalty is calculated on the basis of the number of returns that are late or incorrect. Generally, the penalty will increase with the number of late or incorrect returns, to a specified statutory maximum.

PROVINCIAL/TERRITORIAL BUDGETARY POSITIONS Newfoundland and Labrador Minister of Finance and Treasury Board President Jerome Kennedy brought down the province’s 2009-10 budget on March 26. The minister was able to announce both that, as of the 2008-9 fiscal year, the province had ceased to be an equalization recipient and will post its fourth consecutive surplus. The surplus for 2008-9 year will be $1.3 billion, without taking into account revenue from the Atlantic Accord. With that revenue included, the surplus will reach a record of $2.4 billion. In 2009-10, however, owing to the effects of the global economic downturn, there is expected to be a deficit of $750 million. The province’s revenue and expenditure figures for both fiscal years are summarized in table 2.3.

Tax Changes Effective from January 1, 2009, the province’s small business threshold is increased from $400,000 to $500,000. There is no change in the provincial small business income tax rate of 5.0 percent. SUMMARY OF BUDGETS 2:7

Table 2.3 Financial Highlights—Newfoundland and Labradora 2009-10 2008-9 (est.) (revised) millions of dollars Current account Gross expenditure...... 5,909 5,229 Related revenue ...... !359 !252 Net expenditure ...... 5,550 4,977 Capital account Gross expenditure...... 1,076 803 Related revenue ...... !205 !58 Net expenditure ...... 872 745 Combined net current and capital expenditure ...... 6,422 5,722 Main revenue sources Personal income tax...... 786 900 Corporate income tax...... 617 499 Sales tax ...... 728 711 Offshore royalties ...... 1,262 2,501 Federal government transfers Equalization ...... !147 116 Canada health transfer...... 515 385 Canada social transfer ...... 163 162 Atlantic Accord 1985 ...... 465 557 Atlantic Accord 2005 ...... — 1,153 Principal expenditure functions Education ...... 1,234 1,050 Health ...... 2,559 2,280 a The data for 2007-8 are not available on a comparable basis.

In order to bring the credit rate into line with that offered by other provinces, the provincial dividend tax credit on eligible dividends has been increased from 6.65 percent to 9.75 percent. No effective date was announced for the change. The provincial labour-sponsored venture capital tax credit program has been enhanced, effective for the 2009 and subsequent taxation years. The eligible investment amount increased from $5,000 to $10,000, and the credit percentage increased from 15 to 20 percent. A tax exemption will be provided for gasoline consumed by off-road equipment used in offshore oil exploration. Commercial electrical permit fees are also reduced, and both these measures are effective as from April 1, 2009.

Prince Edward Island The 2009-10 provincial budget was brought down on April 16, 2009 by provincial Treasurer Wesley Sheridan. The treasurer announced that the deficit for the upcoming fiscal year was anticipated to reach $85.3 million. He noted that of that amount, $39.4 million was attributable to a pension adjustment brought about by the downturn in international financial markets. The province’s overall revenue and expenditure picture for fiscal 2008-9 and fiscal 2009-10 are summarized in table 2.4. 2:8 FINANCES OF THE NATION 2009

Table 2.4 Financial Highlights—Prince Edward Islanda 2009-10 2008-9 (est.) (forecast) millions of dollars Total revenue ...... 1,430.0 1,340.2 Total expenditure ...... 1,515.0 1,387.6 Consolidated surplus or deficit (!) ...... !85.4 !41.4 Main revenue sources Personal income tax...... 249 235 Corporate income tax...... 30 39 Retail sales tax ...... 202 195 Property taxes...... 90 87 Gasoline tax ...... 39 39 Federal government transfers Equalization ...... 340 322 Canada health transfer...... 104 100 Canada social transfer ...... 45 44 Principal expenditure functions Education ...... 207 196 Health ...... 445 416 Social services and seniors ...... 124 120 Transportation and public works...... 86 93 Public debt charges...... 114 110 a The data for 2007-8 are not available on a comparable basis.

Tax Changes The treasurer confirmed that, as previously announced, the PEI small business income tax rate had declined to 2.1 percent, effective April 1, 2009. He also announced that the small business income threshold will be increased from the previous level of $400,000 to $500,000, with retroactive effect from January 1, 2009. The only other revenue measure announced in the budget was an increase in provincial tobacco taxes. Effective as of midnight budget night, the tax on tobacco increased by $5.00 per carton of cigarettes. The treasurer indicated that revenue raised by the increase will be allocated to health care.

Nova Scotia Nova Scotia’s government brought down the province’s first budget of 2009- 10 on May 4, 2009. The government was subsequently defeated in the House and in the election that followed and, consequently, the changes announced in that budget were never implemented. On September 24, the newly elected government brought down its first budget, which was substantially the same as that announced on May 4. The provisions of the September 24 budget are summarized below, and the province’s revenue and expenditure picture for 2009-10 is outlined in table 2.5. In July 2009, the newly elected government announced that a rebate of 50 percent of the provincial portion of the harmonized sales tax (HST) will be provided on sales of new homes in the province on which construction began after 2008 and which are substantially completed by March 31, 2010. The SUMMARY OF BUDGETS 2:9 xxxx Table 2.5 Financial Highlights—Nova Scotia 2009-10 2008-9 2007-8 (est.) (actual) (restated) millions of dollars Total revenue ...... 8,055.0 8,134.8 8,179.2 Total expenditure ...... 9,094.1 8,521.1 8,133.0 Surplus or deficit (!) ...... !1,039.1 !386.3 46.2 Net income from government business enterprises ...... 356.8 359.6 344.2 Other adjustments...... 90.2 46.4 28.6 Combined surplus or deficit (!) ...... !592.1 19.7 419.0 Main revenue sources Personal income tax...... 1,781.2 1,818.4 1,778.4 Corporate income tax...... 322.3 352.5 389.5 Harmonized sales tax...... 1,182.0 1,175.0 1,075.0 Federal government transfers Equalization ...... 1,465.0 1,465.0 1,465.0 Canada health transfer...... 700.1 668.7 639.0 Canada social transfer ...... 304.1 297.1 280.4 Offshore oil and gas payments ...... 180.1 106.0 68.2 Principal expenditure functions Education ...... 1,285.2 1,267.5 1,230.0 Health ...... 3,422.3 3,166.0 3,014.0 Community services...... 946.0 891.0 870.3 Transportation and public works...... 374.3 381.3 366.3 maximum rebate per home is $7,000 and the budget for the program will mean that rebates will be provided on a maximum of 1,500 homes.

Tax Changes Beginning October 1, 2009, Nova Scotia will implement a rebate of the provincial portion of the HST on residential electricity usage below a prescribed threshold. Since 2006, Nova Scotia has provided a graduate tax credit for post- secondary graduates who live and work in the province. That credit will be replaced, for the 2009 and subsequent tax years, by the graduate retention rebate. The new program will provide graduates with a recent university degree with a tax reduction of up to $15,000, or $2,500 per year, over a six- year period. Graduates who have received a college diploma or a certificate will receive a tax reduction of up to $7,500 or $1,250 over a six-year period. Graduates who received credits under the previous program may continue to claim unused credits. The province formerly offered an M & P tax credit, but that credit was eliminated (except for carryover amounts) in 2000. Effective January 1, 2010, a new M & P credit equal to 10 percent of eligible investments made after that date will be provided. Details of the new credit will be announced following consultation with the manufacturing industry. Individual taxpayers in the province are eligible to claim an equity tax credit and a labour-sponsored tax credit for eligible investments made. Both credit programs have been extended to February 29, 2012. In addition, the rate 2:10 FINANCES OF THE NATION 2009 of the equity tax credit is increased from 30 to 35 percent of the amount of eligible investments made, and the maximum annual claim will increase from $15,000 to $17,500. Tobacco taxes in Nova Scotia increased, effective June 22, 2009. As of that date, the tobacco tax rate was increased by 5 cents per cigarette, 5 cents per proportionated tobacco stick, and 5 cents per gram of fine cut tobacco. The newly elected government has determined that implementing two individual tax credits will be deferred, as a cost-saving measure. Both tax credits were scheduled to be effective for the 2009 and subsequent taxation years. The affected credits are the healthy living tax credit for adults (the existing credit for children’s sport and recreation activities is not affected) and the transit tax credit. No further information was provided on when the credit programs might be implemented.

New Brunswick The 2009-10 provincial budget brought down by Minister of Finance Victor Boudreau on March 17 included both a four-year plan to balance the province’s budget by 2012-13 and significant changes to the province’s individual and corporate tax systems, to be implemented over the same period. The minister was also able to announce that the deficit for the 2008-9 fiscal year, which had been projected to reach $285 million was now anticipated to be $265.2 million. The projected deficit for the 2009-10 fiscal year is $740.9 million. New Brunswick’s revenue and expenditure figures for both fiscal years are summarized in table 2.6.

Tax Changes In June 2008, the New Brunswick government released a discussion paper that presented a series of options with respect to changes to the provincial tax system, with the aim of shifting reliance from income tax to consumption tax. Following a series of public consultations, the Ministry of Finance prepared and issued the plan for lower taxes in New Brunswick, which was issued as part of the 2009-10 budget. The following tax measures were included in that plan. The current four-rate, four-bracket personal income tax system will be replaced with a system of two rates and two brackets by 2012. The changeover will start with a reduction in personal tax rates in all four existing brackets for 2009, as follows: Income bracket Tax rate, % $0-$35,707 ...... 9.65 $35,708-$71,415 ...... 14.50 $71,416-$116,105 ...... 16.00 Above $116,105 ...... 17.00 In addition, the tuition rebate available to New Brunswick residents is doubled, effective for the 2009 and subsequent taxation years, from $2,000 to $4,000 annually and from $10,000 to $20,000 on a lifetime basis. As well, the SUMMARY OF BUDGETS 2:11 xxxxxx Table 2.6 Financial Highlights—New Brunswicka 2009-10 2008-9 (est.) (revised) millions of dollars Total revenue ...... 7,097 7,138 Total expenditure ...... 7,838 7,403 Surplus or deficit (!) ...... !741 !265 Main revenue sources Personal income tax...... 1,224 1,324 Corporate income tax...... 172 111 Sales tax ...... 999 1,058 Gasoline and motive fuel tax...... 199 199 Federal government transfers Equalization ...... 1,689 1,584 Canada health transfer...... 557 529 Canada social transfer ...... 242 235 Conditional grants ...... 222 253 Other ...... 2 2 Principal expenditure functions Education ...... 963 948 Health ...... 2,303 2,238 Social development ...... 925 932 a The data for 2007-8 are not available on a comparable basis. province increased the low-income seniors’ benefit from $200 to $300 for 2009, with a further increase to $400 planned for 2010. Two personal tax credits have been enhanced for investments made after March 17, 2009. The New Brunswick small business investor tax credit provides a 30 percent non-refundable tax credit on qualifying investments of up to $80,000 annually, for a maximum annual credit of $24,000. Where qualifying investments are made after March 17, that maximum annual investment is increased to $250,000, thereby increasing the maximum annual credit to $75,000. Maximum allowable investments under the New Brunswick labour-sponsored venture capital tax credit were also increased, from $5,000 to $10,000, and the tax credit rate was increased from 15 percent to 20 percent. Both changes will apply to shares purchased after the budget date. Changes were also announced for the provincial business and corporate income tax systems. New Brunswick’s general corporate tax rate is reduced, effective July 1, 2009, from 13.0 to 12.0 percent. The rate will be further reduced each July 1 until it reaches 8.0 percent on July 1, 2012. Effective Janu- ary 1, 2009, the provincial small business limit was increased from $400,000 to $500,000. There is no change to the small business tax rate of 5.0 percent. To assist businesses in the forestry industry, the province reinstated its forestry industry investment tax credit, which had been offered in 2006 and 2007. Qualifying forestry companies will be eligible for a rebate of 50 percent of their capital investments in manufacturing and processing equipment, up to a maximum of 50 percent of provincial property tax paid. As well, the provincial high energy use tax rebate has been extended to apply until March 31, 2010. Under the rebate program, a remission of provincial property taxes payable is provided to qualifying pulp and paper companies in the province. 2:12 FINANCES OF THE NATION 2009

Quebec Minister of Finance Monique Jerome-Forget brought down Quebec’s 2009-10 budget on March 19, 2009. The minister announced that the province had run a deficit for the 2008-9 fiscal year and that a deficit was also projected for the 2009-10 fiscal year. Quebec’s revenue and expenditure picture is summarized in table 2.7. A number of tax measures were also announced as part of the budget, with most of those measures representing enhancements or extensions to existing corporate tax credits.

Tax Changes A 10-year income tax holiday is introduced for new corporations dedicated to the commercialization of intellectual property. The holiday will apply to new corporations that are incorporated between March19, 2009 and April 1, 2012 and that begin to carry on an eligible commercialization business within 12 months of incorporation. Generally, an eligible commercialization business is one in which the only purposes of the business are the making and selling of goods more than 50 percent of whose value stems from eligible intellectual property. A five-year royalty holiday of up to $800,000 per new natural gas well will be provided for any well put into production after March 19, 2009 and before January 1, 2011. The provincial refundable tax credit for manpower training in the manufacturing sector will be extended to apply to the forestry and mining sectors. The credit may be received for eligible training expenditures incurred after March 19, 2009 and before January 1, 2012.

Table 2.7 Financial Highlights—Quebec 2009-10 2008-9 (est.) (prelim.) 2007-8 millions of dollars Total revenue ...... 62,212 62,479 63,093 Total expenditure ...... 66,093 63,989 61,847 Net results of consolidated entities ...... 355 205 404 Surplus or deficit (!) ...... !3,526 !1,305 1,650 Main revenue sources Personal income tax...... 18,203 18,223 18,648 Health services levy...... 5,597 5,576 5,404 Corporate income tax...... 3,266 3,972 4,819 Consumption taxes...... 13,184 13,492 12,962 Federal government transfers Equalization ...... 8,355 8,028 7,160 Canada health transfer...... 4,137 3,741 3,925 Canada social transfer ...... 1,413 1,267 1,516 Other...... 936 888 1,028 Principal expenditure functions Education ...... 14,431 13,941 13,399 Health and social services ...... 26,872 25,417 24,054 Transportation...... 2,771 2,347 2,148 Debt expenses...... 6,104 6,589 7,021 SUMMARY OF BUDGETS 2:13

Quebec provides a large number of refundable tax credits in the cultural field, and the budget contained announcements of improvements in a number of those credits, as follows: • The refundable tax credit for the production of shows is increased, effective after the budget date, from 29.1667 to 35 percent, and the limit on production costs is increased from 45 to 50 percent, while the overall cap of $750,000 is unchanged. • The refundable tax credit for the production of sound recordings has been increased: the credit rate is increased from 29.1667 to 35 percent, the limit on production costs is increased from 45 to 50 percent, and the current dollar amount caps are eliminated. • The refundable tax credits for film dubbing and book publishing are amended to increase certain credit rates from 29.1667 to 30 percent and from 26.25 to 27 percent, respectively. In both cases, the rate increases are effective for projects on which an application for certification is filed after the budget date. • Simplifying changes will be made to the required certification procedure with respect to the refundable tax credit for film production services. The new certification procedure will consist of an approval certificate and an advance ruling, with the final certification stage eliminated. • The province provides a refundable 30 percent tax credit for salaries paid to eligible employees engaged in qualifying activities in the development of e-business. Changes are made to the criteria used to determine a corporation’s eligibility, to facilitate the qualification of certain corporations operating in the information technology sector. The changes apply to eligible salaries and wages paid after March 13, 2008 and before January 1, 2016. • The definition of an eligible design activity for purposes of the refundable tax credit for design is amended to remove the requirement that qualifying goods be produced in Quebec. The change applies to design work carried out after May 31, 2009. The budget also included a number of changes affecting the tax treatment of child-care expenses. Effective for the 2009 and subsequent taxation years, the limit on child-care expenses for a child under the age of 7 is increased from $7,000 to $9,000. As well, the family income brackets used to determine eligibility for the refundable tax credit for child-care expenses is amended, effective for 2009 and subsequent tax years. Finally, child-care expenses incurred during the time in which an individual has received a benefit under the provincial parental insurance plan or the employment insurance plan will, as of the 2009 tax year, be included in the definition of eligible child-care expenses. For a number of years, the province has provided a stock savings plan program under which individual taxpayers who invest in qualifying small and medium-sized corporations in the province can claim a deduction on their provincial tax return for the year. The current program, the small and medium- sized enterprise growth stock plan, was to terminate on December 31, 2009. However, in view of the current economic situation, the budget proposes both that the program be extended for a further five years, until December 31, 2014, 2:14 FINANCES OF THE NATION 2009 and that the tax benefits afforded by the plan be enhanced. For a period of two years, the tax benefit is increased such that the adjusted cost of a qualifying share is raised from 100 to 150 percent of the cost of the share. The increase applies to shares acquired after the budget date and before January 1, 2011. As well, the current asset limit imposed on a qualifying issuing corporation will be increased, the minimum required holding period for investors is shortened, and the administrative requirements concerning registration and eligibility are simplified. Similar changes have been made to the tax credit for the acquisition of shares issued by Quebec labour-sponsored funds (FTQ). The tax credit claimable for qualifying investments in such funds is increased from 15 to 25 percent, effective for shares issued after March 31, 2009 and before the last day of the fiscal year in which the fund reaches a capitalization level of $1.25 billion. Effective January 1, 2011, the Quebec sales tax rate will rise from 7.5 to 8.5 percent. To compensate low- and middle-income households for the increase, the refundable tax credit for the Quebec sales tax (QST) will be increased. Finally, the budget included announcements of Quebec’s intention to harmonize with a number of federal changes announced in the 2009 federal budget. Specifically, the following changes will be adopted for Quebec tax purposes: • the deduction for loss of value of investments in a registered retirement savings plan or a registered retirement income fund after death; • the small business limit is increased from $400,000 to $500,000, effective March 20, 2009; • the time at which the acquisition of control of a corporation takes place to determine whether a company is a small business corporation or a Canadian- controlled private corporation; • amendments pertaining to capital cost allowance applicable to certain assets, generally affecting manufacturing and processing and computer hardware and systems software assets; • the restrictions applicable to the deductibility of certain interest have been withdrawn.

Ontario The 2009-10 Ontario budget brought down on March 26, 2009 by Minister of Finance Dwight Duncan contained a number of significant tax measures. The most far-reaching of those measures was the announcement that, effective July 1, 2010, Ontario will integrate its retail sales tax with the federal goods and services tax (GST) to create an HST of 13.0 percent. Many of the tax measures announced in the budget were consequential on the announcement of the move to an HST, part of what the budget papers termed a “comprehensive tax reform package.” The minister also announced that the province will post a deficit for the 2008-9 fiscal year and that Ontario was projected to remain in that deficit SUMMARY OF BUDGETS 2:15 position for the current and two following fiscal years. Ontario’s revenue and expenditure picture is summarized in table 2.8.

Tax Changes Effective July 1, 2010, Ontario’s retail sales tax will be converted to a value- added tax structure and combined with the federal GST to create a federally administered single sales tax at 13.0 percent. This harmonized sales tax will use, generally, the same rules and tax base as the GST. To provide targeted relief, the province will allow point-of-sale exemptions for specified products, including books, children’s clothing and footwear, children’s car seats and car booster seats, diapers and feminine hygiene products. In addition, buyers of new housing in the province will be eligible for a rebate of part of the additional sales tax imposed, with respect to purchases of houses priced up to $500,000. As part of the sales tax reform, Ontario taxpayers aged 18 and over who have incomes below $80,000 will receive an Ontario sales tax transition benefit. The maximum benefit will be $300 for single taxpayers and $1,000 for single parents and couples. The benefit will be provided by means of a direct payment to eligible taxpayers in each of June 2010, December 2010, and June 2011. The budget also proposes to provide more long-term tax relief in the form of a new Ontario sales tax credit and a new Ontario property tax credit, both of which will replace existing similar credits. The new sales tax credit will provide annual relief of up to $260 for each adult and each child, but will be xxxxx Table 2.8 Financial Highlights—Ontarioa 2009-10 2008-9 (plan) (interim) millions of dollars Total revenue ...... 95,980 93,427 Total expenditure ...... 108,880 97,317 Reserve ...... 1,200 — Surplus or deficit (!) ...... !14,100 !3,900 Main revenue sources Personal income tax...... 25,170 25,574 Corporate income tax...... 8,518 8,603 Sales tax ...... 17,600 17,453 Motive fuel tax ...... 3,099 3,069 Federal government transfers Canada health transfer...... 9,722 8,881 Canada social transfer ...... 4,213 4,081 Other...... 1,419 1,823 Principal expenditure functions Education ...... 14,186 13,285 Health and long-term care ...... 42,170 40,343 Community and social services...... 8,327 8,003 Transportation...... 2,112 2,032 Debt expenses...... 9,301 8,854 a The data for 2007-8 are not available on a comparable basis. 2:16 FINANCES OF THE NATION 2009 reduced by 4 percent of net family income over $20,000 for single taxpayers and over $25,000 for families. The new property tax credit will be structured as a refundable credit based on occupancy cost, which is defined as property tax paid or 20 percent of rent paid. The credit will be calculated as a percentage of occupancy cost, to a specified maximum. Any credit earned will be reduced by 2 percent of adjusted net family income over $20,000 for single taxpayers and over $25,000 for families. The maximum credit for any one taxation year will be $900 for non-seniors and $1,025 for seniors. The general Ontario personal tax rate on the first bracket of income (up to $36,848 for 2009) will be reduced from 6.05 to 5.05 percent, effective with the 2010 taxation year. Although rates for the Ontario surtax will not change, threshold levels will be reduced for the 2010 and subsequent tax years. Effective January 1, 2010, the threshold for the first level (20 percent) surtax will be reduced from $4,257 to $3,978, and the threshold for the second level (36 percent) surtax will be reduced from $5,370 to $5,091 of Ontario tax payable. Changes were also announced to the province’s corporate tax system. Effective July 1, 2010, Ontario’s general corporate tax rate will be reduced from 14.0 to 12.0 percent The rate will be further reduced on July 1 of each following year until it reaches 10.0 percent on July 1, 2013. The income tax rate applied to income from M & P will be reduced from 12.0 to 10.0 percent, also effective July 1, 2010, and the small business tax rate will be reduced from 5.5 to 4.5 percent, effective on the same date. No further changes were announced for either the M & P or small business tax rates. Finally, the existing small business surtax, which erodes the benefit of the preferential small business tax rate on corporate small business income over $500,000, will be eliminated, effective July 1, 2010. Consequential on the change to the general corporate and small business tax rates, Ontario will reduce its dividend tax credit rates. For 2010 and subsequent years, those rates will be 6.4 percent for eligible dividends (those paid by large corporations) and 4.5 percent for dividends other than eligible dividends (those paid from corporate income that has been taxed at the lower small business tax rate). Ontario also imposes a corporate minimum tax (CMT), which generally acts as a prepayment of corporate income tax by providing a 20-year carryforward credit equal to the amount of CMT paid. Effective for taxation years ending after June 30, 2010, the CMT rate will be reduced to 2.7 percent, and corporations (or an associated group of corporations) having under $50 million in total assets or $100 million in annual gross revenue will not be liable for payment of CMT. The current asset and revenue thresholds for application of the tax are set at $5 million and $10 million, respectively. The budget also contained a series of targeted tax measures, generally affecting existing Ontario corporate income tax credits and capital cost allowance rates, as follows. • The taxable income phase-out range for the 10 percent refundable On- tario innovation tax credit (OITC) will be increased from a range of $400,000 to $700,000 to a range of $500,000 to $800,000. The change will take effect SUMMARY OF BUDGETS 2:17 at the same time that a parallel change to the federal investment tax credit for scientific research and experimental development is implemented. • Ontario will parallel the temporary 100 percent CCA rate provided in this year’s federal budget for acquisitions of eligible computers and software made between January 27, 2009 and February 2011. • Ontario will parallel the federal change that extends the 50 percent straightline accelerated CCA rate for eligible M & P assets acquired in 2010 and 2011. • The Ontario interactive digital media tax credit (OIDMTC) provides a 30 percent refundable credit to small corporations and a 25 percent refundable credit to large corporations for expenditures related to the creation, marketing, and distribution of eligible interactive digital media products. The budget proposes to increase the OIDMTC rates, to 40 percent for all corporations that develop their own eligible products and to 35 percent for corporations that develop eligible products under a fee-for-service arrangement. In addition, qualifying corporations will be able to claim 100 percent of eligible labour expenditures, an increase from the current rate of 50 percent. The OIDMTC will also be extended to be available to more fee-for-service arrangements. • The Ontario computer animation and special effects tax credit is a 20 percent refundable tax credit that may be claimed by qualifying corporations for eligible labour expenditures related to digital animation and special effects in qualifying film and television productions. The budget proposed enhancements to the credit that will increase the percentage of eligible labour expenditures claimable for the credit from 50 to 100 percent and will, in addition, expand the definition of eligible labour expenditures to include 100 percent of amounts paid to arm’s-length incorporated individuals claiming freelance services. • Eligibility for the Ontario book publishing tax credit is expanded to include both qualifying expenditures incurred after the budget date for any books by a Canadian author in an eligible category of writing and direct expenses that reasonably relate to publishing an electronic version of an eligible book. • Changes will be made to the cooperative education tax credit to increase the general 10 percent credit rate to 25 percent and the enhanced 15 percent rate for small businesses to 30 percent. As well, the maximum tax credit claimable per work placement will be increased from $1,000 to $3,000. • The budget proposes enhancements to the apprenticeship training tax credit (ATTC), effective for expenditures incurred after the budget date, to increase the general 25 percent credit rate to 35 percent and to increase the enhanced 30 percent small business credit rate to 45 percent. The annual maximum tax credit claimable is increased from $5,000 to $10,000, and the credit will be made available for salaries and wages paid during the first 48 months of an apprenticeship program. Finally, the ATTC was only to be available for qualifying wages paid before January 1, 2015, but the budget proposes to make the credit a permanent tax incentive. 2:18 FINANCES OF THE NATION 2009

The Ontario government will automatically adopt a number of federal proposals announced as part of the 2009 federal budget. Specifically, proposals relating to increases in the withdrawal limit for the home buyers’ plan and to proposals dealing with the carryback and deduction of post-death decreases in the value of an RRSP or a RRIF will take effect for Ontario purposes at the same time as the federal proposals are implemented.

Manitoba Manitoba’s 2009-10 budget was brought down by Minister of Finance Greg Selinger on March 25, 2009. The budget contained a number of tax changes, including a reduction in the provincial small business tax rate to zero percent, effective December 1, 2010. Manitoba’s revenue and expenditure figures are summarized in table 2.9.

Tax Changes Effective December 1, 2010, the Manitoba small business income tax rate will be reduced from 1.0 percent to zero. The province will be releasing a discussion paper to address the question of the tax treatment of provincial non- refundable corporate income tax credits carried forward after 2010. Manitoba provides a 10 percent community enterprise investment tax credit that allows investors in eligible securities acquired between 2007 and 2011 to claim a non-refundable tax credit. The credit has been enhanced by increasing the maximum annual approval limit from $16.667 million to $33 million, xxxxxx Table 2.9 Financial Highlights—Manitobaa 2009-10 2008-9 (est.) (forecast) millions of dollars Total revenue ...... 10,134 10,113 Total expenditure ...... 10,222 10,091 Transfer to debt retirement fund...... !20 !111 Transfer from fiscal stabilization fund...... 110 98 Net income ...... 2 2 Main revenue sources Personal income tax...... 2,342 2,432 Corporate income tax...... 347 380 Sales tax ...... 1,595 1,570 Gasoline and motive fuel tax...... 221 220 Federal government transfers Equalization ...... 2,063 2,063 Canada health transfer...... 903 877 Canada social transfer ...... 392 386 Principal expenditure functions Education ...... 2,083 1,989 Health ...... 4,364 4,229 Family services and housing ...... 1,256 1,234 Debt expenses...... 250 258 a The data for 2007-8 are not available on a comparable basis. SUMMARY OF BUDGETS 2:19 effective for the 2009 and subsequent taxation years. The maximum annual investment limit by an investor that qualifies for the credit remains at $450,000, and the maximum tax credit that may be claimed in a single tax year remains at $45,000. The provincial co-op education and apprenticeship tax credit program has been extended to apply until December 30, 2011. In addition, the program has been expanded to add a new component, the advanced-level apprentices hiring incentive. Under the new component, employers in the province who hire higher level apprentices for work performed in Manitoba will be able to claim a credit equal to 5 percent of the wages and salaries paid to such apprentices, to a maximum of $2,500 per level completed by each apprentice. There is no limit on the number of apprentices who may be hired and in respect of whom the credit may be claimed. The existing provincial research and development tax credit has been made refundable for corporations that incur prescribed expenditures in Manitoba with respect to new technologies and biotechnologies under an eligible contract with a qualifying Manitoba research institute. Eligible expenditures must be incurred after 2009. The basic amount of the education property tax credit has been increased from $600 to $650. The community enterprise development tax credit has been expanded by increasing the maximum amount of issuable shares that a business can apply for from $500,000 to $1 million. The tax credit available under the Manitoba mineral exploration tax credit has been extended to be available with respect to flowthrough share agreements entered into before April 1, 2012. In addition, the credit percentage that may be claimed is increased from 10 to 20 percent for flowthrough share agreements entered into between March 31, 2009 and April 1, 2010 and to 30 percent for agreements entered into between March 31, 2010 and April 1, 2012. Dividend tax credit rates on taxable Canadian dividends that are not eligible dividends (generally, dividends paid out of corporate income that has been taxed at the preferential small business tax rate) are reduced beginning with the 2009 taxation year. For 2009 and 2010 the credit rate is set at 2.5 percent, with a reduction to 1.75 percent scheduled to take effect with the 2011 taxation year. A number of “green measures” were announced in the budget, including the extension of the green energy equipment tax credit to solar thermal energy systems purchased for use in the province in 2009. As well, as of July 1, 2009, a waste reduction and recycling support levy is introduced for certain landfill operators in the province. Finally, the odour control credit, which was scheduled to expire at the end of 2009, has instead been extended to apply until the end of 2011. Effective for fiscal years ending after June 30, 2009, the provincial mining tax is reduced from 18 to 10 percent (when total operator’s profit is less than 2:20 FINANCES OF THE NATION 2009

$50 million), to 15 percent (when total operator’s profit is between $55 million and $100 million), and to 17 percent (when total operator’s profit is over $105 million). Notch provisions will apply to operators with total profit between the various tax thresholds. Aviation fuel tax rates have been reduced, effective July 1, 2009, for cargo flights generally, and the fuel tax exemption for international cargo flights has been expanded. Effective at midnight on budget day, tobacco taxes are increased as follows: • on cigarettes, from 17.5 cents to 18.5 cents per cigarette; • on fine cut tobacco, from 16.5 cents to 17.5 cents per gram; and • on raw leaf tobacco, from 15.0 cents to 16.0 cents per gram. The tax rate per cigar is unchanged at 75 percent of the retail price, to a maximum of $5.00 per cigar. As well, certain enhanced enforcement measures will be implemented to discourage the sale of illegal tobacco.

Saskatchewan Saskatchewan’s 2009-10 budget was brought down on March 18, 2009 by Minister of Finance Rod Gantefoer. There were few tax measures announced as part of the budget, and most of those involved changes or improvements to existing tax credit programs. Saskatchewan’s revenue and expenditure figures are summarized in table 2.10.

Tax Changes Effective for 2010, the provincial dividend tax credit will be increased to 36 percent of the grossed-up dividend amount. That rate will increase to 37.83 percent for 2011 and to 39.95 percent for 2012 and subsequent tax years. The province provides a non-refundable research and development (R & D) tax credit for corporations that carry out eligible activities in the province. Following consultations with Saskatchewan’s R & D sector, the government announced that the existing non-refundable credit is converted to a 15 percent refundable credit for all qualifying expenditures made after March 18, 2009. When corporations have unclaimed non-refundable tax credit balances, those balances may be claimed against corporate income taxes otherwise payable for the existing 10-year carryforward period. Individual taxpayers in the province who invest in provincially registered labour-sponsored venture capital corporations (LSVCCs) can earn a 20 percent refundable tax credit on investments of up to $5,000 per year. The province also provides a 15 percent tax credit on similar investments made in federally registered LSVCCs. Effective for the 2009 and subsequent taxation years, the tax treatment of the two will be equalized, such that a 20 percent credit will also be allowed for an investment in a federally registered LSVCC, to a maximum investment of $5,000 per year. SUMMARY OF BUDGETS 2:21

xxx Table 2.10 Financial Highlights—Saskatchewana 2009-10 2008-9 (est.) (forecast) millions of dollars Revenue...... 10,661 12,172 Operating expense ...... 10,245 10,343 Pretransfer surplus ...... 415 1,829 Transfer to growth and security fund ...... !208 !914 Transfer from growth and security fund...... 217 1,404 Surplus for the year ...... 425 2,318 Main revenue sources Personal income tax...... 1,803 1,825 Corporation income tax...... 625 594 Sales tax ...... 1,156 1,106 Motive fuel tax ...... 438 425 Non-renewable resources...... 3,369 4,644 Federal government transfers Canada health transfer...... 844 828 Canada social transfer ...... 335 341 Other ...... 279 555 Principal expenditure functions Education ...... 1,206 1,187 Health ...... 4,075 3,978 Social services ...... 723 666 Highways and infrastructure...... 437 503 Debt servicing...... !503 !530 a The data for 2007-8 are not available on a comparable basis. Saskatchewan’s general corporation capital tax was eliminated on July 1, 2008, but a capital tax continues to be levied on financial institutions in the province. A technical change will be made to the rules governing the financial institutions capital tax. Specifically, where a financial institution subject to capital tax acquires a corporation that is no longer subject to capital tax, a deduction will be allowed equal to the Saskatchewan taxable paid-up capital of the acquired corporation. The deduction will be effective for all acquisitions that take place after July 1, 2008.

Alberta The 2009-10 Alberta budget was brought down by Minister of Finance Iris Evans on April 7, 2009. While the budget included announcements of a few new tax measures, most of the tax changes discussed related to confirmations of changes announced in previous budgets or in non-budgetary releases. The more significant aspect of the budget was the announcement that the province had run a deficit for the 2008-9 fiscal year and that further deficits were expected for the current and next two fiscal years. Alberta’s revenue and expenditure picture is summarized in table 2.11.

Tax Changes In its 2009-10 budget, the federal government indicated that a number of capital cost allowance rates relating to M & P equipment and computer hardware 2:22 FINANCES OF THE NATION 2009

Table 2.11 Financial Highlights—Alberta

2009-10 2008-9 2007-8 (est.) (forecast) (actual) millions of dollars Revenue...... 31,661 35,627 38,169 Expense...... 36,375 37,053 33,588 Surplus or deficit (!) ...... !4,714 !1,426 4,581 Net transfer from or to (!) sustainability fund/capital account ...... 4,714 1,426 — Main revenue sources Personal income tax...... 8,559 8,615 8,271 Corporate income tax...... 2,447 3,774 4,695 Non-renewable resource revenues ...... 6,745 12,289 11,068 Less royalty tax credit...... !842 — !44 Net non-renewable resource revenues . . . 5,903 12,289 11,024 Federal government transfers Canada health transfer...... 2,037 2,087 1,356 Canada social transfer ...... 1,170 1,207 866 Other...... 1,090 650 655 Principal expenditure functions Health ...... 13,179 13,206 12,286 Education ...... 9,364 9,288 8,886 Social services ...... 3,709 3,465 3,117 Transportation, communication, and utilities ...... 2,204 2,494 2,306 Debt-servicing charges ...... 205 215 214 and systems software will be enhanced. The changes to the CCA rate on M & P equipment is effective for qualifying equipment acquired in 2010 and 2011, while enhanced CCA rates will apply to computer hardware and system software acquired between January 27, 2009 and 2011. The minister indicated that Alberta will parallel both of those federal changes. A number of changes have been made to Alberta’s tobacco tax regime, effective at midnight April 7. The tax on cigarettes is increased by $3.00, to $40.00 per carton, while the tax on loose tobacco goes up by 11.5 cents per gram, to 30 cents per gram. The tax rate applied to a cigar’s taxable price will rise to 103 percent from 95 percent, with the minimum and maximum tax also increasing to 20 cents and $6.27, respectively.

British Columbia British Columbia Minister of Finance Colin Hansen brought down the province’s 2009-10 budget on February 17, 2009 and, on September 1, delivered a budget update that included both new tax measures and a revised deficit forecast. Following the budget update, the province’s forecast deficit for the 2009 fiscal year is $2.8 billion. Smaller deficits are projected for the following two fiscal years, with the government planning to balance the budget in 2013-14, two years later than originally forecast. The province’s revenue and expenditure picture for the current and previous fiscal years are summarized in table 2.12. SUMMARY OF BUDGETS 2:23

The tax measures contained in both the February budget and the September update were, for the most part, relieving in nature and included increases in personal tax credit amounts, a decrease in the general corporate tax rate, and an increase to the provincial small business threshold. Most of the income tax measures announced will take effect with the 2010 tax year. In a non-budgetary announcement made on July 23, 2009, British Columbia announced that it will harmonize the provincial sales tax (social services tax) with the federal GST, effective July 1, 2010. The new HST will then combine a 7.0 percent provincial rate with the 5.0 percent GST for a combined HST rate of 12.0 percent.

Tax Changes Effective January 1, 2010, the basic personal amount is increased from $9,373 to $11,000. As well, the spousal and equivalent-to-spouse credits will be increased by $1,627 each, bringing them both to $9,653. Also effective January 1, 2010, the provincial dividend tax credit rate applied to ordinary dividends (generally, dividends paid from corporate income eligible for the preferential small business tax rate) is reduced from 4.2 to 3.4 percent. The change is consequential on the reduction in the BC small business tax rate from 3.5 to 2.5 percent, effective December 1, 2008. The British Columbia mining flowthrough share tax credit had been scheduled to expire at the end of 2008. It was announced, as part of the February 2009 budget, that the program will be extended to the end of 2009, and the September 2009 budget update further extended that expiry date to the end of 2010.

Table 2.12 Financial Highlights—British Columbiaa 2009-10 2008-9 (est.) (actual) millions of dollars Total revenue ...... 37,608 38,328 Total expenditure ...... 40,133 38,250 Forecast allowance ...... !250 — Surplus or deficit (!) ...... !2,775 78 Main revenue sources Personal income tax...... 5,681 6,093 Corporate income tax...... 1,409 2,038 Sales tax ...... 4,847 4,958 Gasoline and motive fuel tax...... 873 891 Federal government transfers Canada health and social transfers ...... 4,873 4,743 HST transition payments...... 750 — Other federal contributions ...... 1,627 1,246 Principal expenditure functionsb Health ...... 15,722 15,071 Education ...... 10,794 10,238 Social services ...... 3,410 3,347 Debt expenses...... 2,202 2,159 a The data for 2007-8 are not available. b Figures for principal expenditure functions are as forecast and estimated in the February 17, 2009 budget. 2:24 FINANCES OF THE NATION 2009

British Columbia provides a provincial sales tax credit, as well as premium assistance with respect to the medical services plan premiums. The budget announced that, effective January 1, 2009, British Columbia residents who receive income from a registered disability savings plan will not have that income taken into account when determining eligibility for either the sales tax credit or premium assistance. Two corporate tax rate or threshold changes will take effect January 1, 2010. As of that date, the provincial general corporate tax rate is reduced from 11.0 to 10.5 percent, and the provincial small business income threshold is increased from $400,000 to $500,000. A further decrease in the general corporate tax rate to 10.0 percent is scheduled to be effective January 1, 2011. Effective July 1, 2009, the BC basic training tax credit claimed by employers is doubled. Previously, the credit was calculated as 10 percent of wages paid to an eligible apprentice, to a maximum of $2,000 per year. That rate is changed to 20 percent of eligible wages paid, to a maximum of $4,000 per year. Changes have been made to credits relating to film productions carried out in the province. Expiry dates for a number of credits, including the basic, additional, regional, distant location, film training, and digital animation and visual effects tax credits for the film incentive BC and the production services tax credit have been removed. Expiry dates have similarly been removed for the additional basic credit rate of 5 percent for the film incentive BC and the 7 percent rate for the production services tax credit. As well, the requirement that a corporation be BC-controlled in order to be eligible for the film incentive BC tax credit is removed for productions with principal photography starting on or after January 1, 2009. Technical changes were made to the Carbon Tax Act, the Corporation Capital Tax Act, and the International Financial Activity Act. The budget and budget update also contained announcements of a number of changes to the Social Services (Sales) Tax Act, to clarify and expand exemptions provided for purposes of the tax. Beginning January 1, 2010, premiums levied under the province’s medical services plan are increased. Monthly premium rates will increase by $3 per month for single persons and $6 per month for families. At the same time, premium assistance is enhanced by increasing the adjusted net family income thresholds determining eligibility for such assistance by $2,000 each. The province’s tobacco tax was increased, as of February 18, 2009, by $1.20 per carton of 200 cigarettes and by 0.6 cents per gram of fine-cut tobacco. For the 2009 tax year, the threshold for the phase-out of the homeowner grant is maintained at the 2008 level of $1,050,000. For properties valued above the threshold, the grant is reduced by $5 for every $1,000 of assessed excess value. The basic grant is eliminated for properties valued at $1,164,000 and over. The additional grant provided to seniors, veterans, and the disabled is eliminated for properties valued at $1,219,000 and above. SUMMARY OF BUDGETS 2:25

Northwest Territories The Northwest Territories’ 2009-10 budget was brought down on February 5, 2009 by Minister of Finance J. Michael Miltenberger. Although the economic downturn and, particularly, the drop in commodity prices have affected the economy of the Northwest Territories, the minster was able to announce that there will be an operating surplus of $57.6 million for the 2009-10 fiscal year. The Northwest Territories’ revenue and expenditure picture for the year is outlined in table 2.13.

Tax Changes There were only three tax measures announced as part of the budget, all relating to increases in commodity and property taxes. Effective April 1, 2009, the NWT tobacco tax was increased by an estimated $11.20 per carton, in order to reflect current tobacco prices. Also effective April 1, 2009, markups on liquor, beer, and wine were increased by an average of 10 percent. Effective with the 2009 taxation year, property tax rates on mining, oil and gas, and pipeline properties are adjusted to increase revenues from those sources by 15 percent. For the same time period, the education mill rate for all properties in the Northwest Territories’ general taxation area was amended to increase revenue by 15 percent.

Nunavut The 2009-10 Nunavut budget brought down on June 4, 2009 by Minister of Finance Keith Peterson forecast a deficit of $29.1 million for the 2009-10 fiscal year. No new tax measures were announced in the budget. Nunavut’s revenue and expenditure picture for the current year and for 2008-9 are summarized in table 2.14.

Table 2.13 Financial Highlights—Northwest Territories 2009-10 2008-9 2007-8 (est.) (revised) (actual) millions of dollars Revenues...... 1,300.8 1,258.6 1,305.7 Expenses...... 1,201.6 1,189.5 1,179.9 Surplus or deficit (!) ...... 99.2 69.0 125.9 Main revenue sources Personal income tax...... 65.9 74.8 50.0 Corporate income tax...... 82.2 68.8 104.9 Motive fuel tax ...... 17.5 17.2 20.3 Grant from Canada...... 864.2 805.0 842.8 Principal expenditure functions Education, culture, and employment ...... 299.6 294.0 282.3 Health and social services ...... 313.0 309.0 313.0 Transportation...... 97.1 96.5 91.1 2:26 FINANCES OF THE NATION 2009

Yukon The 2009-10 Yukon budget brought down by Premier Dennis Fentie on March 19, 2009 indicated that the territory will run a deficit of $19.3 million for the 2009-10 fiscal year. No tax measures were announced in the budget. Yukon’s revenue and expenditure picture for the current and two previous fiscal years is summarized in table 2.15.

Table 2.14 Financial Highlights—Nunavuta 2009-10 2008-9 (projected) (revised) millions of dollars Revenue...... 1,218.5 1,154.0 Expenditure...... 1,247.6 1,329.1 Surplus or deficit (!) ...... 29.1 !175.1 Main revenue sources Personal income tax...... 13.5 12.8 Corporate income tax...... 7.1 7.4 Motive fuel tax ...... 5.3 5.1 Federal government transfers Formula financing arrangements ...... 1,022.1 944.1 Other federal transfers...... 108.5 119.5 Principal expenditure functions Education ...... 209.9 232.3 Health and social services ...... 263.0 276.0 Economic development and transportation ...... 60.0 82.7 a The data for 2007-8 are not available on a comparable basis.

Table 2.15 Financial Highlights—Yukon 2009-10 2008-9 2007-8 (est.) (forecast) (actual) millions of dollars Revenues...... 962.1 914.0 854.5 Expenses...... 1,003.2 961.0 829.4 Adjustments ...... 60.5 50.0 9.5 Surplus or deficit (!) ...... 19.4 2.6 35.0 Main revenue sources Personal income tax...... 51.3 50.8 44.6 Corporate income tax...... 11.2 13.3 12.8 Motive fuel tax ...... 6.9 6.5 6.7 Federal government transfers Grant from Canada...... 611.7 564.0 543.6 Canada health and social transfers...... 37.2 40.2 31.8 Other...... 34.0 35.5 46.5 Principal expenditure functions Education ...... 128.2 128.0 122.3 Health and social services ...... 238.0 234.3 207.2 Highways and public works ...... 194.3 188.1 156.0 3 Taxes on Individuals

This chapter describes the taxes levied directly on individuals, including personal income taxes, payroll taxes, and health premiums. Employee contributions to employment insurance (EI) and the Canada and Quebec Pension Plans (CPP and QPP) are discussed in chapter 8. Taxes on foreign and domestic income received by Canadians and Canadian income received by non-residents are imposed under, or based on, the provisions in the federal Income Tax Act. Although descriptions of the individual and corporate tax structures are set out separately in this publication, many provisions of the Act apply equally to both individuals and corporate taxpayers. Non-residents are taxed under separate sections of the Act and their taxation is discussed in chapter 4. See chapter 2 for details on 2009 federal, provincial, and territorial budgets.

PERSONAL INCOME TAXES Personal income taxes are imposed by both the federal and provincial/territorial governments. The federal government defines taxable income in the Income Tax Act and levies its personal income tax according to the rate schedule contained in the Act. All of the provinces and territories calculate provincial or territorial tax as a percentage of federally defined taxable income. The federal government does, however, continue to collect personal income taxes for all provinces except Quebec.

Number of Taxpayers and Taxes Paid Table 3.1 illustrates the evolution of the income tax in Canada. From 1934 to 2007, the number of taxpayers grew from fewer than 200,000 to just over 16 million. The number of taxpayers dropped from over 13 million in 1987 to 12.8 million in 1988, reflecting the changes brought about in the first year of the most recent federal tax reform. Under the reform, a significant number of low-income taxpayers were granted tax relief. The decline in the number of taxpayers in 1991 and 1992 was caused by the recession of the early 1990s. The most recent decline, in 2002, reflects further tax reductions. The personal income tax is much more important to the federal revenue structure now than in the pre-World War II period. In the 2008-9 fiscal year, just under 50 percent of the total federal budgetary revenue of $236.4 billion is projected to come from the personal income tax compared with only 8 percent in 1939-40. Table 3.2 provides information on federal tax payable by income class for 2007, and table 3.3 gives a breakdown of federal and provincial/territorial tax payable by province and territory. 3:2 FINANCES OF THE NATION 2009

Table 3.1 Number of Personal Income Tax Payers and Amount of Tax Collected by the Federal Government for Selected Taxation Years, 1934 to 2007 Taxation Number of Total income Federal tax Provincial tax year taxpayers assessed payablea collectedb thousands millions of dollars 1934 ...... 199 714 34 — 1938 ...... 293 1,000 50 — 1945 ...... 2,254 4,548 642 — 1949 ...... 2,232 6,431 501 — 1960 ...... 4,390 18,578 1,784 — 1970 ...... 7,642 49,266 6,037 1,484 1975 ...... 8,492 101,684 12,051 3,519 1980 ...... 9,907 202,513 21,142 7,971 1985 ...... 11,247 288,507 34,597 13,489 1990 ...... 13,796 433,603 59,562 23,929 1992 ...... 13,551 451,027 59,466 24,428 1993 ...... 13,569 460,742 59,631 26,292 1994 ...... 13,695 499,158 61,295 27,208 1995 ...... 14,026 486,536 64,787 29,029 1996 ...... 14,172 505,076 68,505 30,339 1997 ...... 14,420 532,393 74,075 30,759 1998 ...... 14,371 549,803 76,854 30,333 1999 ...... 14,925 594,351 83,025 32,263 2000 ...... 15,412 647,254 90,251 34,520 2001 ...... 15,602 666,178 84,992 33,409 2002 ...... 15,516 680,431 86,713 32,265 2003 ...... 15,836 703,335 88,697 33,558 2004 ...... 16,173 751,140 94,445 37,256 2005 ...... 15,756 763,055 93,323 38,664 2006 ...... 15,722 870,837 99,105 41,444 2007 ...... 16,006 874,977 102,159 44,574 a For 1945, includes refundable portion of tax; for 1960 and 1970, includes old age security tax; and for 1980 and onward, is before deduction of Quebec abatement. b Amounts collected for provinces under collection agreements. Sources: Revenue Canada, Taxation, Taxation Statistics (Ottawa: Supply and Services, various years). Table 3.2 Taxpayers and Federal Tax Payable, by Income Class, 2007 Taxation Year

Total assessed Federal taxa Tax as a % Taxpayers income payable of assessed Income class, $ Number % $ million % $ million % income Less than 10,000..... 197,310 1.2 1,426.2 0.2 12.8 .. 0.9 10,000-15,000 ...... 690,180 4.3 8,870.3 1.1 152.0 0.2 1.7 15,001-20,000 ...... 1,175,420 7.3 20,802.9 2.4 658.1 0.6 3.2 20,001-25,000 ...... 1,479,900 9.2 33,259.3 3.8 1,400.6 1.4 4.2 25,001-30,000 ...... 1,463,210 9.1 40,238.2 4.6 2,194.0 2.1 5.5 30,001-35,000 ...... 1,476,440 9.2 47,924.5 5.5 3,086.0 3.0 6.4 35,001-40,000 ...... 1,417,790 8.9 53,087.4 6.1 3,852.0 3.8 7.3 40,001-50,000 ...... 2,232,740 13.9 99,880.0 11.4 8,570.3 8.4 8.6 50,001-100,000 ...... 4,628,390 28.9 315,391.0 36.0 36,913.0 36.1 11.7 Over 100,000 ...... 1,243,700 7.8 254,116.4 29.0 45,320.5 44.4 17.8 All classes...... 16,005,540 100.0 874,977.2 100.0 102,159.4 100.0 12.3 a Before deduction of abatement for Quebec residents. Source: Canada Revenue Agency, Interim Statistics of Income, 2009 edition, available online at http://www.cra-arc.gc.ca/agency/stats/gb04/pst/final/tables-e.pdf. TAXES ON INDIVIDUALS 3:3 19,912.0 payable, c a payable, Provincial tax Total tax 19.3 56.0 b Before deduction from federal tax payable for the Quebec abatement. the for payable tax federal from deduction Before b 912.5327.4563.0 0.1313.2 0.2 0.1 0.2 94.5 166.6 66.9 0.1 251.0 0.2 0.1 0.3 43.1 69.2 20.9 70.6 144.5 238.0 88.5 321.7 924.2 0.3 258.0 0.3 205.4 476.4 Total assessedTotal tax Federal me Tax Payable, by Province and Territory, and Province by me Tax Payable, 2007 Taxation Year Taxpayers income payable 091,840581,370 38.1494,160781,770 3.6095,120 3.1 347,688.3 11.1 13.1 27,003.8 40.0 24,453.2 123,744.3 115,218.5 3.1 41,505.4005,540 14.1 2.8 13.2 100.0 41.0 2,744.9 16,990.3 2,601.7 13,224.9 874,977.2 23,762.7 16.6 2.7 100.0 13.0 2.6 66,521.3 102,159.4 6,998.1 2,083.1 5,933.7 1,724.2 100.0 24,342.2 4,924.4 19,659.5 44,574.3 4,433.4 149,404.2 258,300475,350 1.6373,440707,870 3.0 2.3 10,707.0 23.2 21,111.0 1.2 15,810.5 182,201.0 2.4 21.0 1.8 1,036.5 2,039.2 19,670.3 1.0 1,509.4 2.0 1.5 844.1 1,596.5 1,167.0 1,917.1 3,704.3 2,721.0 ...... Table 3.3 Taxpayers and Personal Inco Personal and 3.3 Taxpayers Table ...... 2, ...... 16,200 0.1 Collected by the federal government for all provinces and territories except Quebec. Quebec. except and territories provinces all for government federal by the Collected a Source: Same as table 3.2. as table Same Source: Collections by the federal government only. only. government federal by the Collections c otws ertre ...... Territories 19,350Northwest 0.1Nunavut...... Non-residents...... 28,500Total...... 1, 8,720 0.2 16, 0.1 1, aioa...... Manitoba Saskatchewan Alberta...... 1, British Columbia Yukon Ontario...... 6, Nova Scotia...... Nova rneEwr sad...... Island Edward 73,550Prince 0.5 Brunswick...... New Quebec...... 2, 3, Province/territory and Labrador Newfoundland Number % $ million % $ million % $ million $ million 3:4 FINANCES OF THE NATION 2009

Federal Personal Income Tax System Under the Income Tax Act, residents of Canada are liable for tax on their income from all sources, both domestic and foreign. For Canadian residents, income from employment, business (self-employment or unincorporated businesses), and property (interest, dividends, etc.) is subject to tax. Only a few kinds of receipts are not included in the tax base: gifts, inheritances, and lottery winnings are not considered income for tax purposes, neither is the federal child tax benefit, which is a non-taxable payment to parents. There are also a small number of exemptions, such as veterans’ disability pensions. In addition, certain other items, such as workers’ compensation payments under a government scheme and some income- or needs-tested social assistance payments, must be reported as income but are not taxed. Individuals not resident in Canada are taxable on income arising in Canada, which includes income from personal services performed in Canada, business carried on through a permanent establishment in Canada, and capital gains on the disposal of taxable Canadian property.

Types of Income Employment Income Employment income includes salaries, wages, commissions, employment benefits, and living allowances. A few deductions, such as child-care expenses (to a specified maximum), are allowed against employment income. The federal government provides an employment expense tax credit for up to $1,044 in employment expenses. The maximum credit claimable for federal tax purposes is $157.

Business and Property Income The computation of income from a business or property is generally uniform whether it is earned by a sole proprietorship, partnership, corporation, or any other form of organization. Major sources of income from property include interest, dividends, rentals, and royalties and other production payments. Those with business or property income may deduct expenses incurred to earn that income, whether it is earned by an individual, a sole proprietorship, or a partnership. Sole proprietorships and partnerships are not themselves taxable entities. Instead, individuals who are sole proprietors and members of partnerships are subject to personal income tax on their respective shares of the profits of the enterprise. Corporations are separate taxable entities subject to most of the same rules for determining taxable income. The differences are noted in the chapter on corporate income tax (chapter 4). Income for tax purposes from a business, profession, or property is calculated according to generally accepted accounting principles (GAAP) unless the Income Tax Act directs otherwise. Certain receipts or amounts not included in accounting income (for example, excess capital cost allowances claimed) are included in taxable income and some deductions that are not included under GAAP (for example, capital cost allowances that differ from the depreciation normally charged) are allowed. There are limits on the amount of some expenditures that can be deducted; others cannot be deducted at all. TAXES ON INDIVIDUALS 3:5

Certain incentives are provided by way of deduction or credit to further governmental objectives (for example, enhancement of research and development activities). Dividends from taxable Canadian corporations are treated differently from other sources of income from property. To integrate the taxation of corporations and their shareholders, dividend income received from taxable Canadian corporations is grossed up before being included in an individual’s taxable income. A dividend tax credit is then provided to reflect the fact that dividends are paid out of income that has already been taxed at the corporate level. For 2006 and subsequent tax years, there are two rates of gross-up and credit, depending on the underlying corporate income tax rate.

Other Sources of Income The other principal sources of income are capital gains, pension and retirement benefits, child tax benefits, and EI benefits. Old age security (OAS) benefits received by higher-income families are subject to a clawback, as described below. Child tax benefits are not taxable. Since 1972, part of an individual’s net capital gains have been included as income from other sources. For dispositions taking place from January 1, 1990 to February 27, 2000 inclusive, three-quarters of net capital gains are included in income. For dispositions after February 27, 2000, the inclusion percentage is reduced to two-thirds, and for dispositions after October 17, 2000, to one- half. This inclusion was subject to an exemption on the first $100,000 of net capital gains earned between 1984 and 1994, with an enlarged exemption of $500,000 for gains from the sale of farm property or shares of incorporated small businesses. Gains accruing after February 1992 to real estate not used in an active business do not qualify for the $100,000 personal life-time capital gains exemption. Capital gains accruing after February 24, 1994 do not qualify for the $100,000 capital gains exemption. The capital gains exemption for farmers and incorporated small businesses was increased to $750,000, effective for dispositions of qualifying property occurring after March 19, 2007.

Deferred Income The Income Tax Act includes special provisions that further social policy objectives such as saving for retirement or a university education and profit sharing. These measures are provided through deferred income plans, registered pension plans (RPPs), registered retirement savings plans (RRSPs), employee benefit plans, employees’ profit-sharing plans, registered education savings plans (RESPs) and, effective for 2009 and subsequent taxation years, tax-free savings accounts (TFSAs). Although the tax treatment of these plans is not uniform, contributions into a plan by an employee and his or her employer (usually subject to an annual maximum) generally are deductible in calculating income, income accumulat- ing in the plan is tax-sheltered, and benefits from the plan are taxable at the time of receipt. Contributions to RESPs are not deductible, and the income within the plan is not taxed on a current basis; the benefits, when received, are taxable to the recipient, rather than the contributor. In some circumstances, earnings accrued within an RESP (to a specified limit) may be returned to the 3:6 FINANCES OF THE NATION 2009 contributor or may be transferred to the RRSP of the contributor or the contributor’s spouse. Similarly, contributions (to a maximum of $5,000 per taxpayer per year) to a TFSA are not deductible from income, and both the investment gains earned within the TFSA and the original contribution amount are not taxed on withdrawal. RRSP contribution limits for members of RPPs are based on income and contribution limits in the previous year, reduced by a formula that takes into account the amount of RPP contributions made by the employee and employer. For 2009, RRSP contributions are limited to 18 percent of 2008 earned income to a maximum of $21,000 or less, depending on RPP adjustments. That maximum is scheduled to increase to $22,000 for 2010 and to be indexed thereafter to increases in average wage growth. The federal government also has a homebuyer’s plan that allows taxpayers to borrow a maximum of $25,000 from an RRSP (after January 27, 2009) without tax penalty, in order to finance the purchase of a first home. The limit for withdrawals made prior to that date was $20,000.

Tax Rates The marginal tax rates (the rate of tax on the next dollar of income) in the 2009 federal rate schedule range from 15.0 percent on the first $40,726 of taxable income to 29.0 percent on taxable income over $126,264, as shown in table 3.4. These rates are applied to taxable income (total income less deductions) and then refundable credits are subtracted. Special credits such as dividend tax credits and the minimum tax carried over are also subtracted from tax calculated from the rate schedule. The November 2005 economic and fiscal statement reduced the first rate for 2005 from 16 to 15 percent. The 2006 federal budget raised the rate to 15.25 percent for 2006, and 15.50 percent in 2007 and subsequent years. The October 30, 2007 federal economic statement returned the rate to 15.0 percent, effective from January 1, 2007. Higher-income recipients must repay OAS benefits. A tax equal to 15 percent of net income in excess of $66,335, to a maximum of the benefits received, is imposed. The amount clawed back is deductible from taxable income. The federal government makes OAS payments net of the clawback. Table 3.5 compares marginal tax rates for selected years and taxable incomes. In 1949, only the federal government occupied the personal income tax field. Since 1972, however, the federal government imposed its taxes with provincial taxes levied as a percentage of basic federal tax. The 1973 rates shown in the table are federal rates grossed up by 30.5 percent to arrive at the xxx Table 3.4 Federal Taxable Income Brackets, 2009 Federal marginal tax rate, % Before abatement After abatement Taxable income brackets for Quebec for Quebec Up to $40,726 ...... 15.0 12.5 $40,727 to $81,452 ...... 22.0 18.4 $81,453 to $126,264 ...... 26.0 21.7 Over $126,264 ...... 29.0 24.2 TAXES ON INDIVIDUALS 3:7

Table 3.5 Combined Federal and Provincial Personal Income Marginal Tax Rates for Selected Years, 1949 to 2009a Taxable 1949,b 1973, Taxable 1987, Taxable 2009 income, $ % % income, $ % income, $ % 1 ..... 15.00 4.58 1.... 9.00 1 .... 22.20 501 ..... 15.00 5.49 1,321....24.00 40,726 .... 32.56 1,001 ..... 17.00 24.80 2,640....25.50 81,452 .... 38.48 2,001 ..... 19.00 26.10 5,280....27.00 126,264 .... 42.92 3,001 ..... 19.00 27.41 7,919....28.50 4,001 ..... 22.00 27.41 10,560....28.50 5,001 ..... 22.00 30.02 13,198....30.00 6,001 ..... 26.00 30.02 15,839....30.00 7,001 ..... 26.00 32.63 18,477....34.50 8,001 ..... 30.00 32.63 21,119....34.50 9,001 ..... 30.00 35.24 23,756....37.50 10,001 ..... 35.00 35.24 26,398....37.50 11,001 ..... 35.00 38.91 29,038....37.50 12,001 ..... 40.00 38.91 31,678....37.50 14,001 ..... 40.00 43.93 36,953....45.00 15,001 ..... 45.00 43.93 39,597....45.00 24,001 ..... 45.00 48.95 63,347....51.00 25,001 ..... 50.00 48.95 65,994....51.00 39,001 ..... 54.00 56.12 102,950 ....51.00 40,001 ..... 59.00 56.12 105,589 ....51.00 60,001 ..... 64.00 61.34 158,384 ....51.00 90,001 ..... 69.00 61.34 237,575 ....51.08 125,001 ..... 74.00 61.34 329,965 ....51.08 225,001 ..... 79.00 61.34 593,937 ....51.00 400,001 ..... 84.00 61.34 1,055,888 ....51.00 a Taxable income levels are not comparable between 2009 and earlier years. b In calculating marginal rates, all taxable income in excess of $30,000 is assumed to be from investments and therefore subject to surtax. combined federal and provincial tax rates. For 1987, the provincial rate is assumed to be 47.0 percent. Although this rate was not imposed by any province, it represents the rate used by the federal government in designing the rate structure. It is also the federal rate levied on income not earned in a province. For 2009, a nominal provincial rate of 48 percent has been used. In 1949, a surtax of 4 percent on investment income was imposed on foreign-source investment income in excess of the greater of $2,400 and the taxpayer’s personal exemptions. In 1973, federal tax was reduced by 5 percent, but the provincial tax base was not affected. Because of the switch from exemptions to credits, taxable income levels for 2009 are not comparable to those for earlier years. The actual provincial rate structures not only differ from the one used in table 3.5, but also include various low-income tax relief measures, surtaxes, and tax credits.

Federal Tax Credits and Deductions Certain deductions can be used by all taxpayers to reduce income subject to tax. The main deductions are child-care expenses, contributions to registered pension and retirement savings plans, moving expenses for employees changing jobs, union dues, professional membership dues, and a restricted list 3:8 FINANCES OF THE NATION 2009 of expenses incurred in connection with employment. A location-based deduction is allowed to offset the cost of living in northern Canada. In 2009, the maximum deductible child-care expense is $7,000 for each eligible child who is under 7 years old. For each eligible child who is 7 years of age or older, but less than 17 years of age, the maximum is $4,000. Enlarged credits and deductions are available for parents or guardians of disabled children under the age of 17, provided the disability is such that a federal disability tax credit may be claimed. The child-care expense deduction is also subject to an overall limitation of two-thirds of earned income. The current system uses non-refundable tax credits to recognize basic living expenses and personal and family circumstances. The credits reflect the assumption that a certain amount of income should be effectively exempt from tax at the first rate of 15.0 percent. These credits are subtracted from basic federal tax, with a maximum benefit of lowering basic federal tax to zero. The defined basic amounts of the credits, as shown in table 3.6, are indexed annually by any increase in the consumer price index (CPI). In 2009, a basic personal credit of $1,548 is provided to all individual taxpayers. The basic amount of the credit provided for the dependent spouse of a taxpayer is $10,320, with such amount reduced by any spousal net income for the year. Single parents can claim an equivalent-to-married credit for one child. Common-law couples are eligible for the married credit. Taxpayers who provide care in their home for a parent or grandparent who is over the age of 65, or for an adult relative who is dependent on them by reason of physical or mental infirmity, may claim a caregiver or infirm dependent tax credit. The maximum basic amount on which the credit is calculated is $4,198, and that amount is reduced where the net income of the dependant for the year is greater than $14,336. Taxpayers with a disability can claim a credit of $1,079. Persons 65 years of age or over can claim a credit of $961. The basic amount of $6,408 for the age credit is reduced by 15 percent of net income over $32,312. These two credits can be transferred between spouses. Other credits allowed in calculating tax liability include $60 for each month of full-time attendance or $18 for each month of part-time attendance at a post- secondary institution; a textbook credit equal to $9.75 per month for ful1-time post-secondary students and $3.00 per month for part-time post-secondary students; 15.0 percent of medical expenses in excess of 3 percent of income or xxxxxxx Table 3.6 Federal Tax Credits, Selected Years, 1996 to 2009 1996 to 1998 2000 2009 Basic Basic Basic amount Credit amount Credit amount Credit dollars Basic ...... 6,456 1,098 7,231 1,229 10,320 1,548 Married or equivalent...... 5,380 915 6,140 1,044 10,320 1,548 Infirm dependants, 18 and older...... 2,353 400 2,386 406 4,198 630 Over 65 ...... 2,482 592 3,531 600 6,408 961 Disability ...... 4,233 720 4,293 730 7,196 1,079 TAXES ON INDIVIDUALS 3:9

$2,011, whichever is smaller; and 15.0 percent of charitable contributions up to $200 per year. Donations of more than $200 to a maximum of 75 percent of net income are creditable at the 29 percent rate. Up to $2,000 of qualifying pension income is also creditable. Contributions to the CPP, QPP, and EI and tuition fees for students are converted to credits at the rate of 15.0 percent. A credit equal to 15.0 percent of interest paid during the year on qualifying student loans may be claimed. No maximum interest amount is prescribed, and credits earned but not claimed in a taxation year may be carried forward to any of the five subsequent taxation years. The student loan interest credit is not, however, transferable. A number of federal tax credits, including the investment tax credit, foreign tax credit, and federal political contribution tax credit, are available to both corporations and individuals. Individuals can also claim a credit of 15 percent of investments in labour-sponsored venture capital corporations (LSVCCs), to a maximum credit of $750. Certain unused credits and deductions can be transferred to a spouse or other supporting individual. As a result of the province’s opting out of the Federal-Provincial Fiscal Arrangements Act, Quebec taxpayers receive a tax abatement of 16.5 percent of basic federal tax. The abatement reduces federal tax payable and is refundable.

Dividend Tax Credit The dividend tax credit is one of the principal tools used to integrate the personal and corporate income tax systems. Dividends received from taxable Canadian corporations that qualify for the lower effective rate of corporate income tax (see chapter 4) are grossed up by 25 percent before being included 1 in an individual’s income, and basic federal tax is reduced by 13 '3 percent of the grossed-up dividend income. Dividends from Canadian corporations paying the full federal rate are grossed up by 45 percent, and a credit of 18.97 percent is available to the recipient. The provinces also provide similar dividend tax credits, at varying rates, that reduce provincial tax payable.

Sales Tax Credit A refundable sales tax credit (applied after the calculation of basic federal tax) provides relief from the federal goods and services tax (GST) for low-income families and individuals. For July 2009 to June 2010, the credit provides $248 per adult and $130 per dependant under 19, with a supplementary credit for single adults that is phased in at a rate of 2 percent of net income in excess of $8,047, to a maximum of $130. The total credit for 2009 is reduced by 5 percent of net family income over $32,312.

Child Tax Benefit For 1998 and subsequent taxation years, the existing federal child tax benefit program is replaced by an integrated federal and provincial program—the Canada child tax benefit (CCTB). The CCTB has two major components: the CCTB basic benefit and the CCTB national child benefit supplement (NCBS). The 2006 budget introduced the universal child-care benefit, which provides, 3:10 FINANCES OF THE NATION 2009 effective July 2006, a payment of $100 per month for each child under the age of 6. The payment is included in taxable income. For July 2009 to June 2010, the CCTB basic benefit is equal to $1,340 for each child in a family under the age of 18, plus a supplement of $93 per year for the third and each additional child. The total CCTB payable is then reduced by a fixed percentage of family net income over $40,726. For one-child families, the reduction is 2 percent of income, and for families with two or more children the reduction is 4 percent of income in excess of the threshold. The basic benefit is augmented for low-income families by the NCBS. For July 2009 to June 2010, the NCBS is equal to $2,076 per year for the first child, $1,837 for the second, and $1,747 for subsequent children. The NCBS payable is reduced by a specified percentage (ranging from 12.2 percent for a one-child family to 33.3 percent for families with three or more children) of net family income over $23,710. The benefit is not taxable. The child disability benefit (CDB) is available for children who meet the eligibility criteria for the disability tax credit. For July 2009 to June 2010, the CDB provides a maximum of $2,455 per eligible child, with benefits reduced where net family income exceeds $40,726. The percentage reduction is identical to that applied for purposes of the CTB. The basic per-child payment in Alberta differs from the amount provided in other provinces. For further details on the CCTB see chapter 8.

Alternative Minimum Tax The alternative minimum tax (AMT) is payable if it exceeds tax calculated in the normal manner. First, adjusted taxable income is calculated. It differs from regular taxable income in that some deductions and a number of tax incentives are not applicable. Adjusted taxable income includes 80 percent of capital gains and losses not eligible for the capital gains exemption rather than the one-half that is included for regular tax purposes. As well, the actual amount of taxable Canadian dividends (rather than the grossed-up amount) is reported as income, but no dividend tax credit is allowed. A basic $40,000 exemption is subtracted from adjusted taxable income, and a tax rate of 15 percent is applied to the remainder. The federal AMT is this amount minus the basic minimum tax credit and any foreign tax credit. The basic minimum tax equals the sum of personal, spousal, charitable donation, tuition, education, disability, EI, and CPP non-refundable tax credits for the year. No other tax credits are deductible. Federal and provincial surtaxes are payable on the AMT in the same manner as on regular tax. The excess of AMT over regular tax can be carried forward for up to seven years to reduce regular tax payable to the extent that regular tax exceeds AMT.

Indexation Since 1973, the personal income tax system has been indexed annually by raising the tax brackets and increasing the personal exemptions or credits by an inflation factor based on the CPI. These factors are prescribed by regulation. TAXES ON INDIVIDUALS 3:11

The indexing factor for the 2000 and subsequent taxation years is equal to the year-over-year increase in the CPI (for the year ended September 30). Federal tax rates and credits were unchanged by indexing from 1992 through 1999. The $40,000 basic exemption for the AMT is not indexed.

Provincial/Territorial Personal Income Tax Systems The federal government bases its personal income tax on the rate schedule included in the federal Income Tax Act. All the provinces and territories also levy tax by applying their rate schedule to taxable income. The nine provinces and three territories that have collection agreements with the federal government use the federal determination of taxable income. Quebec, which collects its own tax, uses its own definition of taxable income. The tax abatement for Quebec continues to be expressed as a percentage of basic federal tax. Historical data on provincial rates in earlier years and during the period when the agreeing provinces based their tax on federal tax, not income, are available in earlier editions of this publication. Table 3.7 shows the provincial and territorial basic and surtax rates in effect for 2009. Table 3.8 shows the personal income tax credits, by province and territory, for 2009. The following sections give an overview of the personal income tax system in each province and territory. Where tax collection agreements exist, the federal government administers provincial tax credits through the personal income tax return. As well as the tax credits described below, each province provides a tax credit for foreign taxes paid on foreign non-business income not fully offset by the corresponding federal tax credit.

Newfoundland and Labrador Newfoundland and Labrador’s personal income tax rates and brackets for 2009 are shown in table 3.7. Newfoundland and Labrador no longer imposes a high- income surtax. The province provides a number of refundable and non- refundable personal tax credits, as outlined below.

Direct Equity Tax Credit The direct equity tax credit is provided to provincial residents who invest as shareholders in qualifying small business activities in the province. Two credit rates are provided: 20 percent where the qualifying activities take place within North East Avalon and 35 percent where those activities take place outside that area. The credit is administered as a credit against provincial income tax payable.

Political Contribution Tax Credit Newfoundland and Labrador residents who contribute amounts to a registered candidate or political party can claim a non-refundable tax credit for those contributions. The credit is equal to 75 percent of the first $100 in contributions, 50 percent of the next $450 in contributions, and 33.3 percent of the next $600 in contributions, for a maximum annual credit of $500. 3:12 FINANCES OF THE NATION 2009

Table 3.7 Provincial and Territorial Personal Income Tax Brackets and Rates in Effect for 2009 Tax brackets, Rates, Surtax, % of Province/territory $ % provincial/territorial tax payable Newfoundland and Labrador...... 0 to 31,061 7.70 na 31,062 to 62,121 12.80 Over 62,121 15.50 Prince Edward Island 0 to 31,984 9.80 10% on amount over $12,500 31,985 to 63,969 13.80 Over 63,969 16.70 Nova Scotia...... 0 to 29,590 8.79 10% on amount over $10,000 29,591 to 59,180 14.95 59,181 to 93,000 16.67 Over 93,000 17.50 New Brunswick . . . 0 to 35,707 9.65 na 35,708 to 71,415 14.50 71,416 to 116,105 16.00 Over 116,105 17.00 Quebec...... 0 to 38,385 16.00 na 38,386 to 76,770 20.00 Over 76,770 24.00 Ontario...... 0 to 36,848 6.05 20% on amount over $4,257 36,849 to 73,698 9.15 36% on amount over $5,370 Over 73,698 11.16 Manitoba...... 0 to 31,000 10.80 na 31,001 to 67,000 12.75 Over 67,000 17.40 Saskatchewan ..... 0 to 40,113 11.00 na 40,114 to 114,610 13.00 Over 114,610 15.00 Alberta...... All income 10.00 na British Columbia . . 0 to 35,716 5.06 na 35,717 to 71,433 7.70 71,434 to 82,014 10.50 82,015 to 99,588 12.29 Over 99,588 14.70 Northwest Territories...... 0 to 36,885 5.90 na 36,886 to 73,772 8.60 73,773 to 119,936 12.20 Over 119,936 14.05 Nunavut...... 0 to 38,832 4.00 na 38,833 to 77,664 7.00 77,665 to 126,264 9.00 Over 126,264 11.50 Yukon ...... 0 to 40,726 7.04 5% on amount over $6,000 40,727 to 81,452 9.68 81,453 to 126,264 11.44 Over 126,264 12.76

Harmonized Sales Tax Credit The harmonized sales tax (HST) credit is paid to low income residents of the province each October, at the same time as the federal GST credit. The HST credit is equal to a maximum of $40 per adult and $60 per child, where family net income is less than $15,000. The credit is eroded at a rate of 5 percent where family net income exceeds the $15,000 threshold. TAXES ON INDIVIDUALS 3:13

Table 3.8 Provincial/Territorial Personal Income Tax Credits, 2009 Value of credits Married or Over age Province/territory Basic equivalent 65 dollars Newfoundland and Labrador ...... 599 489 281 Prince Edward Island...... 755 642a 369 Nova Scotia...... 702 596 343 New Brunswick ...... 830 705 405 Quebec...... 2,091 na 450 Ontario...... 537 456 262 Manitoba...... 878 878 403 Saskatchewan ...... 1,460 1,460 477 Alberta...... 1,678 1,678 468 British Columbia ...... 474 406 213 Northwest Territories...... 747 747 366 Nunavut...... 466 466 349 Yukon ...... 727 727 451 a The Prince Edward Island spousal credit is $642 and the equivalent to spouse credit is $617.

Low-Income Seniors’ Benefit The low-income seniors’ benefit is a refundable tax credit paid to seniors in the province who have net income up to $25,983 in the previous year. The $798 (for 2009) benefit is phased out as net income increases between $25,983 and $32,827.

Parental Benefits Newfoundland and Labrador provides three types of parental benefits to families in the province. The first, the progressive family growth benefit, provides a $1,000 lump sum to residents of the province who have a child, through birth or adoption, after January 1, 2008. The parental support benefit is a $100 monthly benefit paid for the first 12 months after the birth or adoption of a child, where that birth or adoption takes place after January 1, 2008. Both the progressive family growth benefit and the parental support benefit are non-taxable, and receipt of the benefits is not affected by the level of family income. The province also provides the Newfoundland and Labrador child benefit. The amount of the benefit, which is paid monthly, depends on the number of dependent children under the age of 18 in the family and on net family income. As with the other provincial parental benefits, the Newfoundland and Labrador child benefit is non-taxable.

Sales Tax Rebate Newfoundland and Labrador provides a sales tax rebate with respect to sales tax paid on the purchase of building materials for homes in the province. Residents are required to pay the HST on qualifying purchases, but may then apply to the province for a rebate of the provincial portion (8 percent) of the tax. 3:14 FINANCES OF THE NATION 2009

Home Heating Rebate Provincial residents who have income of less than $40,000 may receive a rebate to offset home heating costs. The amount of the rebate, which ranges from $100 to $500, depends on the type of fuel used for home heating, the location of the home, and the income of eligible individuals or families.

Prince Edward Island Prince Edward Island’s personal income tax rates and brackets for 2009 are as shown in table 3.7. The province also imposes a 10 percent high-income surtax on provincial income tax payable in excess of $12,500. Prince Edward Island provides a number of individual tax credits, including credits for provincial political contributions and tax credits for qualifying investments in specified economic sectors, as outlined below.

Political Contribution Tax Credit Prince Edward Island provides a non-refundable tax credit to Island residents who contribute to registered political parties or candidates for election to the provincial legislature. The credit is calculated as 75 percent of the first $100 in contributions, 50 percent of the next $450, and 33.3 percent of the next $600. The maximum annual credit of $500 is reached at a contribution level of $1,150.

Parental Benefits A tax credit is provided to offset provincial tax paid on the federal universal child-care benefit. The credit is calculated as 9.8 percent of the taxable amount received by an Island resident.

Specialized Labour Tax Credit Individuals who move to Prince Edward Island to work in specified sectors of the economy may claim a tax rebate of 17 percent of approved labour costs. The rebate is generally available to qualifying individuals working in the aerospace, bioscience, information and communications technology, renewable energy, financial services, and export-focused manufacturing and processing (M & P) sectors.

Share Purchase Tax Credit Investors in the aerospace, bioscience, information and communications technology, renewable energy, financial services, and export-focused M & P sectors may claim a tax rebate equal to 35 percent of their investment. The maximum rebate that can be claimed in any one taxation year is $35,000.

Nova Scotia Nova Scotia’s tax rates and brackets for the 2009 taxation year are shown in table 3.7. The province also imposes a high-income surtax of 10 percent of provincial tax over $10,000. Nova Scotia provides several refundable and non- refundable individual tax credits, as outlined below. TAXES ON INDIVIDUALS 3:15

Parental Benefits Families who receive the taxable federal universal child care benefit of $100 per month can claim a credit equal to the provincial tax payable on such amounts. The province also provides a child benefit to families in the province; the amount of the benefit is tied to family size and income.

Political Contribution Tax Credit Nova Scotia residents who contribute to a registered political candidate or political party can claim a non-refundable credit equal to the lesser of $750 or 75 percent of annual contributions. The credit is claimed on the personal income tax return for the year and must be supported by official receipts.

Equity Tax Credit Individuals investing in eligible small businesses in the province can claim a non-refundable tax credit equal to 30 percent of the investment, to a maximum investment of $50,000 per year. Qualifying investments can be made during the calendar year or within 60 days after the end of the year and can generate a maximum annual credit of $15,000. Unused credits may be carried forward for seven years or carried back three years, but the total current and carryforward credit claimed in a single year cannot exceed $15,000.

Labour-Sponsored Venture Capital Tax Credit Nova Scotia residents may claim a 20 percent non-refundable tax credit for investments made in qualifying LSVCCs. The maximum annual credit is $2,000 (reached with a maximum investment of $10,000), and no carryforward is allowed for credits not claimed in the year of investment. Qualifying investments must be made during the calendar year or within 60 days after the end of the year, and investors are required to hold the investment for a period of eight years, failing which the tax credits earned may have to be repaid.

Healthy Living Tax Credit Parents who enroll their children under the age of 18 in qualifying sports programs and other physical activities may claim a non-refundable tax credit for up to $500 in related costs per child. Where the maximum amount is claimed, a reduction in provincial tax of $43.95 will result. There is no limit on the number of qualifying children in respect of whom such expenses can be claimed, and eligibility for the credit is not affected by family income.

Graduate Tax Credit Nova Scotia residents who graduate from an approved post-secondary program (which includes those outside of the province) in 2009 or later years can claim a graduate tax rebate that will reduce provincial taxes otherwise payable. The maximum rebate for university graduates is $2,500 per year, to a maximum of $15,000 claimed over the six-year period following graduation. College graduates or those who graduate from certificate programs may claim up to $1,250 per year, to a maximum of $7,500 over the six-year period. 3:16 FINANCES OF THE NATION 2009

The province formerly offered a graduate tax credit, to a maximum of $2,000, for qualifying individuals who graduated during 2006, 2007, or 2008. Those who earned credits under the former program will continue to be able to use credits not previously claimed during the two-year period following their graduation.

Volunteer Firefighters’ Tax Credit Volunteer firefighters in Nova Scotia are eligible for a refundable tax credit of $500 for 2009 and subsequent years. In order to claim the credit, an individual must satisfy certain criteria with respect to his or her volunteer firefighter status.

New Brunswick Table 3.7 shows the New Brunswick tax rates and brackets imposed for 2009. The province provides several refundable and non-refundable tax credits for individuals and families in the province, as well as a tuition rebate for students, as outlined below.

Political Contribution Tax Credit A non-refundable tax credit is provided to New Brunswick residents who make contributions to registered political parties, riding associations, or independent candidates for the New Brunswick legislature. The credit is equal to 75 percent of the first $200 in contributions, 50 percent of contributions between $200 and $550, and 33.3 percent of contributions over $550. The maximum contribution claimable in any one taxation year is $500, reached at a contribution level of $1,075.

Labour-Sponsored Venture Capital Tax Credit For investments made on or before March 17, 2009, investors in qualifying LSVCCs can claim a non-refundable tax credit of 15 percent of the investment, to a maximum annual credit of $750, reached at $5,000 of eligible investment. Effective for shares purchased after that date, the credit is enhanced to allow for an increase in the qualifying investment from $5,000 to $10,000, and the tax credit rate is increased from 15 to 20 percent. A required holding period of eight years is imposed: where shares are disposed of prior to the expiry of the holding period, any credit claimed must be repaid.

Small Business Investor Tax Credit A 30 percent non-refundable personal tax credit is provided to New Brunswick residents who invest in eligible small businesses in the province before March 17, 2009, to a maximum credit of $24,000 per year, reached on a maximum annual investment of $80,000. Effective March 17, 2009, the credit was enhanced by increasing the size of the allowable annual investment from $80,000 to $250,000. As a result, the maximum annual amount of tax credit available to an individual investor increased from $24,000 to $75,000. Where credits earned cannot be claimed in a particular tax year, they may be carried forward seven years or back three years. TAXES ON INDIVIDUALS 3:17

Parental Benefits New Brunswick provides families that have dependent children under the age of 18 with a non-taxable child tax benefit. The benefit is equal to $250 annually for each dependent child, with benefits reduced where net family income exceeds $20,000. The province also provides a working income supplement to families with dependent children under 18, where those families have earned income. The supplement is $250 per family per year and is reduced where family earned income exceeds prescribed thresholds.

Student Benefits Two benefits are provided to New Brunswick post-secondary students. The first is the debt reduction for timely completion program. The program is available to students who complete an undergraduate program at a qualifying educational institution in the province within the established timeline of the program. Students who have combined (federal and provincial) government student loan borrowings exceeding $26,000 will have 100 percent of their provincial student loan in excess of the $26,000 forgiven. The program is available to qualifying students who graduate after April 1, 2009, and application for the benefit must be made within seven months of graduation. New Brunswick also provides a tuition rebate to anyone who, after January 1, 2005, paid tuition to a qualifying post-secondary institution (which need not be located in the province); graduated from such an institution; and lives, works, and pays personal income taxes in New Brunswick. The rebate, which may be claimed up to 20 years after the credit is first earned, is equal to 50 percent of qualifying tuition costs, with a maximum lifetime rebate of $20,000. The maximum rebate, which may be claimed in any one taxation year, is $4,000, and all rebate amounts paid are non-taxable.

Quebec Quebec remains outside the tax collection arrangements and levies a personal income tax under its own statute. The Quebec tax system is not, as a consequence, directly comparable to those of the other provinces. Quebec imposes a three-bracket income tax structure for 2009, as shown in table 3.7. Non- refundable credits are calculated as 20 percent of the basic amounts, which are shown in table 3.8. Quebec taxpayers file separate federal and provincial personal income tax returns. In addition to federal tax credits, Quebec taxpayers receive a refundable tax abatement of 16.5 percent of basic federal tax in calculating federal tax payable. This measure reflects Quebec’s opting out of the programs under the Federal-Provincial Fiscal Arrangements Act. Quebec provides its taxpayers with a very broad range of refundable and non-refundable tax credits. Individual credits, which are comparable to those provided by most of the other provinces, are outlined below.

Sales Tax Credit Quebec provides a refundable tax credit in respect of Quebec sales tax (QST) paid. The credit is paid in two instalments annually, the first in August and the second in December. The QST credit is available to individuals and families 3:18 FINANCES OF THE NATION 2009 whose income falls below a defined threshold, which varies with family size and composition. The income threshold ranges between $35,445 and $41,425.

Tax Credit for a Labour-Sponsored Fund Quebec taxpayers may claim a non-refundable tax credit for purchases of class A shares in the Fonds de solidarité des travailleurs du Québec (FTQ) that are made during a taxation year or within 60 days after the end of the year. The maximum credit claimable in any one taxation year is $750.

Property Tax Refund Quebec taxpayers who were resident in the province on December 31 and who paid property tax during the year may be eligible for a refund of property taxes paid where their income for that year falls below a specified threshold.

Tax Credit for Contributions to Authorized Quebec Political Parties A non-refundable tax credit may be claimed for contributions made to authorized provincial political parties, riding associations, independent candidates, municipal political parties, or independent candidates. The maximum credit claimable in a taxation year is $405.

Other Tax Credits Quebec also provides the following refundable and non-refundable tax credits.

Refundable tax credits: Non-refundable tax credits: property tax refund for forest tax credit for a beneficiary of a producers, designated trust, QST rebate for employees and tax credit for graduates working in athletes, a remote resource region, and tax credit for a top-level athletes, tax credit for the acquisition of tax credit for respite for caregivers, Capital regional et cooperative tax credit for home improvement Desjardins shares. and renovation, tax credit for home support services for seniors, tax credit for income from an income-averaging annuity for artists, tax credit for taxi drivers and taxi owners, tax credit for the repayment of benefits, tax credit for reporting tips, tax credit for the treatment of infertility, tax credit for volunteer respite services, tax credit respecting the income tax paid by environmental trusts, and tax credits respecting the work premium. TAXES ON INDIVIDUALS 3:19

Ontario Ontario’s tax brackets and rates for 2009 are shown in table 3.7. The surtax rates are 20 percent of provincial tax payable over $4,257 plus 36 percent of provincial tax payable in excess of $5,370. In addition, the province levies a health premium, which is imposed on every income tax payer with income over $20,000. The premium is administered by the Canada Revenue Agency and appears as a payroll deduction. Ontario provides a number of individual tax credits, including a property tax credit, a sales tax credit, a political contributions tax credit, and tax credits for investments in flowthrough shares or labour-sponsored investment funds. Unincorporated employers in the province can earn tax credits for employing apprentices or cooperative education students.

Sales and Property Tax Credits The Ontario sales tax credit is provided to individual taxpayers in the province. The credit is equal to $100 per taxpayer and another $100 for a spouse. A credit of $50 can be claimed for a dependent child under the age of 19. Ontario residents who pay rent or property taxes during the year, or who live in a student residence, may claim a credit on the annual tax return. The amount for a person living in a student residence is $25.00, while renters may claim 20 percent of rent payments made during the year. Property owners may claim any property tax paid during the year. However, the total amount that may be claimed is capped at $250 for a taxpayer under the age of 65 or $625 for taxpayers aged 65 and older. The total of the sales and property tax credits calculated is then reduced by a percentage of the net income of the taxpayer (or the taxpayer and his or her spouse) in excess of a threshold amount. Any excess credits are not refundable and may not be carried over to another taxation year.

Political Contribution Tax Credit Ontario residents who contribute to political parties and constituency associations that are registered for Ontario purposes or to registered candidates may claim a non-refundable tax credit. The credit is calculated as 75 percent of the first $372 of contributions, 50 percent of the next $868 in contributions, and 33.3 percent of the next $1,581 in contributions. The maximum annual credit of $1,240 is reached when contributions of $2,821 are made.

Flowthrough Share Tax Credit A 5 percent refundable tax credit is provided for expenditures on eligible Ontario mining exploration expenses that have been allocated to the taxpayer on mining flowthrough shares. In order to obtain the credit, the taxpayer must be resident in Ontario on the last day of the taxation year for which the credit is claimed .

Labour-Sponsored Investment Funds Tax Credit Ontario residents who invest funds in an approved labour-sponsored investment fund can receive a non-refundable credit equal to 15 percent of that 3:20 FINANCES OF THE NATION 2009 investment, to a maximum credit of $1,125 on an investment of $7,500. No carryover of excess credits is provided for, and investors must hold the investment for a period of eight years.

Apprenticeship Training Tax Credit Unincorporated businesses are eligible for a tax credit based on salaries and wages paid to apprentices in qualified skilled trades. The credit is equal to 45 percent for businesses having annual payroll costs below $400,000. Businesses with annual payroll costs in excess of $600,000 can receive a credit equal to 35 percent. The credit ranges between 35 and 45 percent for businesses with annual payroll between $400,000 and $600,000. The maximum allowable credit is $10,000 per year for each apprentice, over the first 48 months of employment. These credit rates and allowable credit amounts are effective for qualifying expenditures made after March 26, 2009. For qualifying expenditures made before that date, the credit rate for small businesses was 30 percent, and the rate for larger businesses 25 percent, with the overall annual credit per apprentice capped at $5,000.

Cooperative Education Tax Credit A refundable tax credit is provided for unincorporated businesses that provide qualifying work placements for post-secondary cooperative students. As with the apprenticeship tax credit, the percentage credit is greatest (30 percent) for employers having an annual payroll of less than $400,000, and is reduced to 25 percent for employers with annual payroll over $600,000. A credit of between 25 and 30 percent is provided to businesses with payrolls between $400,000 and $600,000. The credit is calculated on total salaries and wages paid to an eligible co-op student and cannot exceed $3,000 for each work placement. The credit rate and maximum credit amounts are effective for qualifying expenditures made after March 26, 2009. For expenditures made prior to that date, the 30 percent rate was 15 percent, and the 25 percent rate was 10 percent, with the maximum credit per work placement set at $1,000.

Manitoba Manitoba uses a provincial tax-on-income system. The tax rates and brackets for 2009 are shown in table 3.7. The province also provides a number of individual refundable and non-refundable tax credits, which are summarized below.

Political Contribution Tax Credit A Manitoba taxpayer who contributes to a recognized political party or to a candidate for election to the provincial legislature may claim a tax credit equal to 75 percent of the first $400 of contributions, 50 percent of the next $350 of contributions, and 33.3 percent of the next $525 of contributions. The maximum credit claimable in any one taxation year is $650. TAXES ON INDIVIDUALS 3:21

Labour-Sponsored Funds Tax Credit Manitoba provides a tax credit for investors in approved LSVCCs during the calendar year or within 60 days after the end of the year. The credit is equal to 15 percent of the qualifying investment, to a maximum of $750 (for such corporations registered before July 1, 2006) or $1,800 (for qualifying corporations registered after June 30, 2006).

Equity Tax Credit A tax credit of 5 percent of the price of qualifying shares acquired by a Manitoba taxpayer can be claimed for share purchases made prior to June 30, 2008. The maximum non-refundable credit claimable in a taxation year is $1,500.

Mineral Exploration Tax Credit Manitoba taxpayers who invest in eligible flowthrough shares of qualifying mineral exploration companies can claim a credit equal to 10 percent of the cost of those investments. The credit is non-refundable, but excess credits earned in a year may be carried back 3 years or forward 10 years and claimed against provincial tax otherwise payable. The credit will increase in two steps: to 20 percent on flowthrough share agreements entered into from April 1, 2009 until March 31, 2010, and to 30 percent on flowthrough share agreements entered into from April 1, 2010 until March 31, 2012.

Tuition Fee Income Tax Rebate Graduates of post-secondary education institutions who live and work in Manitoba can claim a rebate of tuition fees paid. The rebate is equal to 60 percent of tuition fees paid, to a lifetime maximum rebate of $25,000 and is claimed on the Manitoba tax return. The rebate is available for as long as 20 years following graduation.

Community Enterprise Tax Credits The province offers two different tax credits for investments made in eligible community enterprise projects. The first, the community enterprise development tax credit, provides investors with a 30 percent non-refundable credit for investments in eligible community enterprise development projects. The maximum credit claimable in a tax year is $9,000, based on a $30,000 investment. The second credit is the community enterprise investment tax credit, which provides a 30 percent non-refundable credit to investors who acquire equity shares in qualifying emerging enterprises. The maximum creditable investment in a single taxation year is $135,000, giving rise to a credit of $45,000. Both credits, to the extent that they are earned but not used in a given taxation year, can be carried back 3 years and forward 10 years. 3:22 FINANCES OF THE NATION 2009

Primary Caregiver Tax Credit Beginning with the 2009 tax year, Manitoba taxpayers who are the primary caregivers to qualifying dependent individuals for a period of more than three consecutive months without remuneration can claim the primary caregiver tax credit. That refundable tax credit provides such caregivers with a maximum of $1,020 per year.

Odour Control Tax Credit Unincorporated Manitoba farmers may claim a 10 percent refundable tax credit for costs incurred in acquiring equipment used to prevent or reduce odours that arise from organic waste. The credit is applied first to Manitoba income tax payable and can then be refunded, up to the amount of property tax paid on the farmland for the year. Any credit amount in excess of property taxes paid for the year may then be carried forward 10 years or back 3.

Cooperative Education and Apprenticeship Tax Credits Manitoba provides four refundable tax credits relating to the placement of students enrolled in co-op education programs and to the hiring of journeypersons or advanced-level apprentices. The co-op education program provides unincorporated employers in the province with a tax credit of 10 percent of salary paid to a student employed as part of a work placement program run by a qualifying post-secondary institution. The maximum credit claimable for each qualifying work placement is $1,000. The cooperative graduate hiring incentive provides a tax credit to employers who hire graduates of a recognized post-secondary cooperative education program in a field of studies related to the employment. The tax credit is equal to 5 percent of wages and salaries paid to the graduate in each of the first two full years of employment, to a maximum of $2,500 per year, where the employment commences within 18 months of graduation. Under the journeypersons hiring incentive (JHI), employers who employ graduates of cooperative programs within 18 months of their graduation may also claim a credit equal to 5 percent of salaries paid to such graduates, to a maximum of $2,500 per year. The terms of the advanced-level apprentices hiring incentive are similar to those of the JHI in that the employer may claim 5 percent of salaries and wages paid to qualifying apprentices, also to a maximum of $2,500 per apprentice per level. Each of the credits offered under the co-op education and apprenticeship tax credit programs was extended by the 2009 provincial budget to the end of 2011.

Saskatchewan The Saskatchewan tax rates and brackets for 2009 are shown in table 3.7. Saskatchewan offers a number of tax credits, as follows. TAXES ON INDIVIDUALS 3:23

Labour-Sponsored Venture Capital Tax Credit Saskatchewan residents who invest in a provincially or federally registered LSVCC can claim a tax credit equal to 20 percent of the first $5,000 of funds invested in a tax year.

Political Contribution Tax Credit Donors to qualifying political parties or election candidates can claim a non- refundable tax credit equal to 75 percent of the first $400 in donations, 50 percent of the next $350, and 33.3 percent of the next $525. The maximum tax credit claimable in any one taxation year is $650, reached at a donation level of $1,275. No carryover of excess credits is permitted.

Graduate Retention Program Saskatchewan provides a tuition rebate of up to $20,000 for post-secondary graduates who live and work in the province for at least seven years following graduation. Qualifying graduates will have their rebate paid out through the provincial income tax system based on a seven-year rebate schedule, with 10 percent of the entitlement paid out in each of the first four years after graduation, and 20 percent paid out in each of the next three years. The graduate retention program replaces the provincial graduate tax exemption, effective for the 2008 and subsequent taxation years.

Sales Tax Credit Effective July 1, 2008, Saskatchewan replaced its existing sales tax credit with a new low-income tax credit. The new credit is fully refundable and provides lower-income individuals and families in the province with $216 per adult and $84 per child. Eligibility for the full credit is tied to income.

Farm and Small Business Capital Gains Tax Credit Saskatchewan taxpayers who dispose of qualifying farm and small business property in the province after 2000 may benefit from the farm and small business capital gains tax credit. The credit operates by removing eligible capital gains from the taxpayer’s income and recalculating provincial tax payable, applying the lowest provincial rate to those eligible gains.

Employees’ Tool Tax Credit Employees who are required under the terms of their employment to purchase, replace, and upgrade tools may claim a two-part provincial credit. The two components of the credit are the one-time trade entry amount and the annual maintenance amount. Each amount, which is calculated by the taxpayer, is converted to a credit by multiplying by 11.0 percent.

Mineral Exploration Tax Credit Effective for qualifying share purchases made after March 31, 2008, the province provides a non-refundable 10 percent tax credit to Saskatchewan tax- 3:24 FINANCES OF THE NATION 2009 payers who invest in eligible flowthrough shares issued by mining or exploration companies.

Active Families Benefit Beginning with the 2009 tax year, parents or legal guardians of children 6 to 14 years old are eligible to receive an annual tax benefit of up to $150 per child per taxation year. The credit is intended to help offset the cost of children’s participation in cultural, recreational, and sports activities.

Alberta Alberta uses a flat tax, single rate system, the only Canadian province or territory to do so. For 2009, Alberta levies a tax of 10 percent of taxable income. Alberta provides provincial residents with a political contribution tax credit, as well as a family employment credit.

Family Employment Tax Credit The family employment tax credit is provided to working families in the province who have at least one child under the age of 18 and family employment income of at least $2,760. The refundable credit is calculated as 8 percent of family employment income above the $2,760 threshold, to a maximum per child amount. The credit is reduced by 4 percent of net family income over $33,873.

Political Contribution Tax Credit Contributions made to registered political parties, constituency associations, and candidates may be eligible for a non-refundable tax credit. The credit is calculated as 75 percent of contributions up to $200, 50 percent of contributions between $150 and $1,100, and 33.3 percent of contributions between $1,100 and $2,300. The credit is non-refundable and no carryover is provided for credits earned but not used in a taxation year. The maximum allowable credit in any one year is $1,000, reached at a contribution level of $2,300.

British Columbia British Columbia uses a provincial tax-on-income system, with tax rates and brackets for 2009 as shown in table 3.7. The province also provides a number of refundable and non-refundable credits, as outlined below.

Mining Flowthrough Share Tax Credit Individuals who invest in flowthrough shares may claim a non-refundable tax credit equal to 20 percent of their provincial flowthrough mining expenditures. Any credits unused in a year may be carried back 3 years or forward 10 years. The mining flowthrough share credit program, which was scheduled to expire on December 31, 2009, has been extended to December 31, 2010.

Low-Income Climate Action Tax Credit Effective July 1, 2008, the province implemented a carbon tax. As part of the implementation of that tax, it created a refundable climate action tax credit for TAXES ON INDIVIDUALS 3:25 low-income residents of the province. Beginning July 1, 2009, the credit is equal to $105 per individual, $105 for a spouse, and $31.50 for each qualified dependant. For 2009, the credit is reduced by 2 percent of income in excess of $30,600 for a single taxpayer and income in excess of $35,700 for a married couple or single parent.

Mining Exploration Tax Credit Provincial residents who conduct grassroots mineral exploration in British Columbia and incur qualified mining exploration expenses before January 1, 2017 can claim a refundable tax credit equal to 20 percent of such qualified expenses. An enhanced credit rate of 30 percent is provided for qualified mineral exploration undertaken in prescribed mountain pine beetle affected areas.

Political Contribution Tax Credit Contributions made by BC residents to registered BC political parties, constituency associations, or candidates for election to the provincial legislature may qualify for the provincial political contribution tax credit. That credit is calculated as 75 percent of contributions up to $100, 50 percent of contributions between $100 and $550, and 33.3 percent of contributions over $550. The credit is non-refundable, and the maximum credit that can be claimed in any one taxation year is $500. Credits may not be carried over to other taxation years.

Sales Tax Credit British Columbia provides a sales tax credit of $75 per individual with an additional $75 for a spouse. To claim the credit, an individual must be 19 years of age or older (or be a spouse or a parent) and must reside in the province on December 31 of the year for which the credit is claimed. The sales tax credit is reduced by 2 percent of individual net income over $15,000 (for single taxpayers) or net family income over $18,000 (for married taxpayers).

Training Tax Credits Apprentices in the province may claim a refundable training tax credit for each level of training completed during a taxation year. The amount of the credit ranges from $500 to $3,750, depending on the nature of the program and the level of training completed. Enhanced credits are provided for First Nations individuals and persons with disabilities.

Venture Capital Tax Credit BC investors in venture capital corporations may claim a refundable provincial tax equal to 30 percent of their investment, to a maximum credit of $60,000 per year. Where the credit earned in a year exceeds $60,000, the excess credit may be carried forward for up to four years. 3:26 FINANCES OF THE NATION 2009

Employee Share Ownership Plan and Employee Venture Capital Corporation Tax Credit Employees of BC companies that register an employee share ownership plan (ESOP) or an employee venture capital corporation (EVCC) plan and who purchase shares in the employer’s company through such plans may claim a credit against provincial tax otherwise payable. The credit is 20 percent for qualifying investments in ESOP shares or 15 percent for shares issued under an EVCC, with a maximum credit of $2,000 claimable under each program. For the credit to be claimed, shares must be purchased during the calendar year or within 60 days of the end of the calendar year. The credit is non-refundable and no carryover of excess credits is permitted.

Northwest Territories The NWT tax brackets and rates for the 2009 taxation year are set out in table 3.7. The territory levies a 2 percent employee payroll tax on all employment income, payable by the employee. It was brought in as a way to tax the relatively large number of individuals who work in the territory on a seasonal or temporary basis and pay personal income tax in other provinces. Residents of the Northwest Territories are eligible for a cost-of-living tax credit and a tax credit for territorial political contributions.

Cost-of-Living Tax Credit For 2009, the territorial cost-of-living tax credit is available to all residents of the Northwest Territories, with the amount of the credit decreasing as adjusted net income increases. The minimum tax credit is $350 for single filers and $700 for couples.

Political Contribution Tax Credit The Northwest Territories provides a tax credit of 100 percent of the first $100 donated to election candidates and a credit of 50 percent of additional donations. The maximum credit claimable in a tax year is $500, reached at a contribution level of $900.

Nunavut Nunavut’s tax brackets and rates for the 2009 taxation year are outlined in table 3.7. Nunavut offers a political contribution tax credit and a cost-of-living credit. It also imposes a payroll tax on employees at a rate of 2 percent, similar to that used in the Northwest Territories.

Cost-of-Living Tax Credit Nunavut provides individuals resident in the territory on the last day of the taxation year with a cost-of-living tax credit similar to that provided by the Northwest Territories. The Nunavut credit is equal to 2 percent of adjusted net income, with a maximum credit of $1,200. The maximum credit is reached at adjusted income of $60,000. TAXES ON INDIVIDUALS 3:27

Political Contribution Tax Credit Nunavut residents who contribute to candidates for election to the territorial government are eligible for a non-refundable tax credit of 100 percent of the first $100 contributed and 50 percent of the next $800 contributed. The maximum credit obtainable in any one taxation year is $500, reached at a contribution level of $900.

Yukon The tax brackets and rates used for the 2009 taxation year are set out in table 3.7. A 5 percent surtax is payable on territorial tax over $6,000.

Political Contribution Tax Credit Residents of Yukon who contribute funds to recognized territorial political parties or to candidates for election to the Council of Yukon Territory may claim a non-refundable tax credit in respect of those contributions. The credit is calculated as 75 percent of the first $100 in contributions, 50 percent of the next $450 in contributions, and 33.3 percent of the next $600 in contributions. The maximum annual credit is $500, reached at a contribution level of $1,150.

Small Business Investment Tax Credit Yukon residents who invest in qualifying small business corporations can receive a non-refundable tax credit equal to 25 percent of qualified investments, with the maximum claim being $25,000 in any one taxation year. Credits earned but not used in a year may be carried back three years or forward seven.

First Nations Income Tax Credit The First Nations income tax credit is available, as part of a tax-sharing arrangement, to individuals residing on specified settlement lands in the territory. The credit consists of 75 percent of basic federal tax and 95 percent of Yukon territorial tax. Those amounts are then allocated to the self- governing First Nation. The purpose of the credit is to provide a tax abatement to individuals living on settlement lands, such that the total amount of taxes payable to the federal and Yukon governments will be the same.

Research and Development Tax Credit A refundable tax credit is provided to individuals who are resident in Yukon on the last day of the taxation year and who make expenditures in respect of scientific research and experimental development carried out in Yukon that qualify for the federal research and development tax credit. The territorial credit is equal to 15 percent of total eligible expenditures, plus an additional 5 percent of total eligible Yukon College expenditures.

Combined Federal and Provincial/Territorial Tax Rates The actual federal and provincial/territorial taxes payable by various types of taxpayers for 2009 are shown in tables 3.9 through 3.13, where the specific 3:28 FINANCES OF THE NATION 2009 provincial and territorial rates, credits, and high-income surtaxes are incorporated. These tables show both the extent to which provincial/territorial taxes deviate from what is provided for in the federal system and the effect of these deviations on tax payable. The federal and combined federal and provincial/territorial personal income tax position for 2009 for a single taxpayer with no dependants is shown in table 3.9, a taxpayer over the age of 65 with no dependants in table 3.10, a single taxpayer with one dependent child in table 3.11, a taxpayer with a dependent spouse and two dependent children in table 3.12, and a two-income family with two dependent children in table 3.13. These tables have been calculated using the provisions of federal and provincial/territorial income tax legislation as follows: 1) Except in the case of the taxpayer over 65, all income is assumed to be from Canadian employment. Credits for CPP/QPP contributions and EI premiums are taken. No allowance has been made for registered pension or retirement savings plan contributions. Income for the taxpayer over 65 is assumed to be old age security plus private pension income, and no credits for CPP/QPP contributions and EI premiums are taken. 2) All child tax benefits are non-taxable. The single dependent child is assumed to be 6 years old. The two dependent children are assumed to be 6 and 12 years old. The universal child-care benefit has not been included. 3) Federal tax payable for 2009 is computed under the rate schedule provided in the Income Tax Act. Quebec residents receive an abatement from federal tax payable of 16.5 percent of the federal tax. If any part of the federal abatement cannot be offset against federal tax payable, it is refunded. 4) Refundable sales tax credits (federal and provincial) and cost-of-living credits, as described above, have not been taken into account. 5) Provincial/territorial surtaxes have been taken into account. Low-income tax reductions provided against provincial/territorial tax payable have not been taken. 6) Both the federal and provincial/territorial governments provide tax credits beyond those reflected in these tables. To incorporate tax credits such as the political contribution tax credit, provincial/territorial property and sales tax credits, and investment-related tax credits requires unduly restrictive assumptions.

SUCCESSION DUTIES AND GIFT TAXES Succession duties and gift taxes were a significant tax field for both the federal and provincial/territorial governments during the 30 years prior to the federal elimination of these taxes at the end of 1971. By the end of 1979, all provinces but Quebec had withdrawn from the estate and gift tax field. Quebec eliminated taxes on successions and gifts made after April 23, 1985.

HEALTH INSURANCE PREMIUMS Alberta and British Columbia levy health insurance premiums to help finance their health programs. Alberta’s premiums were eliminated effective January TAXES ON INDIVIDUALS 3:29

1, 2009. In British Columbia, premium rates are $648 for one person, $1,152 for a family of two, and $1,296 for a family of three or more. Total or partial relief is given to low-income residents through subsidies or free access to insured services. Ontario’s health-care levy is described in the section on income tax above.

OTHER REVENUE Revenue sources that fall outside the main tax revenue categories described earlier in this chapter and in chapters 4, 5, and 6 are defined as other revenue and include levies imposed for social security programs, such as the Canada and Quebec Pension Plans, employment insurance, and workers’ compensation, as well as health insurance premiums in some provinces. Also included are provincial/territorial payroll taxes, motor vehicle licence and registration fees, sales of goods and services, investment income, and natural resource revenues. Total revenue from miscellaneous sources totaled $153 billion for 2008-9 (as shown in table 3.14), which accounted for 26 percent of all government revenue in 2008-9. The federal government was responsible for 31 percent of miscellaneous revenue, mainly in contributions to social security plans, as shown in table 3.15. For 2008-9, the provincial and territorial governments collected $109 billion, about 71 percent of all miscellaneous revenue (see table 3.16). Miscellaneous revenue amounted to about 32 percent of total provincial and territorial revenue. The most important source of miscellaneous revenue for the provinces/territories was investment income, which includes some aspects of natural resource revenue. At 77 percent, receipts from the sale of goods and services (including water revenue) accounted for the largest share of local revenue in this category, $24 billion, as detailed in table 3.17. 3:30 FINANCES OF THE NATION 2009 dollars Combined federal and provincial/territorial tax (Single Taxpayer—No Dependants) Taxpayer—No (Single Table 3.9 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial and Federal Taxes: Income 2009 Personal of Comparison 3.9 Table Other Federal tax 10,000 . . .15,000 . . .20,000 . . .25,000 — . . .30,000 357 . . .35,000 942 . 1,526 . .40,000 . 2,110 . — .45,000 . 2,695 . 428 .50,000 1,128 1,827 . 3,279 . .55,000 2,527 . 4,119 . .60,000 1,979 3,227 . 133 3,038 920 5,030 . .65,000 3,927 . 2,218 4,098 5,948 . 3,375 1,061 .70,000 4,933 176 . 5,358 6,867 . 2,082 4,533 .80,000 3,192 6,024 . 6,672 7,785 . 5,810 972 .90,000 4,327 2,115 7,124 134 . 3,265 8,296 8,704 . 7,168 . 10,021 5,745 10,541 8,224 1,646 4,415 3,030 8,835 965 10,610 11,761 7,163 12,663 9,324 5,566 1,730 10,724 4,414 12,400 10,424 87 3,012 13,501 8,892 12,624 6,924 10,436 12,571 5,908 357 14,190 15,319 3,994 2,284 3,487 15,166 8,627 11,203 — 17,194 12,261 14,433 7,453 16,009 4,977 20,944 1,740 4,691 17,944 13,122 14,086 2,953 16,366 9,293 9,347 748 21,814 6,206 25,036 18,300 10,904 5,973 15,040 15,911 1,334 10,608 4,166 22,167 26,026 2,500 7,653 1,080 17,736 12,345 12,462 7,274 16,959 5,380 21,515 38 26,497 9,948 3,667 18,877 1,606 11,698 14,083 14,019 2,542 8,887 22,804 6,593 25,657 15,636 10,661 4,833 13,448 527 15,820 9,061 1,492 3,478 19,317 27,326 2,467 8,215 17,697 148 12,261 6,000 15,198 9,797 21,637 4,414 23,600 1,415 16,948 8,312 3,442 11,282 13,861 2,302 7,477 428 20,448 25,919 5,464 15,461 — 9,942 4,417 11,472 1,727 12,767 6,024 3,188 2,756 18,661 24,290 6,840 14,252 10,679 5,477 13,002 9,229 17,462 4,075 3,784 22,203 12,079 670 14,532 7,779 10,495 12,129 6,896 17,817 — 21,198 4,997 4,812 13,579 13,663 8,911 16,526 15,247 21,579 6,341 5,872 517 18,456 19,968 7,341 22,191 529 7 699 — — — 100,000 . . .200,000 . . . 14,834 38,391 17,766 45,978 29,186 30,299 72,898 30,931 76,882 29,857 77,480 31,897 74,908 27,940 79,454 30,259 73,562 28,190 75,871 25,803 71,110 25,038 64,015 25,399 67,950 23,468 67,292 25,992 62,523 67,238 Income, $Income, QC provinces NL PE NS NB QC ON MB SK AB BC NT NU YT TAXES ON INDIVIDUALS 3:31 dollars me Taxes: Federal and Provincial/Territorial and Federal me Taxes: e 65—No Dependants) Combined federal and provincial/territorial tax (Single Senior, Ag Other Table 3.10 Comparison of 2009 Personal Inco of 2009 Personal 3.10 Comparison Table Federal tax 000.—— ————————————— 10,000...— 15,000 . . .20,000 . . .25,000 . . .30,000 — . . .35,000 159 . . .40,000 786 . 1,412 . .45,000 . 2,089 . — .50,000 . 2,809 . 191 .55,000 1,691 . 3,779 . 941 .60,000 2,501 . 4,791 . .65,000 3,364 . 207 3,138 800 5,804 . 1,952 .70,000 4,525 . 4,621 6,816 . 3,438 .80,000 2,169 5,738 248 . 6,213 929 7,829 . 4,932 .90,000 3,225 6,950 1,997 . 8,104 9,279 . 6,558 . 10,045 4,849 12,446 8,163 177 3,253 808 8,483 2,021 10,459 11,946 6,525 15,674 9,375 4,600 10,526 3,496 12,408 11,004 13,827 8,500 2,056 14,500 6,226 115 788 10,195 12,552 5,392 14,310 15,789 2,932 1,879 18,070 8,185 11,710 18,139 12,205 14,526 7,382 16,243 4,070 23,012 3,578 18,615 189 13,763 593 14,204 16,572 9,647 2,252 9,058 23,530 5,528 27,958 18,943 10,773 5,088 15,815 16,142 10,480 2,818 23,855 28,519 7,192 1,518 18,416 12,372 12,488 6,669 527 17,867 4,223 23,242 28,919 34 9,555 2,357 20,244 11,500 14,222 14,169 1,107 8,549 25,225 5,718 28,172 16,274 10,468 3,719 13,445 16,072 8,681 2,471 20,989 962 30,562 7,610 1,468 18,382 231 12,256 5,157 15,328 9,685 23,357 3,563 26,039 17,535 8,050 2,289 11,315 14,043 6,893 1,244 22,136 28,406 4,829 16,143 218 — 9,714 3,418 11,400 12,913 8,027 1,996 20,488 26,811 1,046 6,414 14,884 10,469 4,704 13,087 8,877 19,217 3,022 24,908 15,138 7,284 2,484 11,920 191 12,062 6,340 1,382 19,552 10,170 23,759 4,150 — 14,029 3,675 13,669 8,421 18,176 24,159 5,692 15,776 4,973 465 20,158 22,562 6,672 24,732 21 199 — 191 — 280 — 100,000 . . .200,000 . . . 19,019 43,325 21,780 50,660 33,045 33,649 77,936 34,188 80,624 33,242 81,193 36,015 78,714 31,229 84,289 33,595 77,318 31,626 79,674 29,468 74,939 28,515 68,233 28,906 71,814 27,061 71,212 29,463 66,526 71,152 Income, $Income, QC provinces NL PE NS NB QC ON MB SK AB BC NT NU YT 3:32 FINANCES OF THE NATION 2009 dollars Combined federal and provincial/territorial tax (Single Taxpayer—One Dependant, Age 6) Dependant, Taxpayer—One (Single Table 3.11 Comparison of 2009 Personal Income Taxes: Federal and Provincial/Territorial and Federal Taxes: Income 2009 Personal of Comparison 3.11 Table Other Federal tax 000.—— ————————————— 10,000...— 15,000 . . .20,000 . . .25,000 . . .30,000 — . . .35,000 — . . .40,000 233 . . .45,000 818 . 1,402 . — .50,000 . 1,987 . — .55,000 . 2,827 . 279 .60,000 1,679 . 3,737 . 979 .65,000 2,379 . 4,656 . 1,001 .70,000 3,385 3 . 362 3,320 5,574 . 2,060 .80,000 1,186 4,476 . 4,634 6,493 . 3,621 .90,000 — 2,343 5,576 1,048 449 . 6,258 7,411 . 4,978 . 3,601 6,676 2,183 7,984 9,248 6,646 1,012 5,019 11,371 7,776 358 3,312 — 9,724 8,420 2,162 11,464 6,748 1,433 10,210 8,876 4,671 4,312 12,000 11,076 13,281 8,580 2,818 10,428 1,008 13,618 6,374 282 12,289 5,856 13,820 — 2,972 15,156 10,008 1,990 8,183 18,906 11,833 14,223 7,696 1,061 15,755 11,525 4,202 22,998 3,547 19,625 400 13,444 13,658 16,156 9,607 2,265 23,837 5,648 8,900 20,023 10,457 4,848 — 15,362 15,483 2,372 279 24,293 7,342 1,159 19,262 11,656 12,015 6,460 146 17,281 9,919 3,585 23,404 1,679 21,207 10,441 13,394 13,572 8,181 25,729 5,207 279 17,140 — 8,691 2,774 979 12,191 15,271 2,460 9,036 21,340 277 6,941 19,211 10,636 4,252 13,941 7,436 23,493 3,509 1,524 17,441 2,122 588 9,328 10,813 12,236 5,836 21,283 — 4,886 — 15,436 7,843 3,182 10,707 1,147 12,298 2,061 18,978 9,177 6,358 15,508 10,115 4,601 12,237 279 7,647 19,244 2,983 1,175 15,521 2,467 8,665 11,318 11,565 — 6,117 19,283 — 4,327 14,512 7,215 3,527 1,439 12,902 17,954 288 9,734 5,765 16,111 4,997 8,150 19,806 — 6,566 411 73 — — — — — — — 100,000 . . .200,000 . . . 13,542 37,099 16,218 44,430 27,148 28,107 70,860 28,727 74,628 27,604 75,276 30,300 72,655 25,681 77,858 27,833 71,302 25,183 73,445 22,578 68,102 23,083 60,790 23,103 65,996 21,454 64,997 23,608 60,509 64,854 Income, $Income, QC provinces NL PE NS NB QC ON MB SK AB BC NT NU YT TAXES ON INDIVIDUALS 3:33 and Provincial/Territorial and dollars come Taxes: Federal Federal come Taxes: Combined federal and provincial/territorial tax (Married Taxpayer—Spouse and Two Dependent Children, Ages 6 and 12) Other Table 3.12 Comparison of 2009 Personal In of 2009 Personal 3.12 Comparison Table Federal tax 10,000 . . .15,000 . . .25,000 — . . .30,000 — . . .35,000 . . .40,000 171 . — . .45,000 755 . — 1,340 . .50,000 . 1,924 . .55,000 . 2,764 . 204 .60,000 — 1,604 . 3,675 . 904 .65,000 2,304 . 4,593 . .70,000 3,310 3 . 3,245 926 5,512 — . 1,985 .80,000 4,401 . 4,559 6,430 . 3,546 1,111 .90,000 — 2,268 5,501 . 6,183 7,349 . 4,903 . 3,526 6,601 — 2,108 7,909 9,186 6,571 973 4,944 11,308 7,701 3,237 9,649 8,345 2,087 — — 11,389 6,673 10,135 8,801 4,596 4,689 937 11,925 11,001 13,206 8,505 3,304 10,353 13,543 6,299 12,214 6,098 13,745 — 2,897 15,081 1,920 — 1,915 8,108 9,933 18,831 11,758 14,148 7,938 15,680 4,127 22,923 11,767 3,472 19,550 13,685 13,583 16,081 9,848 2,190 23,762 5,573 933 19,948 10,382 4,773 15,604 15,408 8,825 2,297 149 — 24,218 7,267 1,084 19,187 11,581 11,940 6,385 17,522 3,510 23,329 1,604 21,448 9,844 10,366 986 13,319 13,497 — 8,106 25,971 5,132 17,065 2,699 904 12,116 — 15,196 8,616 2,385 8,961 21,265 6,866 19,136 10,561 4,177 13,866 204 23,418 3,434 1,449 17,366 7,361 2,047 9,253 10,738 — 12,161 5,761 21,208 4,811 15,361 3,107 10,632 1,072 — 12,223 1,986 7,768 18,903 9,102 204 6,283 15,433 10,040 4,526 12,162 19,169 2,908 1,100 15,446 7,572 2,392 8,590 — 11,243 11,490 6,042 19,208 4,252 14,437 — 513 3,452 1,364 12,827 7,140 17,879 9,659 5,690 16,036 4,922 19,731 — 8,075 204 6,491 — 213 — — 336 — — — — — 20,000 . . . — — 362 449100,000 . . .200,000...... 358 . . . 13,479 36,973 282 16,143 44,280 949 27,073 28,032 70,710 146 28,652 74,478 27,529 75,126 277 30,542 72,505 25,606 78,036 — 27,758 71,152 25,108 73,295 22,503 67,952 — 23,008 60,640 23,028 65,846 21,379 64,847 23,533 60,359 73 64,704 — — — Income, $Income, QC provinces NL PE NS NB QC ON MB SK AB BC NT NU YT 3:34 FINANCES OF THE NATION 2009 and Provincial/Territorial and nt Children, Ages 6 and 12) dollars come Taxes: Federal Federal come Taxes: Combined federal and provincial/territorial tax (Two-Income Family—Two Depende Other Table 3.13 Comparison of 2009 Personal In of 2009 Personal 3.13 Comparison Table Federal tax 10,000...— — ——— ————————— —— ——— 10,000...— 15,000 . . .25,000 . . .30,000 — . . .35,000 . . .40,000 — . . .45,000 . . — .50,000 6 240 . . .55,000 590 . 1,175 . — .60,000 . 1,759 . .65,000 . 2,344 . 288 .70,000 61 1,407 . 8 2,928 . 707 .80,000 2,107 . 625 3,513 . 1,632 .90,000 85 2,807 . 3,469 4,171 . 2,410 . 2,012 992 3,507 810 4,529 5,714 4,046 2,889 4,207 1,786 6,576 7,284 1,275 52 5,203 3,726 4,996 678 2,616 6,755 6,401 1,812 1,096 4,861 6,843 3,832 7,967 — 7,678 2,682 6,156 1,353 1,082 8,723 4,982 624 9,269 3,881 8,955 12,011 7,451 2,494 10,321 1,270 6,133 5,268 13,342 — 3,194 14,994 8,746 10,130 637 2,152 149 7,297 13,331 6,655 2,096 16,575 4,176 4,223 8,593 9,977 13,034 16,683 8,041 3,019 5,278 1,003 648 — 10,994 358 5,427 14,382 16,158 3,145 9,428 6,381 1,932 11,413 6,670 17,798 1,312 8,804 4,359 2,286 587 7,640 13,557 14,218 1,287 7,932 800 10,546 5,572 3,453 12,352 16,683 2,601 9,194 1,009 415 47 6,785 1,665 9,338 11,006 4,619 15,422 3,537 2,411 7,998 10,023 99 13,860 5,786 1,436 8,208 — 4,473 741 3,386 10,085 12,561 6,952 27 2,169 5,416 7,536 1,283 4,361 — 12,701 3,056 9,194 2,794 6,432 677 5,336 1,766 — 11,643 7,514 10,784 493 3,942 3,822 13,508 6,369 1,018 4,829 4,851 249 6,786 262 5,720 — 5,879 8,109 6,912 89 221 — 409 101 — 201 — 20,000 . . . — — 277 359100,000 . . .200,000...... 298 . . . 8,853 28,424 267 10,603 — 34,041 18,133 53,306 19,809 151 59,440 20,048 60,417 19,462 58,263 350 21,238 62,652 17,120 54,391 — 19,809 59,029 18,493 54,998 16,713 50,116 — 15,198 49,092 15,401 49,308 14,127 101 45,445 16,262 50,359 — — 4 Income, $Income, QC provinces NL PE NS NB QC ON MB SK AB BC NT NU YT TAXES ON INDIVIDUALS 3:35

Table 3.14 Consolidated Other Revenue,a All Levels of Government, Fiscal Years 2000-1 and 2008-9 2000-1 2008-9 millions of dollars Miscellaneous revenue Payroll taxes ...... 8,013 10,450 Motor vehicle licences ...... 2,737 3,557 Natural resource taxes and licences ...... 706 1,652 Miscellaneous taxes...... 3,701 6,148 Total...... 15,157 21,807 Health and drug insurance premiums...... 2,178 3,390 Contributions to social security plans...... 30,087 35,404 Sales of goods and services ...... 34,689 53,625 Investment income ...... 37,749 54,068 Other revenue from own sources ...... 7,020 6,836 Total other revenue, all levels of government ...... 126,880 153,323 a Excludes intergovernmental transfers. Source: Statistics Canada, June 2009.

Table 3.15 Other Revenue, Federal Government, Fiscal Years 2000-1 and 2008-9 2000-1 2008-9 millions of dollars Miscellaneous revenue Natural resource taxes and licences ...... 97 227 Miscellaneous taxes...... 488 980 Total...... 585 1,207 Contributions to social security plans...... 22,591 22,538 Sales of goods and services ...... 4,472 9,588 Investment income...... 7,060 14,017 Other revenue from own sources ...... 741 439 Total other revenue, federal government ...... 35,449 47,789 Source: Same as table 3.14.

Table 3.16 Other Revenue, Provincial and Territorial Governments, Fiscal Years 2000-1 and 2008-9 2000-1 2008-9 millions of dollars Miscellaneous revenue Payroll taxes...... 8,013 10,450 Motor vehicle licences...... 2,737 3,557 Natural resource taxes and licences ...... 610 1,425 Miscellaneous taxes...... 2,699 4,228 Total...... 14,059 19,660 Health and drug insurance premiums...... 2,178 3,390 Contributions to social security plans...... 7,496 12,866 Sales of goods and services ...... 21,823 29,862 Investment income...... 28,465 37,314 Other revenue from own sources ...... 3,370 5,426 Total other revenue, provincial and territorial governments . 77,391 108,518 Source: Same as table 3.14. 3:36 FINANCES OF THE NATION 2009

Table 3.17 Other Revenue, Local Governments, Calendar Years 2000 and 2008 2000 2008 thousands of dollars Miscellaneous taxes...... 513,763 940,384 Sales of goods and services ...... 12,094,702 18,342,111 Investment income...... 2,441,897 3,355,207 Other revenue from own sources ...... 685,825 1,154,976 Total other revenue, local governments ...... 15,736,187 23,792,678 Source: Same as table 3.14. 4 Taxes on Business

This chapter describes the income and related taxes currently levied on businesses, including corporate income taxes, capital taxes, and payroll taxes. The taxation of non-residents is also discussed. Employer contributions to employment insurance and the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) are reviewed in chapter 8. The most important tax on companies is the corporate income tax, which is imposed by the federal government and all provinces and territories. Corporate income taxes are expected to account for about 13 percent of the federal government’s total budgetary revenue in 2008-9. The federal government and all provinces except Alberta levy capital taxes on financial institutions. Manitoba, Ontario, Quebec, and Nova Scotia levy a general corporate capital tax, although exemptions are provided in Manitoba, Ontario, and Quebec for companies engaged in manufacturing and processing (M & P) activities. In addition to the taxes on corporations described in this chapter, companies are normally subject to consumer and miscellaneous other taxes.

CORPORATE INCOME TAXES The federal corporate income tax, like the personal income tax, is imposed under the Income Tax Act. The principles defining the scope of the tax parallel those that apply to individual income tax payers, and net income or profit received by Canadians is often defined by the Act without reference to individuals or corporations. Income from a business, profession, or property is calculated according to generally accepted accounting principles (GAAP) unless the Act directs otherwise. For income tax purposes, certain receipts or amounts not included in accounting income (for example, excess capital cost allowances claimed) are included in taxable income, and some deductions that are not included under GAAP (for example, capital cost allowances that differ from the depreciation normally charged) are allowed. There are limits on the amount of some expenditures that may be deducted; others may not be deducted at all. In order to further government policy objectives, certain incentives are provided by way of a deduction from income or a credit against tax payable. Both the corporate and personal income tax systems contain elements intended to improve integration between the two systems. A perfectly integrated system would be neutral in the amount of tax levied on income flowing through a corporation to shareholders and on the same income earned directly by shareholders. The principal tool for integration in the personal income tax is the dividend gross-up and tax credit. Canadian corporations are allowed to exclude from taxation dividends received from other Canadian corporations, 4:2 FINANCES OF THE NATION 2009 on the assumption that the first company has already paid tax on them. Special rules are in effect for some preferred shares. As part of the current federal-provincial fiscal arrangements, the federal government provides a tax credit for taxable corporation income earned in a province or territory to make room for the provinces and territories to levy their own corporate income tax. As long as the provincial or territorial government applies the federal definition of corporation taxable income, the federal government will collect the tax on behalf of the province or territory as a provincially/territorially imposed tax. All provinces and territories impose corporate income taxes. Quebec and Alberta currently administer their own provincial corporate income taxes, although their tax bases are not radically different from the federal base. The federal government collects the provincial/territorial corporate income tax in all other provinces and the territories. Ontario, which formerly administered its own corporate income tax system, has entered into an agreement with the federal government under which the Canada Revenue Agency administers Ontario’s corporate tax system, generally effective for corporate tax years ending after 2008. A corporation is subject to provincial income tax in each province in which it has a permanent establishment. If a corporation has a permanent establishment in more than one province, its taxable income is allocated among the provinces according to formulas agreed upon by the federal and all the provincial and territorial governments. Currently, provincial payroll and capital taxes are deductible when calculating income for the federal corporate tax, but provincial corporate income taxes are not. This situation has created an incentive for provincial governments to impose payroll and capital taxes instead of income taxes. Through a series of announcements beginning in 1992, the federal government has re- peatedly delayed the implementation of a proposal to limit the deductibility of these taxes when calculating income for federal tax purposes. In the 2007 budget, the federal government proposed a financial incentive for provinces to encourage them to eliminate (or to accelerate the elimination of) their capital taxes by 2011. The federal incentive will equal the average expected federal corporate income tax gain from the elimination of provincial capital taxes and will be available to provinces that, on or after March 19, 2007, enact legislation to eliminate their capital taxes before January 1, 2011. The incentive will also be available to provinces that restructure their capital tax on financial institutions into a minimum tax, similar to the federal minimum tax on financial institutions. The following sections provide an overview of the structure of the federal corporate income tax system and the corporate income taxes levied in each province and territory. For specific details, the reader should refer to the relevant federal and provincial/territorial statutes and regulations. TAXES ON BUSINESS 4:3

Federal Corporate Income Tax System Tax Rates The federal corporate income tax rate structure is a basic rate of 38 percent with a general tax reduction of 9.0 percentage points and further reductions for the first $500,000 of active business income of Canadian-controlled private corporations (CCPCs) and income earned in a province (10 percentage points). There is no longer any general corporate surtax. The 2007 federal economic statement reduced the effective general rate to 19.5 percent in 2008, 19.0 in 2009, 18.0 percent in 2010, 16.5 percent in 2011, and 15.0 percent in 2012. As shown in table 4.1, for 2009 the basic federal rate on corporate income earned in a province (that is, after deducting the abatement in favour of the provinces discussed above) is 19 percent. The federal corporate rate on active business income of a CCPC below $500,000 is 11 percent. The small business deduction is phased out for CCPCs with taxable capital of between $10 million and $15 million and is eliminated for CCPCs with taxable capital of more than $15 million. Because corporations are taxed on a fiscal-year basis rather than a calendar-year basis, rate changes made at any point in the calendar year are usually prorated over the fiscal year.

Tax Credits Investment tax credits, which reduce tax otherwise payable, are available for certain investments and qualifying expenditures. Credits of 20 or 35 percent can be claimed for expenditures on scientific research and experimental development (SR & ED) carried on anywhere in Canada. Unclaimed balances may be carried forward or backward for limited periods. Corporations can also take advantage of tax credits or deductions for federal political contributions, charitable donations, and gifts to Canada and the provinces, as well as tax credits to offset the double taxation of foreign-source income. The federal government also provides a credit for logging taxes paid.

Provincial Corporate Income Tax Systems The corporate income tax rates levied on small business by each province and territory for 2009 are listed in table 4.2, and the rates for large corporations are summarized in table 4.3. All provinces and territories have at least two rates for corporate income. A lower rate is levied on corporate income that qualifies for the federal small business deduction and a higher general rate (or rates) on other corporate income. Since the federal government raised the threshold at which the low rate disappears, all provinces and territories have followed the federal practice. Table 4.2 shows the provincial/territorial thresholds for 2009. A number of provinces have committed to raising their thresholds even 4:4 FINANCES OF THE NATION 2009 Effective January 1, Effective January

a The 11.0 rate for 2009 applies to non-M & P active business income of a CCPC below a CCPC of income business active & P non-M to 2009 applies for rate The 11.0 b Selected Years, 1987 to 2010 1987 2005 2006 2007 2008 2009 2010 $200,000 $300,000 $300,000 $400,000 $400,000 $500,000 $500,000 Table 4.1 Federal Corporate Income Tax Rates, Income Corporate 4.1 Federal Table ...... 15% 12% 12% 12% 11.0% 11% 11% b Net of the 10 percent credit for provincial corporate income tax. tax. income corporate provincial for credit 10 percent the of Net a Threshold begins...... Threshold the $500,000 threshold. $500,000 the General business...... 36%General ...... resources...... income & P) (M and processing Manufacturing 36% 30%Natural 36% 21%Investment Small business rate 25% 21% 21% 28% 23% 21% 28% 21% 21% 19.5% 28% 21% 19.5% 19% 19.5% 19% 19.5% 18% 19% 18% 18% 19% 18% TAXES ON BUSINESS 4:5

Table 4.2 Provincial/Territorial Corporate Income Tax Rates on Small Businesses for 2009 Threshold Province/territory Rate begins percent dollars Newfoundland and Labrador ...... 5.0 500,000 Prince Edward Islanda ...... 2.4 500,000 Nova Scotia...... 5.0 400,000 New Brunswick ...... 5.0 500,000 Quebec...... 8.0 400,000b Ontarioc ...... 5.5 500,000 Manitoba...... 1.0 400,000 Saskatchewan ...... 4.5 500,000 Alberta...... 3.0 460,000d British Columbia ...... 2.5 400,000 Northwest Territories...... 4.0 500,000 Nunavut...... 4.0 500,000 Yukone ...... 4.0 400,000 a The Prince Edward Island small business rate decreases from 3.2% to 2.1%, effective April 1, 2009. The rate shown is the effective 2009 rate for calendar year companies. b Increases to $500,000 effective April 1, 2009. c The Ontario small business rate is phased out where corporate income exceeds $1.5 million. d Increases to $500,000, effective April 1, 2009. e The lower M & P rate may be claimed by small businesses. See table 4.3.

Table 4.3 Provincial/Territorial Corporate Income Tax Rates on Large Businesses for 2009 Manufacturing and Province/territory processing General percent Newfoundland and Labrador ...... 5 14 Prince Edward Island...... 16 16 Nova Scotia...... 16 16 New Brunswicka ...... 12.5 12.5 Quebec...... 11.9 11.9 Ontario...... 12 14 Manitobaa ...... 12.5 12.5 Saskatchewan ...... 10 12 Alberta...... 10 10 British Columbia ...... 11 11 Northwest Territories...... 11.5 11.5 Nunavut...... 12 12 Yukon ...... 2.5 15 a The New Brunswick and Manitoba general and M & P tax rates decrease from 13.0% to 12.0%, effective July 1, 2009. further in future years. Although the general rate is applicable to all other corporate income, several provinces have a preferred rate for M & P income. For detailed information, the reader should look to the relevant province or territory’s statutes and regulations. 4:6 FINANCES OF THE NATION 2009

Agreeing Provinces All provinces and territories except Quebec and Alberta have signed agreements with the federal government that allow it to collect corporate income tax on their behalf. The agreement between the federal government and Ontario takes effect generally for corporate taxation years ending after 2008. Credits, deductions, and rates are, however, not uniform across the provinces and territories, as outlined below.

Newfoundland and Labrador The general corporate income tax rate for Newfoundland and Labrador for 2009 is 14.0 percent. Both active business income of a CCPC below $500,000 and income from M & P are taxed at a preferential rate of 5.0 percent. The province offers a number of corporate tax credits, as follows: • political contribution tax credit, • direct equity tax credit, • R & D tax credit, • film and video tax credit, and • resort development tax credit.

Prince Edward Island Prince Edward Island imposes a general corporate tax rate for 2009 of 16.0 percent. The province also provides a lower rate on the first $500,000 of active business income of a CCPC. The small business rate is 3.2 percent from January 1 to March 31, 2008 and 2.1 percent from April 1 to December 31, 2008. The blended rate payable by calendar-year companies for 2009 is therefore 2.37 percent. Prince Edward Island does not provide a preferential rate for income from M & P. The province provides two corporate tax credits: • political contribution tax credit and • investment tax credit on acquisitions of qualifying M & P property.

Nova Scotia The general provincial corporate tax rate for 2009 is 16.0 percent. Nova Scotia also provides a lower rate of 5.0 percent on the first $400,000 of active business income of a CCPC. Nova Scotia does not provide a preferential rate for income from M & P. For 2009, Nova Scotia offers the following corporate tax credits: • political contribution tax credit, • film industry tax credit, • R & D tax credit, • corporate income tax reduction for new corporations, TAXES ON BUSINESS 4:7

• energy tax credit, and • digital media tax credit.

New Brunswick The New Brunswick general corporate tax rate for 2009 is 13.0 percent from January 1 to June 30 and 12.0 percent from July 1 to December 31, giving a blended rate of 12.5 percent for calendar-year companies. The rate levied on the first $500,000 of active business income of a CCPC is 5.0 percent for 2009. The province does not offer a preferential tax rate for income from M & P operations. New Brunswick provides the following corporate tax credits for 2009: • political contribution tax credit, • foreign tax credit, • R & D tax credit (refundable), and • film tax credit.

Ontario Ontario levies three corporate income tax rates. For the 2009 calendar year, active business income of a CCPC below $500,000 is taxed at 5.5 percent. The general corporate income tax rate for the year is 14.0 percent. Ontario provides a preferential rate of 12.0 percent for M & P income earned in the province. The province also imposes a 4.25 percent surtax on the excess over $500,000 of taxable income of CCPCs; the surtax claws back the benefits of the lower tax rate from large companies. For 2009, the benefit of the lower rate is eliminated when corporate taxable income of a CCPC reaches $1.5 million. Ontario also levies a corporate minimum tax (CMT) on corporations with annual gross revenues in excess of $10 million or total assets in excess of $5 million. The tax is paid to the extent that CMT liability exceeds regular income tax liability. The tax is based on a company’s financial statement income computed according to GAAP, but the financial statement cannot be prepared on a consolidated basis. The tax is imposed on the portion of a corporation’s CMT base that is allocated to Ontario at a rate of 4 percent. Ontario has entered into an agreement with the federal government that will take effect for corporate taxation years ending after 2008. Under that agreement, the Ontario corporate income tax base has been harmonized with the federal base, and the federal government will administer Ontario’s corporate tax system. Ontario provides a number of corporate tax credits, including the following: • apprenticeship training tax credit, • cooperative education tax credit, • Ontario business research institute tax credit, • Ontario innovation tax credit, 4:8 FINANCES OF THE NATION 2009

•Ontario R & D expenditures deduction, • Ontario book publishing tax credit, • Ontario computer animation and special effects tax credit, • Ontario film and television tax credit, • Ontario interactive digital media tax credit, • Ontario production services tax credit, and • Ontario sound recording tax credit.

Manitoba For 2009, the Manitoba general corporate tax rate was 13.0 percent from January 1 to June 30 and 12.0 percent from July 1 to December 31. A blended rate of 12.5 percent therefore applies to calendar-year companies for 2009. The province’s small business rate for 2009 was 1.0 percent for the entire year, and the provincial small business limit was $400,000. Manitoba does not offer a preferential rate for M & P income in the province. A tax credit is, however, provided for investments in qualifying M & P equipment and, effective July 1, 2008, M & P companies in the province are exempt from Manitoba’s general corporate capital tax. The province provides the following corporate tax credits or incentives for 2009: • manufacturing investment tax credit, • film and video production tax credit, • interactive digital media tax credit, • book publishing tax credit, • odour control tax credit, • R & D tax credit, • green energy manufacturing tax credit, • community enterprise development tax credit, and • co-op education and apprenticeship tax credits.

Saskatchewan The Saskatchewan general corporate income tax rate for 2009 was 12.0 percent. The Saskatchewan small business rate was 4.5 percent throughout the year, with the small business limit set at $500,000. Saskatchewan does not provide a specific rate for M & P companies. Instead, companies engaged in M & P activities may be eligible for a reduction in the general corporate rate, to as low as 10 percent, depending on the proportion of M & P profits allocated to the province. The province also provides a tax credit for investments in M & P plant and equipment. Saskatchewan allows a number of corporate tax credits for 2009, as follows: TAXES ON BUSINESS 4:9

• M & P investment tax credit, • R & D tax credit, • film employment tax credit, and • royalty tax rebate.

British Columbia British Columbia levies corporate income tax at a rate of 11.0 percent, with a lower rate of 2.5 percent provided for active business income of a CCPC below the provincial small business income threshold of $400,000. British Columbia does not provide a preferential rate for income from M & P. Corporations in the province may be eligible for a number of tax reductions and refundable and non-refundable tax credits, including: • book publishing tax credit, • film and television tax credit, • foreign tax credit, • logging tax credit, • mineral tax credit, • mining exploration tax credit, • oil and gas royalties and freehold production tax credit, • political contribution tax credit, • productions services tax credit, • qualifying environmental trust tax credit, • SR & ED tax credit, • small business venture capital tax credit, and • training tax credit.

Northwest Territories For 2009, the Northwest Territories imposes a general corporate tax rate of 11.5 percent. The territory’s small business rate for the year is 4.0 percent, levied on active business income of a CCPC up to $500,000. The Northwest Territories does not provide a preferential rate for income from M & P. For 2009, the Northwest Territories provides a political contribution tax credit.

Nunavut Nunavut’s general corporate income tax rate for 2009 is 12.0 percent, and its small business tax rate (levied on active business income of a CCPC under $500,000) is 4.0 percent. Nunavut does not provide a lower rate on income from M & P. 4:10 FINANCES OF THE NATION 2009

Nunavut provides the following corporate tax credits for 2009: • political contribution tax credit and • business training tax credit (after April 1, 2009).

Yukon Yukon’s general corporate tax rate for 2009 is 15 percent. Small CCPCs are eligible for a lower rate of 4.0 percent on their first $400,000 of active business income. Yukon also provides a preferential 2.5 percent rate on income from M & P. Small businesses that carry out M & P operations in Yukon are also eligible for the 2.5 percent rate on such income. Yukon provides the following corporate tax credits for 2009: • political contribution tax credit and • R & D tax credit.

Quebec Quebec has a two-tiered corporate income tax system. Eligible business income of a CCPC below $400,000 (which includes active business income and excludes investment income, income from a personal services corporation, and specified investment business income) is taxed at 8.0 percent for the 2009 calendar year. All other corporate income, including active business income and investment income, is taxed at 11.9 percent. Quebec does not provide a preferential rate for income from M & P. Quebec offers a large number of corporate tax credits, which are often aimed at encouraging investment in specific economic sectors. A list of current credits includes: • tax credit for book publishing, • tax credit for an in-house design activity, • tax credit for a design activity carried out by an outside consultant, • tax credit for film dubbing, • tax credit for film production services, • tax credit for the production of performances, • tax credit for the production of sound recordings, • tax credit for a Quebec film production, • tax credit for hiring financial analysts who specialize in financial deriva- tives, • tax credit for major employment-generating projects, • tax credit for job creation in the resource regions, • tax credit for job creation in the Gaspésie region and in certain maritime regions of Quebec, TAXES ON BUSINESS 4:11

• tax credit for job creation in the aluminum industry in the Saguenay–Lac- Saint-Jean region, • tax credit for an on-the-job training period, • tax credit for reporting tips, • tax credit for resources, • tax credit for the production of ethanol, • tax credit for the construction or major repair of public access roads and bridges in forest areas, • tax credit for the acquisition of pig manure treatment facilities, • tax credit for SR & ED, • tax credit for the acquisition of qualifying M & P assets (after March 13, 2008), • tax credit for the construction or conversion of a vessel, • tax credit for taxi firms, • tax credit for the modernization of the taxi fleet, • tax credit for francization in the workplace, • tax credit for technological adaptation services, • tax credit for salaries and wages (biotechnology development centre, or BDC), • tax credit for the acquisition or rental of property (BDC), • tax credit for the acquisition or lease of a recognized “green” vehicle, • tax credit for the short-term rental of facilities (BDC), • tax credit for multimedia titles, and • tax credit for corporations specializing in the production of multimedia titles.

Alberta Alberta imposes a general corporate income tax rate of 10.0 percent and a small business rate of 3.0 percent for the 2009 taxation year. The income threshold for the Alberta small business rate was $460,000 from January 1 to March 31 and $500,000 from April 1 to December 31. Alberta does not provide a preferential rate for income from M & P operations in the province. The province provides for the following tax credits and incentive programs: • Alberta royalty tax deduction, • foreign investment income tax credit, • political contribution tax credit, and • SR & ED tax credit. 4:12 FINANCES OF THE NATION 2009

Combined Federal and Provincial Rates Table 4.4 provides information on the structure of federal and provincial/territorial top corporate tax rates for selected years since 1949. Table 4.5 shows the structure of federal and provincial/territorial corporate tax rates levied on small businesses for selected years since 1972. Table 4.6 shows the combined federal and provincial/territorial rates levied on corporate income in each province and territory for 2009. These rates are levied on (1) income eligible for the small business deduction, (2) income eligible for the M & P deduction but not eligible for the small business deduction, (3) all other corporate business (non-investment) income, and (4) investment income earned by a CCPC.

NON-RESIDENT TAX Individuals and corporations not resident in Canada are liable for federal income tax at the regular rates on income from employment in Canada and from carrying on business here, as well as on one-half of capital gains (since October 17, 2000) on the disposal of taxable Canadian property. Other forms of income, such as dividends, interest, rents, management fees, alimony, and royalties when paid or credited to non-resident persons, are subject to special withholding taxes under part XIII of the Income Tax Act. These taxes, which must be withheld by the payer, are levied on the gross amount of the payments. The general rate of withholding tax on investment income paid to non-residents is 25 percent unless reduced by treaty. The federal government will lower the withholding tax rate on dividends to 5 percent for any country willing to treat dividends flowing into Canada in a similar manner. Unless the rate is reduced by treaty, non-resident corporations carrying on business in Canada are also subject to an additional tax (branch tax) of 25 percent on after-tax earnings minus an allowance for increases in capital investment. The purpose of the tax is to equalize, at least roughly, the tax burden on Canadian branches and Canadian subsidiaries of foreign corporations.

CAPITAL TAXES Federal Capital Taxes The federal government imposes a capital tax on financial institutions on taxable capital in excess of $1 billion, at a rate of 1.25 percent. Capital tax payable is reduced by the amount of the corporation’s federal income tax liability.

Provincial Capital Taxes Nova Scotia, Quebec, Ontario, and Manitoba levy a general corporate capital tax. All of the provinces except Alberta levy a tax on the paid-up capital of banks and loan and trust companies. The Northwest Territories, Nunavut, and Yukon do not impose either a general corporate capital tax or a financial institutions capital tax. Provincial general and financial institution capital tax rates for 2009 are shown in table 4.7. TAXES ON BUSINESS 4:13 NU YT c SK AB BC NT b decrease rates tax P & and M general Manitoba The b percent ax Rates for Selected Years, 1949 to 2009 Years, for Selected ax Rates QC ON MB a Provincial/territorial and combined rates (P—provincial/territorial top rate; C—combined top rate) C 33 35 35 31.5 30.9 33 31.5 31 29 30 30.5 31 34 C 33.5 35.5 35.5 32.5 30.9 33.5 33 32 29.5 31 31 31.5 34.5 C 36.12 38.12 38.12 35.12 32.02 36.12 36.12 35.62 32.12 34.12 33.62 34.12 37.12 C 36.12 38.12 38.12 35.12 38.37 36.12 36.87 37.62 32.5 34.12 34.87 34.12 37.12 C 36.12 38.12 38.12 35.12 38.37 36.12 37.12 39.12 33.62 34.12 36.12 34.12 37.12 C 36.12 38.12 38.12 35.12 38.37 36.12 37.62 39.12 33.62 35.62 36.12 34.12 37.12 C 43.12 44.12 45.12 46.12 45.37 44.62 46.12 46.12 44.62 45.62 43.12 na 44.12 C 52.57 51.57 51.57 51.57 50.51 52.07 53.57 53.57 50.58 51.57 46.57 na 46.57 C 52.8 47.8 50.8 51.8 50.8 51.8 52.8 51.8 48.8 53.8 47.8 na 47.8 C5046484848495150475146na46 C5046484648485148475146na46 nd Provincial/Territorial Top Corporate T Corporate Top Provincial/Territorial nd Includes Nunavut before 1999. before Nunavut Includes c Credit $35,000 9 P 9 9 9 9 12 11 10 10 9 9 — na — $10,000 5 P — — — — 7 — — — — — — na — $10,000 — P 5 5 5 7 7 5 5 5 5 5 — na — Federal rates and credits 50% on excess50% C 50 50 50 50 52 52 51 51 50 50 50 na 50 52% on excess52% C 52 52 52 52 54 52 52 52 52 52 52 na 52 33% on excess33% C 38 38 38 38 40 38 38 38 38 38 33 na 33 Table 4.4 Structure of Federal a of Federal 4.4 Structure Table ...... 28 9 P 14 16 16 12.5 11.9 14 12.5 12 10 11 11.5 12 15 ...... 29.5 10 P 14 16 16 13 11.4 14 13.5 12.5 10 11.5 11.5 12 15 ...... 32.12 10 P 14 16 16 13 9.9 14 14 13.5 10 12 11.5 12 15 ...... 32.12 10 P 14 16 16 13 16.25 14 15.5 12 14.75 10.38 12 12.75 15 ...... 32.12 10 P 14 16 16 13 16.25 14 15 17 11.5 12 14 12 15 ...... 32.12 10 P 14 16 16 13 16.25 14 15.5 17 11.5 13.5 14 12 15 ...... 39.12 10 P 14 15 16 17 16.25 15.5 17 17 15.5 16.5 14 na 15 ...... 46.57 10 P 16 15 15 15 13.94 15.5 17 17 15 14.01 10 na 10 ...... 47.80 10 P 15 10 13 14 13 14 15 14 11 16 10 na 10 ...... 46.00 10 P 14 10 12 12 12 13 15 14 11 15 — na — ...... 45.50 10 P 13 10 10 10 12 12 13 11 11 10 — na — ...... on 21% ...... on 22% ...... on 10% The New Brunswick general and M & P tax rates decrease from 13.0% to 12.0%, effective July 1, 1, 2009. July effective 12.0%, to 13.0% from decrease rates tax & P and M general New Brunswick The a 2009 2008 2007 2006 2005 2004 1995 1987 1981 1978 1972 1962 1952 1949 from 13.0% to 12.0%, effective July 1, 2009 1, July effective 12.0%, to 13.0% from Year General rates allowed NL PE NS NB 4:14 FINANCES OF THE NATION 2009 009 NU YT a all Businesses, Selected Years, 1972 to 2 Years, Selected all Businesses, percent 5 5 8 5.5 1 4.5 3 2.5 4 4 4 b (P—provincial/territorial small business rate; C—combined small business rate) 16 13.37 16 16 19 16.5 12 15.5 14 13.5 15 15 15 ncial/Territorial Corporate Tax Rates for Sm Tax Rates Corporate ncial/Territorial C 18.12 17.69C 18.12 16 18.12 21.12 14.47 18.62 16 16.12 17.62 16 16.12 17.62 19 17.12 17.12 17.12 16.5 13 15.5 14 14.91 15 15 15 C 18.12 18.8 18.12 14.87 21.25 18.62 17.62 18.12 16.12 17.62 17.12 17.12 17.12 C 18.12 19.62 18.12 15.12 22.02 18.62 18.12 18.12 16.12 17.62 17.12 17.12 17.12 C 18.12 20.62 18.12 15.87 22.02 18.62 18.12 19.12 16.12 17.62 17.12 17.12 19.12 C 18.12 20.62 18.12 20.12 18.87 22.62 22.12 21.12 19.12 23.12 18.12 na 19.12 C 24.94 24.94 24.94 19.94 18.16 24.94 24.94 24.94 19.94 24.45 24.94 na 19.94 C 27.75 25.75 25.75 24.75 18.75 25.75 26.75 25.75 20.75 23.75 25.75 na 25.75 C 27.75 25.75 25.75 24.75 27.75 25.75 26.75 26.75 20.75 25.75 25.75 na 25.75 C2725272427252626262725na25 C2925272527242827262725na25 C2825252527272827262725na25 C 26.25 23.25 23.25 23.25 25.25 25.25 26.25 24.25 24.25 23.25 23.25 na 23.25 10 P10 5 P 5 3.47 5 2.37 5 8 5.5 2 4.5 3 3.91 4 4 4 The PEI small business tax rate is reduced from 3.2% to 2.1%, effective April 1, 2009. 1, April effective 2.1%, to 3.2% from reduced is rate tax business small PEI The b .00 .00 Federal rates and credits Provincial/territorial and combined rates Small business Credit ...... 21 21 ...... 23.12 10 P 5 4.57 5 5 8 5.5 3 4.5 3 4.5 4 4 4 ...... 23.12 10 P 5 5.68 5 1.75 8.13 5.5 4.5 5 3 4.5 4 4 4 ...... 23.12 10 P 5 6.5 5 2 8.9 5.5 5 5 3 4.5 4 4 4 ...... 23.12 10 P 5 7.5 5 2.75 8.9 5.5 5 6 3 4.5 4 4 6 ...... 23.12 10 P 5 7.5 5 7 5.75 9.5 9 8 6 10 5 na 6 ...... 24.94 10 P 10 10 10 5 3.22 10 10 10 5 9.51 10 na 5 ...... 25.75 10 P 12 10 10 9 3 10 11 10 5 8 10 na 10 ...... 25.75 10 P 12 10 10 9 12 10 11 11 5 10 10 na 10 ...... 25.00 10 P 12 10 12 9 12 10 11 11 11 12 10 na — ...... 25.00 10 P 14 10 12 10 12 9 13 12 11 12 — na — ...... 25.00 10 P 13 10 10 10 12 12 13 12 11 12 — na — ...... 23.25 10 P 13 10 10 10 12 12 13 11 11 10 — na — Includes Nunavut before 1999. 1999. before Nunavut Includes a Table 4.5 Structure of Federal and Provi and of Federal 4.5 Structure Table 2008 2009 2007 2006 2005 2004 1995 1987 1981 1980 1978 1976 1974 Year rates allowed NL PE NS NB QC ON MB SK AB BC NT 1972 TAXES ON BUSINESS 4:15

Table 4.6 Combined (Federal and Provincial/Territorial) Corporate Income Tax Rates, 2009 Small business, Manufacturing CCPC below and investment Province/territory thresholda processing General income percent Newfoundland and Labrador ...... 16.00 24.0 33.0 48.67 Prince Edward Island...... 13.37 35.0 35.0 50.67 Nova Scotia...... 16.00 35.0 35.0 50.67 New Brunswick ...... 16.00 31.5 31.5 47.17 Quebec...... 19.00 30.9 30.9 46.57 Ontario...... 16.50 31.0 33.0 48.67 Manitoba...... 12.00 31.5 31.5 47.17 Saskatchewan ...... 15.50 29.0 31.0 46.67 Alberta...... 14.00 29.0 29.0 44.67 British Columbia ...... 13.50 30.0 30.0 45.67 Northwest Territories...... 15.00 30.5 30.5 46.17 Nunavut...... 15.00 31.0 31.0 46.67 Yukon ...... 15.00 21.5 34.0 49.67 a See table 4.2 for specific provincial/territorial small business rates.

Table 4.7 Other Provincial Taxes Payable by Corporations, 2009 Paid-up capital tax Banks and trust Province General and loan companies Payroll tax percent Newfoundland and Labrador . . — 4.0 2.0 Prince Edward Island...... — 5.0 — Nova Scotia...... 0.175/0.35 4.0 — New Brunswick ...... — 3.0 — Quebec...... 0.24 0.7 2.7/4.26 Ontario...... 0.225 0.45/0.675 1.95 Manitoba...... 0.1/0.3 3.0 2.15/4.3 Saskatchewan ...... — 0.7/3.25 — Alberta...... — — — British Columbia ...... — 0.416/1.247 —

Each province defines its paid-up capital base somewhat differently. As well, the definition of paid-up capital is different for financial institutions and other corporations. In general, paid-up capital includes the amount received by a company on its issued share capital as well as its contributed surplus, retained earnings, long-term debt, short-term debt of a capital nature, and all reserve funds except those for depreciation, depletion, and doubtful debts. Limited allowances are made for goodwill and investment. Governmental corporations (for example, municipalities) and charitable organizations are generally exempt from capital taxation. Newfoundland and Labrador levies a capital tax on financial institutions at a rate of 4 percent. Financial institutions having taxable capital of less than $10 million may claim a $5 million capital deduction. 4:16 FINANCES OF THE NATION 2009

Prince Edward Island levies capital tax at a rate of 5 percent on taxable capital of financial institutions in excess of $2 million. For 2009, Nova Scotia’s capital tax rate is 0.175 percent on corporations with taxable capital in excess of $10 million. Where taxable capital is less than $10 million, the applicable rate is 0.35 percent, and a capital deduction of $5 million is allowed. Financial institution capital tax is levied at 4 percent of taxable capital over $500,000. Trust and loan companies with head offices in the province are eligible for an enhanced capital deduction of $30 million. New Brunswick imposes a financial institutions capital tax at a rate of 3 percent on taxable capital in excess of $10 million. In Quebec, the general capital tax rate is 0.24 percent of paid-up capital in excess of $1 million. Financial institutions pay tax at a base rate of 0.48 percent, plus the 0.25 percent “compensation tax.” In Ontario, the general rate is 0.225 percent, applicable to corporations that have taxable capital in excess of $15.0 million. For financial institutions, the tax rate is 0.45 percent on the first $400 million of taxable capital and 0.675 percent on taxable capital over $400 million. Corporations in Manitoba with paid-up taxable capital of between $10 million and $20 million are subject to a 0.1 percent tax rate, while corporations with taxable capital in excess of $21 million are subject to a rate of 0.3 percent. The province provides a deduction for the first $10 million in capital, and these rates are net of that deduction. Manitoba also imposes a financial institutions capital tax rate of 3.0 percent on taxable capital over $10 million. Financial institutions in Saskatchewan that have more than $1.5 billion in paid-up capital are taxed at a rate of 3.25 percent. Financial institutions with taxable capital that is less than $1.5 billion are eligible for a lower rate of 0.7 percent. British Columbia imposes a financial institutions capital tax at a rate of 1.247 percent on banks and trust companies with paid-up capital in excess of $1 billion; those with taxable capital under $1 billion are taxed at 0.416 percent. Effective April 1, 2009, the capital tax rates were reduced from 2 percent to 1.0 percent and from 0.667 percent to 0.333 percent, respectively. The blended rates for calendar year 2009 appear in table 4.7.

PAYROLL TAXES Several provinces levy payroll taxes that are usually related to health and/or education services. Under the Health and Post-Secondary Education Tax Act, Newfoundland and Labrador levies a 2.0 percent tax on payrolls in excess of $1 million per year. The Quebec health services fund (HSF) tax of 4.26 percent is levied on businesses with total annual payrolls of more than $5 million. Employers with total annual payrolls of $1 million or less pay the HSF tax at a rate of 2.70 percent. TAXES ON BUSINESS 4:17

Where the total annual payroll of a business is between $1 million and $5 million, the HSF rate imposed is between 2.70 percent and 4.26 percent. The Quebec government also requires employers that have annual payrolls of more than $1 million to spend the equivalent of 1 percent of their annual payroll on employee training. Ontario levies an employer health tax at a rate of 1.95 percent on annual payrolls over $400,000. Manitoba imposes a payroll tax of 2.15 percent on payrolls exceeding $2.5 million. Payrolls of less than $1.25 million are exempt; those that fall between $1.25 million and $2.5 million are taxed at 4.3 percent on the amount by which the payroll exceeds $1.25 million. The Northwest Territories and Nunavut impose taxes on employment earnings that are referred to as payroll taxes. Because they are levied on and paid by employees, they are described in chapter 3. Workers’ compensation programs are also financed by provincial levies on employers’ payrolls, adjusted on an actuarial basis to reflect the claims experience of and the hazards associated with various industries. xxxxxxxxxxxxxx 5 Sales and Other Taxes

SALES TAXES Federal Goods and Services Tax The goods and services tax (GST) was introduced on January 1, 1991. The GST is a variant of the value-added tax (VAT), which is used extensively in most other industrialized countries, although few VATs are as comprehensive as the GST. Under the GST, almost every sale and importation of a broad range of goods and services is taxable to the purchaser. Sellers must register with the Canada Revenue Agency (CRA) and collect the tax on behalf of the agency. Initially 7 percent, the GST rate was reduced to 5 percent, effective January 1, 2008. The GST, which is intended to be a tax on final consumption only, is imposed on the sale of goods and services at all stages of production and consumption. Businesses are allowed input tax credits or refunds for all GST that they have paid on goods and services purchased during the course of their business. Only the ultimate consumer cannot benefit from such credits. Therefore, the total tax on a particular good or service is equal to the final selling price multiplied by the nominal GST rate, no more and no less. There are, however, several exceptions for specified goods and services, which are discussed below. The GST also provides a mechanism for the preferential treatment of selected purchasers. Specifically identified purchasers are given rebates or grants equal to all, or a portion, of the tax that they have paid on their purchases. Some individuals and agencies have constitutional or traditional immunity from taxation, and all their purchases are taxed at a zero rate, thereby maintaining their immunity. The federal government and its agencies pay the tax. Exports are usually zero-rated; imports are subject to the tax. The legislation requires sellers at every level to make it clear to purchasers when the GST has been applied. Sellers may quote prices exclusive of the GST and add the tax at the cash register and on invoices, or may quote prices inclusive of the 5 percent tax and state so on cash register tapes and invoices or on appropriate signs at the point of sale. The federal government changed its accounting system to allocate all of the revenues from the GST, net of all credits and rebates, to the debt-servicing and reduction fund. The net amount credited to the fund in 2007-8 was $29,920 million, as shown in table 5.1. The refundable tax credits provided to low-income Canadians reduced the gross by $3,510 million. A further $1,129 million was debited to the GST collections to eliminate the tax originally paid by federal departments and agencies and later forgiven by a blanket remission order. 5:2 FINANCES OF THE NATION 2009

Table 5.1 Gross and Net Collections of Goods and Services Tax for Fiscal Year 2007-8 millions of dollars GST collections ...... 34,559 Less GST tax credits...... 3,510 Remission of GST a ...... 1,129 Net collections ...... 29,920 a Tax paid by federal departments and agencies. Source: Public Accounts.

Zero-Rated Goods Some purchases are zero-rated—that is, no tax is collected on the final sale, but sellers can claim input tax credits on their purchases. Thus, all tax paid at the intermediate stages is stripped away, and no tax is levied on the final sale or buried in the price. Basic groceries (broadly defined to exclude only snack foods and non-fruit beverages, prepared foods, and restaurant meals), prescription drugs, medical devices, and exports are zero-rated. Provincial and territorial governments are entitled to the zero rate on all their purchases because the federal government cannot tax them. Exports are also zero-rated. Most sales by farmers are zero-rated (as food products), but farmers are required to pay the GST on their purchases and then apply for input tax credits. Goods normally bought only by farmers, such as seed and fertilizer in large quantities, are zero-rated when purchased by farmers, thereby eliminating the wait for the input tax credit. Treaty Indians on reserves can purchase goods and services for use on the reserve on a zero-rated basis. Since 1997, the federal government has passed legislation enabling the Cowichan, Westbank, Kamloops, Sliammon, Chemainus, Buffalo Point, Adams Lake, Tzeachten, Shuswap, and Whitecap First Nations to levy a First Nations’ tax (FNT) on sales of all listed products on their reserves. Listed products are alcoholic beverages, fuel, and tobacco products. When FNT applies to a product, GST or First Nation goods and services tax (FNGST) does not. The FNT rate is the same as that for the GST, 5 percent. In 2004, the FNGST replaced the GST for eight First Nations in Yukon, followed by the Kluane First Nation (Yukon), the Tlicho First Nation (Northwest Territories) in 2005, and the Tsawout First Nation (British Columbia) in 2006. In 2007, an additional two Yukon First Nations and the Inuit in Newfoundland and Labrador replaced the GST with the FNGST. Effective January 1, 2008, five First Nations in British Columbia followed suit and, on January 2, 2009, the Whitecap Dakota First Nation in Saskatche- wan began imposing the FNGST. The federal government administers the FNGST on behalf of these First Nations. The FNGST is payable on all taxable supplies purchased on First Nations lands and has the same rate and basic operating rules as the GST. When FNGST is payable, GST and FNT are not. Individuals and organizations with diplomatic immunity may purchase goods on a zero-rated basis or may pay the GST and apply for a full rebate. SALES AND OTHER TAXES 5:3

Exempt Goods Some purchases are exempt from the GST—that is, no tax is collected on the final sale and no input tax credits are allowed to offset the GST paid by the seller. In this situation, the tax component in the final price is less than would be the case if the sale were taxable, but is greater than if the sale were zero- rated. The sellers of exempt goods and services must initially absorb the tax on purchases, but may raise selling prices to recoup it. Sales made by small traders (defined as those with gross annual sales of less than $30,000) and occasional sales made by private individuals (such as the private sale of a used car) are exempt. Small traders can register (and collect tax on their sales) if it is to their advantage to claim the input credit on their purchases or if their customers wish to claim credits. Residential rents (other than temporary accommodation), most health and dental services, financial services (such as interest on loans, charges for accounts, credit card fees, and commissions on transactions in stocks or other securities), day-care services, municipal transit, and most educational services are exempt. Resales of old homes are exempt, but sales of new ones are fully or partially taxable. New homes that cost more than $450,000 are subject to the full 5 percent tax, while those that cost less than $350,000 qualify for a rebate of 36 percent of the tax paid, making the effective rate 3.5 percent, about the same as under the old manufacturer’s sales tax (MST). For homes costing between $350,000 and $450,000, the rebate is phased out gradually. Homebuyers in Nova Scotia may qualify for an additional rebate, maximum $1,500.

GST Rebates The MUSH (municipalities, universities, schools, and hospitals) sector had a number of exemptions under the MST but still paid a significant amount of tax on purchases of taxable goods. The federal government made the commitment that MUSH agencies would pay no more tax under the GST than they had under the MST. After negotiating with representatives from each of these groups, the federal government agreed to grant a partial rebate on all purchases. Universities and public colleges receive a 67.0 percent rebate, and the rebate for schools is 68.0 percent. School authorities in Nova Scotia also qualify for a 68 percent rebate of the provincial part of the harmonized sales tax (HST). Public hospitals and eligible charities and non-profit organizations that provide services similar to those traditionally performed in hospitals qualify for an 83.0 percent rebate. Since February 1, 2004, municipalities receive a 100 percent rebate of the GST and the federal component of the HST. Municipalities in New Brunswick and Nova Scotia also qualify for a 57.14 percent rebate on the provincial portion of the harmonized sales tax (HST). The federal government rebates the GST on books purchased by schools, universities, libraries, and charities. Registered charities and non-profit organizations that are government-funded receive a 50 percent rebate of all tax paid on their purchases, thereby paying an effective rate of 2.5 percent. 5:4 FINANCES OF THE NATION 2009

The 2007 federal budget eliminated the GST/HST tourist rebate on purchases of goods and short-term accommodation, effective March 31, 2007. The budget introduced the foreign convention and tour incentive program, effective April 1, 2007, to apply GST relief to foreign conventions held in Canada, non-resident exhibitors, and the short-term accommodation portion of tour packages for non-residents and tour operators.

Low-Income Tax Relief When the GST was introduced, the finance minister enriched the existing sales tax credit so that families with incomes below $30,000 per year would be better off under the new system than under the old. The credit, which currently amounts to $248 per year for adults and $130 for dependants under 19 and a supplement of $130 for single adults, reduced by 5 percent of family income in excess of $32,312 per year, is described in chapter 3.

Provincial/Territorial Retail Sales Taxes Alberta and the three territories do not levy a retail sales tax on sales of tangible personal property. Since 1997, the federal government levies an HST in Newfoundland and Labrador, Nova Scotia, and New Brunswick. The rates shown below are those that the federal government remits to the three provinces. Details on the harmonization of federal and provincial sales taxes are provided later in this chapter. As well as the general sales tax on goods purchased at the retail level, many provinces provide for separate sales taxes on specified goods and services such as alcoholic beverages, restaurant meals, and telephone services. Estimated 2008-9 provincial-territorial sales tax collections are shown in table 5.2. Services are generally exempt from retail sales taxes. Those that are taxed are discussed below. The 2009 provincial sales tax rates are as follows: Sales tax rates, 2009 Newfoundland and Labrador ...... 8% Prince Edward Island ...... 10% Nova Scotia...... 8% New Brunswick...... 8% Quebec ...... 7.5%a Ontario ...... 8% Manitoba...... 7% Saskatchewan...... 5% British Columbia ...... 7% a Quebec’s 2009 budget announced that, effective January 1, 2011, the sales tax rate will increase to 8.5%.

Because provincial retail sales taxes are imposed on the selling price, the provinces imposing retail sales taxes were faced with a difficult decision when the GST came into effect. If the tax was imposed on the selling price including GST—that is, imposing a tax on the new federal tax—the provinces stood to gain additional revenue but lose public support. The provinces east SALES AND OTHER TAXES 5:5 xxxx Table 5.2 Provincial and Territorial General Government Consumption Tax Revenue, by Type of Tax, Fiscal Year 2008-9

General Gasoline Alcoholic sales and motive beverages and Province/territory taxes fuel taxes tobacco taxes Other Total millions of dollars Newfoundland and Labrador...... 711 152 175 164 1,202 Prince Edward Island..... 195 39 43 27 304 Nova Scotia...... 1,168 246 148 364 1,927 New Brunswick ...... 1,058 198 105 273 1,633 Quebec...... 9,758 1,659 825 3,466 15,709 Ontario...... 17,453 3,069 1,480 3,305 25,307 Manitoba...... 1,650 227 185 533 2,595 Saskatchewan ...... 1,181 425 192 523 2,322 Alberta...... — 725 840 2,460 4,026 British Columbia ...... 5,058 1,482 713 2,115 9,368 Northwest Territories..... — 17 15 26 58 Nunavut...... — 3 12 3 18 Yukon ...... — 7 15 10 30 Total...... 38,232 8,249 4,747 13,270 64,499 Source: Statistics Canada, June 2009. of the Ottawa River (including Quebec) chose this option because they were not strong enough financially to forgo the revenue. Newfoundland and Labrador, Nova Scotia, and New Brunswick have since harmonized their sales tax with the federal tax; only Prince Edward Island and Quebec still impose provincial sales tax on the GST-included selling price. The provinces west of the Ottawa River chose to impose their sales taxes on the price before imposition of the GST, thereby reducing the base for their retail sales taxes. Ontario’s 2009 budget proposed that the province would harmonize the provincial sales tax with the GST, for a single tax of 13 percent, effective July 1, 2010. British Columbia subsequently announced, in July 2009, that it would also harmonize its provincial sales tax with the federal GST, effective July 1, 2010. British Columbia’s new HST rate will be 12 percent. See chapter 2 for more detail. The following summary is necessarily brief and lacks the precision required to answer specific questions under the various provincial statutes. For such problems, the reader should turn to the appropriate provincial administration and its statutes and regulations. Technically, sales taxes are paid by those who purchase or import goods and some services for consumption or use in the province or who acquire taxable services in the province. Sales taxes are applied to the final purchase price of a product sold by registered retailers. Retailers act as tax collectors for the provincial government and are required to observe regular filing dates, maintain records, etc. A significant portion of the retail sales tax is paid on business inputs and is therefore worked into the final price of products. Products purchased for use 5:6 FINANCES OF THE NATION 2009 directly in the production process are generally exempt, but those purchased for general administration, etc., are not. Revenues from the retail sales tax for 2009-10 are estimated at $38.2 billion, about 12 percent of the total provincial gross general revenue. Sales taxes are the second largest source (after income taxes) of provincial tax revenue. Total provincial revenue from consumption taxes, including utilities and services that are levied under statutes other than the general retail sales tax, is shown in table 5.3 for fiscal years 2004-5 to 2008-9.

Exempt Goods Each province exempts the sales of certain goods from taxation. The exemptions are clearly delimited by statute or regulation. The following is an overview of the most common exemptions.

Consumer Goods Certain consumer goods are almost uniformly exempted while the treatment of others varies across Canada. Food, prescription drugs and medical appliances, most books, and children’s clothing are exempt in all provinces. Newfoundland and Labrador, Prince Edward Island, Nova Scotia, Manitoba, Saskatchewan, and British Columbia have fairly broad exemptions for non- prescription drugs and medical supplies. Goods taxed under separate statutory provisions are exempt in most provinces. In most provinces, however, tobacco products are subject to both general and specific sales taxes as are retail sales of alcoholic beverages in Prince Edward Island. Most provinces exempt certain thermal insulation materials and energy conservation devices. Automobiles that use alternative energy fuels and conversion kits to transform vehicles are included in these exemptions in xxxxxxx Table 5.3 Provincial and Territorial Government Revenue from Consumption Taxes, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 1,098 1,064 1,133 1,187 1,202 Prince Edward Island.... 285 297 301 295 304 Nova Scotia...... 1,732 1,841 1,830 1,819 1,927 New Brunswick ...... 1,303 1,405 1,421 1,378 1,633 Quebec...... 14,418 14,729 14,868 15,186 15,709 Ontario...... 23,081 23,666 24,088 24,883 25,307 Manitoba...... 2,102 2,187 2,294 2,435 2,595 Saskatchewan ...... 1,985 2,095 2,118 2,126 2,322 Alberta...... 3,220 3,421 3,765 3,962 4,026 British Columbia ...... 7,765 8,127 8,642 9,054 9,368 Northwest Territories.... 56 57 60 60 58 Nunavut...... 16 13 15 18 18 Yukon ...... 22 23 25 26 30 Total...... 57,084 58,925 60,560 62,429 64,499 Source: Same as table 5.2. SALES AND OTHER TAXES 5:7

British Columbia, as well as products for environment enhancement and pollution control. Adult clothing and footwear receive limited exemptions in Newfoundland and Labrador, Nova Scotia, New Brunswick, Quebec, and Saskatchewan. Prince Edward Island does not levy sales tax on clothing and footwear purchases. Some provinces provide an exemption for used clothing and footwear, usually subject to cost and/or other limitations. Several provinces exempt yard goods and patterns for clothing. Magazines and periodicals, as well as limited classroom and students’ supplies, are exempt in all provinces except Newfoundland and Labrador and Ontario. Prince Edward Island provides a limited exemption for candy. Candy, confections, and soft drinks are exempt in Manitoba, Saskatchewan, and British Columbia.

Production Goods Exemptions for production goods also vary among provinces. All provinces exempt farm machinery and equipment; farm products, seeds, and crops; farm livestock and feed; and fertilizers, etc. There is no provincial sales tax on production machinery and equipment in British Columbia. Commercial fishing gear and equipment, commercial ships and vessels, and ships’ stores for commercial vessels receive exemptions in most provinces. New Brunswick exempts tug boats. British Columbia also provides exemptions and rebates for specified aquaculture items. Exemptions for production machinery, production consumables, and processing materials are becoming the norm. Production machinery is exempted outright in Newfoundland and Labrador, Prince Edward Island, New Bruns- wick, Quebec, and Ontario. Other provinces provide more limited exemptions for specified machinery and equipment. Production consumables are completely exempt in Newfoundland and Labrador, Quebec, Ontario, Saskatchewan, and British Columbia. They receive limited exemptions in New Brunswick and Manitoba. Processing materials are exempt in all provinces except New Brunswick, where specified processing materials are taxed at lower rates. In Ontario, farm building materials receive a point-of-sale exemption. Equipment used in mineral exploration is not subject to sales tax in Saskatchewan. Manitoba’s 2009 budget made permanent the provincial sales tax exemption for manure slurry tanks and lagoon liners used by livestock producers. Many provinces provide some exemptions or rebates for building materials purchased for public buildings such as hospitals and schools. Ontario provides a rebate for farm building materials. Most provinces provide specific exemptions for certain purchases by municipalities.

Prepared Meals Of the provinces levying sales tax, all but Saskatchewan and British Colum- bia tax prepared meals, and all but Newfoundland and Labrador set a mini- 5:8 FINANCES OF THE NATION 2009 mum on taxable meals. In all the provinces, the minimum for taxable prepared meals does not apply to liquor purchased with the meal.

Services and Utilities Certain services and utilities are taxed in some provinces under the general retail sales tax legislation or other specific legislation, as follows. 1) Telephone and other telecommunication services are subject to sales tax in most provinces. The tax generally applies to all telephone and telegraph services and to cable television and pay television subscription charges. British Columbia does not tax local residential telephone services, basic cable television service, and 1-800 and equivalent lines. Prince Edward Island and New Brunswick exempt 1-800 toll charges from sales tax. Quebec refunds the sales tax paid on such telephone services. 2) Hotel and motel accommodation is taxable in all provinces. 3) Prepackaged computer software is taxable in most provinces; custom- designed software is not. Quebec only taxes software sold for personal use, and Manitoba limits its taxation of computer software to “systems” software and software for video games. Only New Brunswick, Quebec, Saskatchewan, and British Columbia have legislative provisions for taxing computer software; the other provinces use administrative policies to determine taxability. 4) Labour services to install, repair, and maintain taxable property are taxable in all provinces except Alberta. These services are not taxable if they are identified separately on the bill of sale in Quebec and British Columbia. 5) Quebec taxes broadcast advertising at 2 percent. Saskatchewan includes flyers and advertising materials inserted into newspapers in the provincial sales tax base. 6) Insurance premiums are taxable in most provinces. Ontario eliminated the retail sales tax on motor vehicle insurance premiums in 2004 and, effective January 1, 2008, Newfoundland and Labrador eliminated the retail sales tax on insurance premiums for property and vehicles. 7) Laundry and drycleaning services are taxable in Newfoundland and Labrador, Prince Edward Island, and New Brunswick. Utility services—petroleum fuels and electricity used for heating, lighting, and cooking—are generally exempt from sales tax. In Nova Scotia, only electricity is taxable. Quebec taxes all fuels and electricity used for these purposes. Manitoba taxes natural gas, electricity, and coal except when used to heat domestic dwellings or farm buildings. Saskatchewan taxes electricity except for residential or farm use. British Columbia taxes natural gas, fuel oil, and electricity except for residential use.

Municipal Access to Sales Taxes British Columbia shares retail sales tax revenue with its municipalities. In British Columbia, municipalities may request that the hotel room tax be levied at 10 percent rather than 8 percent, the additional 2 percent to be transferred to local governments. SALES AND OTHER TAXES 5:9

Federal and Provincial Sales Tax Harmonization Since 1996, the provincial retail sales taxes of Newfoundland and Labrador, Nova Scotia, and New Brunswick have been harmonized with the federal GST. The federal government collects the 13 percent tax and remits 8 percentage points to each of the three provinces. Quebec has a separate agreement with the federal government. Quebec’s provincial sales tax base includes movable property subject to the federal GST, telecommunications, and meals. The 2009 Ontario budget announced that, effective July 1, 2010, the provincial sales tax and the federal GST will be harmonized. The province will also introduce a permanent sales tax credit of up to $260 for every adult and child. The budget also provided a payment of $1,000 to every eligible family with income below $160,000, commencing in June 2010. Single persons with incomes less than $80,000 annually will receive $300.

EXCISE TAXES AND DUTIES The following sections provide an overview of the structure of the existing federal excise levies on specific commodities. For details, the reader is advised to refer to the Excise Act, 2001 and the Excise Act, their respective regulations, and commodity tax policy statements issued by the federal government. The Excise Act, 2001 replaced outdated legislation governing the taxation of alcohol and tobacco products, effective July 2003. The new legislation does not cover the taxation of beer, which continues to be governed by the provisions of the Excise Act. Excise taxes were introduced originally as taxes on luxury goods such as jewellery. The scope of excise taxes was broadened considerably over time but was reduced with the introduction of the GST. Excise taxes are imposed as fixed amounts per unit or as ad valorem taxes based on the manufacturers’ selling price. Table 5.4 provides details on excise tax and duty rates for selected years from 1976 to 2009, and table 5.5 shows federal excise duties for spirits, mixed beverages, and beer over the same period. The 2005 federal budget announced the phasing out of the excise tax on jewellery and clocks and watches and other related items over five years. Effective March 1, 2008, the rate on jewellery declined to 2 percent and was eliminated on March 1, 2009. The excise tax on clocks adapted for household or personal use, however, increased to 10 percent in 2005, and the rate reduction schedule was eliminated. Excise tax on all watches was eliminated in 2005. The March 2007 federal budget imposed a new excise tax on vehicles that are not fuel efficient. The tax is based on a vehicle’s average fuel consumption rating and ranges from $1,000 for a vehicle rated at least 13 litres per 100 kilometres to $4,000 for a vehicle rating of 16 or more litres per 100 kilometre. The heavy vehicle weight tax was repealed as of March 20, 2007. Excise duties, levied only on domestic alcohol and tobacco products, are now included in the Excise Act, 2001. They provide some degree of control 5:10 FINANCES OF THE NATION 2009 xxx Table 5.4 Federal Excise Tax and Duty Rates,a Selected Years, 1976 to 2009 1976 1990 2008 2009 Gasoline (motor and aviation)b ...... 10¢/gal. 8.5¢/litre 10¢/litre 10¢/litre Diesel and aviation fuel . . . — 4.0¢/litre 4.0¢/litre 4.0¢/litre Cigarettesc ...... 3¢/5 cig. 10.688¢/ 42.50¢/ 42.50¢/ 5 cig. 5 cig. 5 cig. Manufactured tobaccoc . . . 90¢/lb. $14.254/kg $57.85/kg $57.85/kg Cigarsc ...... 20.5% 40% $18.50/1,000 $18.50/1,000 plus add’l plus add’l duty of duty of 6.7¢ per 6.7¢ per cigar or 67% cigar or 67% ad valorem ad valorem Tobacco sticksc ...... 90¢/lb. $14.254/kg 6.325¢/stick 8.5¢/stick Winesc Alcohol, 1.2% or less . . 27.5¢/gal. 1.79¢/litre 2.05¢/litre 2.05¢/litre Alcohol, 1.2% to 7% . . 27.5¢/gal. 21.47¢/litre 29.50¢/litre 29.50¢/litre Alcohol, over 7% ..... 55¢/gal. 44.72¢/litre 62.0¢/litre 62.0¢/litre Sparkling...... $2.55/gal. — — — Automobile air conditioners...... $100/unit $100/unit $100/unit $100/unit Coin-operated games or amusement devices ..... 10% 10% — — Jewellery...... 10% 10% 2%d — Watches, clocks ...... 10% 10% 10%e 10%e Lighters...... 10¢/unit 10¢/unit — — Matches...... 10% 4¢/1,000 — — Smokers’ accessories ..... 10¢/unit 10¢/unit — — Playing cards...... 20¢/pack 20¢/pack — — a For excise taxes on automobiles, see text. b Effective 1989, leaded gasoline is taxed at a rate that is 1 cent per litre higher than that shown for unleaded gasoline. c Effective July 1, 2003, under the provisions of the Excise Act, 2001. d Reduced to 2% on March 1, 2008 and eliminated on March 1, 2009. e 10 percent of the amount by which sale price or duty paid value exceeds $50. Excise tax on all watches was eliminated in November 2005. over the manufacture and distribution of these products, which is exercised through licensing requirements imposed on all manufacturers of goods subject to excise duties. Imported alcoholic beverages and tobacco products do not, however, enjoy any advantage from their excise duty exemption because customs duties more than compensate.

Tobacco Taxes Federal Designed to reduce the incentive to smuggle Canadian-produced tobacco products back into Canada from export markets, a federal two-tiered export tax is applied on Canadian tobacco products. For exports of up to 1.5 percent of a tobacco manufacturer’s annual production, the rate is $15.00 per carton. For exports over 1.5 percent, the rate is $35.55 per carton. The revenue yields from excise levies on alcohol and tobacco products for selected fiscal years from 1964-65 to 2007-8 are shown in table 5.6. Federal cigarette taxes for 2009 are shown in table 5.7. SALES AND OTHER TAXES 5:11

Table 5.5 Federal Excise Duties,a Selected Years, 1976 to 2009 1976 1987 2008 2009 Distilled spirits ...... $16.25/proof gal.b $10.733/L alc. $11.066/L alc. $11.696/L alc. Mixed beverages, up to 7% alcohol ...... — — 24.59¢/L 29.50¢/L Special dutyc ...... 12¢/L 12¢/L Beer Up to 1.2% alcohol . . . — $1.789/hL $2.59/hL $2.59/hL 1.2% to 2.5% alcohol . — $9.660/hL $15.61/hL $15.61/hL Over 2.5% alcohol . . . 42¢/gal. $19.323/hL $31.22/hL $31.22/hL Cigarettes Up to 1,361 gm/1,000 . $5.00/1,000 $10.525/1,000 dd Over 1,361 gm/1,000 . $6.00/1,000 $12.424/1,000 dd Cigars...... $2.00/1,000 $5.799/1,000 dd Manufactured tobacco . . . 50¢/lb. $2.433/kg dd Raw leaf tobacco ...... — 63.278¢/kg dd Tobacco stickse ...... dd /L alc. = per litre of absolute ethyl alcohol by volume; /hL = per hectolitre; /L = per litre. a Excise duties were indexed annually from September 1, 1981 to September 1, 1984. In 1985 the automatic increases were replaced by legislated increases, the first of which was effective May 24, 1985. b The excise duty on brandy was $14.25/proof gallon. c Payable on imported spirits delivered to or imported by a licensed user. d Under provisions of the Excise Act, 2001. See table 5.4. e Tobacco sticks were taxed as manufactured tobacco up to February 27, 1991.

Table 5.6 Excise Tax and Excise Duty Revenue from Alcohol and Tobacco Products for Selected Fiscal Years Ending on March 31, 1965 to 2008

Tobacco products Alcohol Tobacco and Excise Excise Excise Excise alcohol, Year tax duty Total taxa dutyb Total totalc millions of dollars 1964-65 ...... 218.3 177.2 395.5 — 240.1 240.1 629.7 1975-76 ...... 369.5 289.7 659.2 — 536.6 536.6 1,185.0 1986-87 ...... 1,107.4 553.0 1,660.4 99.7 916.5 1,016.2 2,676.6 1988-89 ...... 1,159.8 567.7 1,727.5 92.6 885.2 977.8 2,705.3 1990-91 ...... 1,063.3 1,354.4 2,417.7 93.3 832.5 925.7 3,343.4 1992-93 ...... 1,998.4 982.4 2,980.8 110.3 913.4 1,023.7 4,004.5 1994-95 ...... 516.3 1,398.2 1,914.5 109.6 935.3 1,044.9 2,959.4 1996-97 ...... 643.9 1,386.8 2,030.7 119.3 888.3 1,007.6 3,038.3 1998-99 ...... 832.5 1,397.6 2,230.1 120.0 959.2 1,079.2 3,309.3 1999-2000 .... 825.3 1,285.9 2,111.2 139.9 953.0 1,092.9 3,204.1 2000-1 ...... 894.7 1,263.1 2,157.8 144.1 945.3 1,089.4 3,247.2 2001-2 ...... 1,270.1 1,239.4 2,509.5 143.7 1,171.7 1,315.4 3,824.9 2002-3 ...... 1,942.8 1,096.6 3,039.4 161.8 927.4 1,089.2 4,128.6 2003-4 ...... 485.5 2,864.3 3,349.8 177.8 1,087.3 1,265.1 4,614.9 2004-5 ...... !9.9 2,973.5 2,963.6 143.4 1,152.9 1,296.3 4,259.9 2005-6 ...... 1.8 2,692.6 2,694.4 251.3 1,103.4 1,354.7 4,049.1 2006-7 ...... — 1,597.2 1,597.2 — 1,423.7 1,423.7 3,020.9 2007-8 ...... — 1,428.8 1,428.8 — 1,521.4 1,521.4 2,950.2 a Levied on wines only. b Levied on distilled spirits and beer only. c Discrepancies in totals are due to refunds and drawbacks of excise duties, which are reflected in the grand totals. Source: Public Accounts. 5:12 FINANCES OF THE NATION 2009

Table 5.7 Federal and Provincial/Territorial Cigarette Taxes,a 2009 Federal Provincial Province/territory excise dutyb tobacco tax Total dollars per carton of 200 Newfoundland and Labrador ...... 17.00 36.00c 53.00 Prince Edward Island...... 17.00 44.90 61.90 Nova Scotia...... 17.00 33.04 50.04 New Brunswick ...... 17.00 23.50 40.50 Quebec...... 17.00 20.60 37.60 Ontario...... 17.00 24.70 41.70 Manitoba...... 17.00 37.00 54.00 Saskatchewan ...... 17.00 36.60 53.60 Alberta...... 17.00 40.00 57.00 British Columbia ...... 17.00 37.00 54.00 Northwest Territories...... 17.00 53.20 70.20 Nunavut...... 17.00 42.00 59.00 Yukon...... 17.00 42.00 59.00 a Does not include federal GST and HST and provincial sales tax, where applicable. b Effective July 1, 2003, under the provisions of the Excise Act, 2001. c Reduced rate of $16.50 (8.25¢/cig.) applies in Labrador City, Wabush, and the coastal area of southern Labrador. The reduced rate is provided by means of a rebate to the retailer.

Provincial/Territorial See table 5.7 for provincial/territorial cigarette taxes in 2009. The Newfoundland and Labrador tax on fine cut tobacco in Labrador border zones equals the Quebec rate, thereby discouraging cross-border shopping. Amendments to Newfoundland and Labrador’s Tobacco Tax Act in December 1998 ensured that tobacco tax rates in the Labrador border zones remain competitive with those in Quebec.

All provinces and territories levy a special tax on cigarettes, cigars, and tobacco. The tobacco taxes are levied on a per unit or an ad valorem basis. Most provinces also subject tobacco products to the retail sales tax. In 2002, Ontario removed provincial sales tax from cigarettes and other tobacco products in a move to deal with tax evasion. Revenues were recovered through an equivalent increase in rates under the Tobacco Tax Act. Quebec removed the provincial sales tax from tobacco products in 1998 but increased the excise tax an equivalent amount in order to curtail fraud and the sale of contraband cigarettes on native reserves.

Gasoline Taxes Federal Gasoline is subject to a federal excise tax of 10.0 cents per litre (11.0 cents per litre for leaded gasoline). A rebate system provides partial relief for certain users, such as the handicapped.

Provincial/Territorial Motor fuel is subject to general taxation at the point of sale in all provinces and territories. Traditionally, fuel taxes have been levied as a specific tax per SALES AND OTHER TAXES 5:13 unit. Between 1980 and 1982, the provinces that imposed general motor fuel taxation switched to an ad valorem basis for levying the tax; however, all have returned to specific taxation except the Northwest Territories. Yukon’s fuel taxes have always been legislated flat rates. Under the ad valorem fuel taxes, the prices and/or the taxes are prescribed in cents per litre to facilitate collection. See table 5.8 for the provincial/territorial fuel tax rates for 2009. The tax on motor fuels is a major source of government revenue. It is estimated that in 2008-9, $8.2 billion, about 2 percent of total provincial gross revenue, was raised. For answers to specific problems or questions, the provincial statutes or administrations should be consulted. Each province’s legislation and regulations define its tax base and provide exemptions, refunds, or reduced rates of tax for specified uses. Most gasoline and other fuels not used to propel vehicles on public roads are either exempt or taxed at lower rates. In some provinces, coloured fuel for restricted use is tax-exempt or taxed at a lower rate when sold, while in others a full or partial refund is paid on application to the provincial government. Under The Gas Tax Accountability Act, Manitoba dedicates all provincial road-use gas and diesel taxes to the province’s roads, highways, and transportation systems and any new share of federal fuel taxes to municipal roads, highways, and infrastructure.

Local Government British Columbia has legislation that provides, inter alia, for sharing gasoline and motive fuel tax revenues with its municipalities. Under the British Columbia Transit Authority Act, permissive legislation allows the municipal

Table 5.8 Provincial/Territorial Fuel Tax Rates, 2009 Propane Marine diesel Clear and Aviation locomotive Province/territory Gasoline diesel butane fuel fuel cents per litre Newfoundland and Labrador ...... 16.5 16.5 7.0 0.7 3.5 Prince Edward Island...... 14.5 19.0 — 0.7 — Nova Scotia...... 15.5 15.4 7.0 2.5 1.1 New Brunswick ...... 10.7 16.9 6.7 2.5 4.3 Quebec...... 15.2a, b 16.2 — 3.0 3.0 Ontario...... 14.7 14.3 4.3 2.7 4.5 Manitoba...... 11.5 11.5 3.0 3.2 6.3 Saskatchewan ...... 15.0 15.0 9.0 1.5 15.0 Alberta...... 9.0 9.0 6.5 1.5 1.5 British Columbia ...... 14.5a 15.0 2.7 2.0 3.0 Northwest Territories...... 10.7 9.1 — 1.0 11.4c Nunavut...... 10.7d 9.1 — 1.0 11.4 Yukon ...... 6.2 7.2 — 1.1 — a An additional 1.5 cents per litre is imposed in Montreal, 6 cents per litre in the greater Vancouver area, and 2.5 cents per litre in Victoria. b The rate is reduced in regions bordering other provinces. c The marine diesel rate is 3.1 cents per litre; the railway locomotive fuel rate is 11.4 cents per litre. d For gasoline purchased on a highway system. For gasoline purchased off a highway system, the rate is 6.4 cents per litre. Sources: Provincial statutes and regulations; provincial administrations. 5:14 FINANCES OF THE NATION 2009 gasoline taxes to be used to finance urban transportation. Currently, the province dedicates 12 cents per litre in the greater Vancouver transportation service region to TransLink to help finance road and bridge maintenance and public transit operation. In the Victoria regional transit service area, 3.5 cents per litre is dedicated to public transit. Province-wide, British Columbia dedicates 6.75 cents per litre to the British Columbia Transportation Financ- ing Authority to help finance major transportation projects. See table 11.4 in chapter 11, Transportation and Communications, for more information on dedicated gasoline taxes in British Columbia.

Alcohol Taxes Federal Table 5.6 shows federal revenues from excise taxes and duties on alcohol for selected years from 1964-65 to 2007-8. Excise tax rates and duties for alcohol and beer appear in tables 5.4 and 5.5.

Provincial/Territorial Alcoholic Beverages The provinces obtain revenue from alcoholic beverages from several sources, which include the profits of the provincial liquor commissions, revenues from licence and permit fees, general sales tax levies, and receipts from fines. Alcoholic beverages are subject to tax at the normal sales tax rate except in Prince Edward Island, Quebec, Ontario, Manitoba, Saskatchewan, and British Columbia, where differentially higher rates are levied. Yukon, which does not have a general sales tax, levies a 12 percent tax on retail sales of alcoholic beverages. In Prince Edward Island, a 25 percent tax is levied on all retail purchases of alcoholic beverages. This tax is levied in addition to the general sales tax. Quebec levies a tax of 65 cents per litre of beer and $1.97 per litre for other alcoholic beverages sold in licensed establishments, as well as a specific duty for home consumption equal to 40 cents per litre of beer and 89 cents per litre for all other alcoholic beverages. The tax is reduced for beer and alcoholic beverages made in Quebec by certain producers. Ontario levies two differentially higher sales tax rates on alcoholic beverages: 12 percent on purchases from liquor stores and 10 percent on purchases in licensed establishments. Manitoba exempts beer from its higher rate of 12 percent, which is levied on all other sales of alcoholic beverages. In British Columbia the tax on liquor is 10 percent. The revenues from retail sales taxes on alcoholic beverages are included with revenues from the retail sales taxes. Revenue from taxes specifically levied on alcoholic beverages are included in revenue from “Alcoholic beverages and tobacco taxes” (shown in table 5.2). In addition to sales tax revenues, provincial governments obtain revenue from the sale of alcoholic beverages through the profits of liquor commissions, licence and permit fees related to the control and resale of liquor, and fines and penalties. SALES AND OTHER TAXES 5:15

Liquor Authorities The sale of liquor in all provinces is controlled by provincial government monopolies. The most common method used by the provincial liquor authorities is to restrict sales to both consumers and licensees to stores operated by the liquor authorities and to require strict licensing for resale. All provinces except Alberta rely on their own agencies to retail spirits, but most also allow private agencies to handle sales in small or remote communities. Domestic beer is sold through provincial liquor stores in all provinces except Quebec, where all sales for home consumption are handled by grocery and convenience stores. It is also sold in grocery and convenience stores in Newfoundland and Labrador; brewery-owned stores in Ontario; and licensed hotels in Manitoba, Saskatchewan, Alberta, British Columbia, and the North- west Territories. Newfoundland and Labrador, New Brunswick, Quebec, Ontario, Alberta, and British Columbia permit retail sales by wineries. Total provincial/territorial revenue from the control and sale of alcoholic beverages in Canada for the fiscal year ending March 31, 2008 is shown in table 5.9. As can be seen in the table, net income from the sale of alcoholic beverages provides the largest share of liquor revenues in all provinces. Issuing permits to sell or produce alcoholic beverages is much more lucrative in some provinces than in others. Revenue from fines is included in other non-tax revenue. See table 5.2 for the estimated provincial and territorial tax revenue from alcoholic beverages and tobacco taxes for 2008-9.

Table 5.9 Provincial/Territorial Revenue from the Administration of Liquor Control, for the Fiscal Year Ending on March 31, 2008 Net Special Licences income liquor and Total Province/territory from sales taxa permits Fines revenue millions of dollars Newfoundland and Labrador ..... 118.1 — — — 118.1 Prince Edward Island...... 13.6 14.2 0.1 — 27.9 Nova Scotia...... 198.7 — 1.8 — 200.5 New Brunswick ...... 144.8 — 0.9 0.7 146.4 Quebec...... 760.7 — 163.7 0.2 924.6 Ontario...... 1,374.2 — 479.8 — 1,854.0 Manitoba...... 218.5 — 2.2 — 220.8 Saskatchewan ...... 172.7 — 1.0 — 173.6 Alberta...... 672.1 — 6.0 0.1 678.2 British Columbia ...... 857.2 — 8.9 0.2 866.2 Northwest Territories...... 21.9 — 0.4 .. 22.3 Nunavut...... 0.8 — 0.6 .. 1.5 Yukon ...... 6.0 3.3 0.1 — 9.5 Total...... 4,559.4 17.5 665.4 1.2 5,243.6 a Revenues from general provincial retail sales taxes are not included. Only special taxes that are levied in addition to general sales taxes at the point of sale are included. Source: Statistics Canada, The Control and Sale of Alcoholic Beverages in Canada: Fiscal Year Ended March 31, 2008, catalogue no. 63-202-XWE. 5:16 FINANCES OF THE NATION 2009

OTHER TAXES Federal A number of minor taxes and levies are included in the total budgetary revenue of the federal government. The largest is the system of employment insurance levies described in detail in chapter 8. Other tax revenue is expected to amount to about 1 percent of total budgetary revenue.

Tariffs Tariffs on goods imported into Canada are levied under the Customs Tariff Act. They are levied as ad valorem taxes or specific duties. Although the customs tariff is regarded primarily as an instrument of foreign commercial policy, it is still an important source of federal revenue, producing $3.9 billion in 2007-8. The bulk of this revenue comes from imports of manufactured goods and food, beverages, and tobacco products. The North American free trade agreement (NAFTA) was implemented on January 1, 1994. The agreement eliminated tariff barriers between Canada, the United States, and Mexico over a 15-year period.

Provincial Fuels for Use Off Public Roads Most fuels used off public roads receive exemptions or rate reductions. Aviation fuel is the only category of off-road use that is taxed by all provinces. The rates are lower than those applied to motor vehicle usage on public roads. Fuels used off public roads by farmers and fishers are exempt from tax.

Land Transfer Taxes New Brunswick levies a 0.25 percent real property transfer tax on the value of real property transactions. Ontario levies land transfer taxes. The general rate for all land except single-family residential is 0.5 percent on the first $55,000, 1.0 percent on the next $195,000, and 1.5 percent of any value exceeding $250,000. Where the land contains one or two single-family residences, there is an additional tax of 2.0 percent of the value over $400,000. A rebate is available of up to $2,000 on land transfer tax payments for first-time purchasers of newly constructed homes. Farms that change ownership between family members are exempt from the land transfer tax. Manitoba’s land transfer tax is levied at graduated rates based on the value of the property. The first $30,000 of the price is exempt from the land transfer tax, the next $60,000 is taxed at 0.5 percent, the subsequent $60,000 at 1.0 percent, the subsequent $50,000 at 1.5 percent, and amounts in excess of $200,000 at 2.0 percent. Legislation prevents avoidance of the tax by dividing the transferred property into several sections below the $30,000 exempt level. SALES AND OTHER TAXES 5:17

British Columbia’s Property Transfer Tax Act levies 1 percent on the first $200,000 of the fair market value of the taxable transaction and 2 percent on the value in excess of $200,000.

Amusement Taxes Prince Edward Island, Nova Scotia, New Brunswick, and Ontario levy specific taxes based on the admission price to amusements. In Ontario, the amusement tax is imposed under a separate rate schedule in the Retail Sales Tax Act. Saskatchewan levies a tax on lotteries. The provinces that levy amusement taxes provide some measure of exemption for performances given for charitable, religious, and educational purposes; for amateur athletic contests and theatrical productions; and for agricultural and fisheries fairs. Exemption is generally at the discretion of the lieutenant governor in council or the appropriate minister. New Brunswick and Ontario also have statutory exemptions.

Pari-Mutuel Betting Taxes All provinces levy taxes on pari-mutuel betting at horse race tracks. Off-track betting is subject to tax in Nova Scotia, Saskatchewan, and British Columbia. Most provinces earmark some portion of the receipts from the pari- mutuel betting tax for use by their provincial horse-breeding or horse- racing associations.

Local Government Land Transfer Taxes In Nova Scotia, the Municipal Government Act permits any city, town, or rural municipality to pass a bylaw providing for a local land transfer tax to be levied on the value of property transferred. The tax is levied by about one-third of the municipalities. Current rates range from 0.5 percent to 1.5 percent. For Halifax, special legislation provides for a deed transfer tax of up to 2 percent; the current rate is, however, 1.5 percent. The City of Toronto levies a land transfer tax of 0.5 percent on the first $55,000; 1 percent on transfers between $55,000 and $400,000, 1.5 percent for transfers between $400,000 and $40 million; and 1 percent on values exceeding $40 million. The Manitoba Provincial-Municipal Tax Sharing Act authorizes municipalities to tax land transfers within their boundaries. As far as is known, no municipalities impose this tax. No tax rates are set in the enabling legislation.

Amusement Taxes Most municipalities in all provinces draw some revenue from amusements such as circuses, juke boxes, and bowling alleys through licences. The provincial governments in Quebec, Manitoba, and Saskatchewan have granted municipalities the right to levy amusement taxes. 5:18 FINANCES OF THE NATION 2009

In Manitoba, municipalities may impose tax on amusements, which include dances, contests, and exhibitions. The rate can vary at council’s discretion. Saskatchewan authorizes cities, towns, villages, and rural municipalities to levy an amusement tax, which may vary, at council’s discretion, with the amount of admission paid. In general, exemptions from municipal amusement taxes are at council’s discretion. 6 Property and Related Taxes

Real property taxes and other property-based taxes are imposed by both provincial and local governments. They represent only a small part of provincial revenue but are the single most important source of municipal revenue. Table 6.1 shows local government revenue from property and related taxes, by province and territory. The table also shows the percentage of total local government revenue that was derived from property and related taxes in 2000 and 2008. As shown in the table, the proportion of revenue received from property and related taxes in the country as a whole has decreased slightly over the nine-year period between 2000 and 2008. The importance of this source of local revenue is most evident in New Brunswick, where it increased to 57 percent of total local government revenue in 2008. This chapter summarizes the general structure of real property taxes and the variations on that structure, by province and territory. The provincial/territorial governments provide some relief to counteract the perceived regressivity of property taxation on residential property. The other major property-based taxes—business taxes and special assessment levies—are also discussed. For specific details, the reader should refer to the relevant provincial/territorial legislation and to provincial/territorial and municipal administrations. The separate taxation of personal property was a relatively important source of municipal revenue until the early 1900s. By the 1970s, only remnants of personal property taxation remained. Personal property is now most frequently taxed to the extent that it is property “affixed to” real property. Table 6.2 shows the consolidated provincial, territorial, and local government revenue from property-based taxes for selected fiscal years from 2000-1 to 2008-9.

REAL PROPERTY TAXES The property tax is one of the oldest taxes in Canada and is levied as an annual charge paid by the owners of real property on some measure of its value. The tax rate, also known as the mill rate, is usually expressed in dollars (or mills) per $1,000 of assessed value. Different rates are often applied to different types of property. The property tax rate for any given property may be made up of several components because the same base is often used to raise funds for local and regional municipal governments, school authorities, and the provincial government. Municipalities and school authorities set their property tax rate so as to cover costs not met from other revenue sources or transfers from the federal and provincial governments. The property tax therefore provides a means to allocate the net cost of local government among all taxpayers: it is based on wealth as measured by the assessed value of property owned. Table 6.3 shows the estimated property taxes for 2009 on various types of housing xxxxxxxx 6:2 FINANCES OF THE NATION 2009

Table 6.1 Local Government Revenue and Percentage of Total Revenue from Property and Related Taxes, by Province and Territory, 2000 and 2008 2000 2008 Percentage Percentage of total of total Province/territory $ thousand revenue $ thousand revenue Newfoundland and Labrador . . . 191,491 18.4 293,184 21.0 Prince Edward Island...... 35,684 17.4 53,250 16.5 Nova Scotia...... 696,828 41.7 961,663 39.1 New Brunswick ...... 328,995 54.1 518,833 57.0 Quebec...... 7,609,518 43.1 10,253,946 42.6 Ontario...... 16,268,959 45.5 22,642,514 40.6 Manitoba...... 1,049,631 38.5 1,253,667 35.8 Saskatchewan ...... 1,142,602 51.5 1,591,713 42.3 Alberta...... 2,366,423 26.7 4,694,117 28.3 British Columbia ...... 2,599,612 30.5 3,830,456 30.5 Northwest Territories...... 31,047 22.4 41,547 17.7 Nunavut...... 5,528 4.3 10,358 7.7 Yukon ...... 20,783 38.8 28,064 38.6 Total...... 32,347,101 40.6 46,173,312 37.9 Source: Statistics Canada, June 2009.

Table 6.2 Consolidated Provincial, Territorial, and Locala Government Property and Related Tax Revenue, by Province and Territory, for Selected Fiscal Years 2000-1 to 2008-9 Province/territory 2000-1 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 198 264 271 291 303 Prince Edward Island...... 81 110 117 128 141 Nova Scotia...... 757 981 979 1,005 1,030 New Brunswick ...... 620 813 854 896 926 Quebec...... 9,712 10,859 11,090 11,498 11,432 Ontario...... 18,432 22,842 23,465 24,425 24,941 Manitoba...... 1,391 1,475 1,543 1,554 1,627 Saskatchewan ...... 1,486 1,585 1,631 1,663 1,714 Alberta...... 3,555 4,615 5,093 5,778 6,156 British Columbia ...... 4,760 5,874 6,139 6,544 6,485 Northwest Territories...... 38 53 57 60 63 Nunavut...... 9 9 10 11 12 Yukon ...... 23 27 27 29 31 Totalb ...... 41,062 49,507 51,276 53,882 54,861 a Local government data are on a calendar-year basis .b Totals may not add due to rounding. Source: Same as table 6.1. in selected cities across Canada. Space does not permit a detailed examination of property taxes for each area of the large cities selected for the table; in some cases, taxes payable in one or more areas are shown. Property taxes are levied by municipalities in all provinces and territories and all provinces and territories may use school tax rates to raise revenues in addition to those transferred from the provincial/territorial governments. PROPERTY AND RELATED TAXES 6:3 xxxxx Table 6.3 Estimated Property Taxes for Selected Cities, 2009 Housing types Exec. Standard Detached detached Standard Standard Senior condo- City bungalow two-storey two-storey townhome executive minium dollars St. John’s, west ...... 1,600 2,800 2,200 1,000 3,000 1,800 Halifax, south end...... aa a aaa Charlottetown...... aa a aaa Fredericton ...... 2,569 3,839 3,137 2,229 4,929 2,103 Montreal, Dorval ...... 3,600 4,700 3,600 aa3,600 Quebec, haute-ville .... 5,135 6,459 3,767 3,716 8,772 3,501 Toronto High Park...... 5,500 6,700 4,600 aa2,700 Etobicoke, south ..... 2,750 3,900 2,850 2,300 a 2,300 Scarborough, central . . 2,400 3,450 2,700 1,700 3,700 1,600 Winnipeg area, Brandon 2,900 4,000 2,000 a 5,200 850 Saskatoon, north ...... aa a aaa Calgary, northwest..... aa a aaa Edmonton, Riverbend . . 2,900 2,900 2,500 1,800 6,000 1,478 Vancouver, west ...... 5,000 7,250 6,000 3,750 11,750 3,250 Kelowna ...... 2,200 2,850 2,500 1,750 3,000 1,000 a Not available or not applicable. Source: Royal LePage, Survey of Canadian House Prices, Second Quarter 2009 (Toronto: Royal LePage, 2009).

Newfoundland and Labrador does not impose a school tax. The extent of the school tax for the provinces and territories that impose it varies substantially: all provinces and territories levy property taxes in municipally unorganized regions, and provincially/territorially imposed property taxes are becoming more prevalent as a means of financing education. In Newfoundland and Labrador municipal property taxes are optional. Prince Edward Island imposes general property taxes at both the provincial and the municipal level that are collected by the provincial government. A regional school board in Prince Edward Island may impose a single tax rate on all real property within its jurisdiction to finance a supplementary educational program. In New Brunswick, both the province and municipalities levy property taxes. Although individual municipalities determine their own property tax rates, the province is responsible for the billing and collection of all property taxes levied, including those levied by municipalities. In Nova Scotia, property taxes subsidize a small portion of the cost of public education. Municipalities collect and submit property tax revenue to school boards on behalf of the province. Property taxes used to support public education are currently capped at 2007-8 levels, with increases indexed to the consumer price index (CPI). In addition, the Halifax regional municipality provides supplementary funds to the local school boards to fund special or enhanced programs. In Quebec, municipalities use the property tax, and school boards levy a supplementary tax to finance the expenditures not covered by provincial grants. 6:4 FINANCES OF THE NATION 2009

In Ontario, property taxes are an important revenue source for municipalities. The municipalities collect property taxes in municipally organized areas. School boards lost the right to local taxation in 1998 when the province assumed full responsibility for financing education. Provincial governments impose property taxes in the unincorporated areas of northern Manitoba and northern Saskatchewan. Municipal governments levy the property taxes elsewhere. In Alberta, municipalities raise revenues for municipal expenditures and the payment of education and other requisitions under the authority of property tax bylaws. The province requisitions municipalities for education property tax purposes. The municipality applies a tax rate to assessments to satisfy the education property tax requisition and then submits the requisition to the province. In 1994, Alberta assumed responsibility for the education property tax and established the Alberta school foundation fund (ASFF). A special school tax levy may be approved by local voters within a municipality under the School Act. Education property tax revenues are deposited into the ASFF and distributed to school boards. In British Columbia, general purpose property taxes are imposed by local municipalities in organized parts of the province and by the provincial government in unorganized areas. School taxes are imposed by the provincial government in all parts of the province. Local school boards may hold referendums to gain voter permission for a local school property tax to fund new programs and capital. Amendments to the federal Indian Act in 1988 allowed First Nations to tax their own lands. In 1990, British Columbia passed legislation giving First Nations three options for entering the property tax field: First Nations may share taxation with local governments; provincial taxes may be completely vacated if First Nations wish to implement their own property tax system; and a First Nation may assume duties and functions that are similar to a municipality’s. Currently, 68 First Nation bands implement their own property tax system in the province. The Northwest Territories government levies tax on properties outside cities, towns, or villages that levy taxes within their municipal areas. Nunavut levies tax on properties in all communities except Iqaluit. Yukon levies taxes on properties outside incorporated municipalities, and local councils levy property taxes within municipalities.

Tax Base The base for the property tax is the assessable part of “real property”—that is, land and things permanently attached to the land. All provinces and territories include land and buildings in their definitions of property; however, the property tax bases vary because of provincial/territorial differences in the scope of inclusions for machinery and equipment “affixed to” real property. As well, there is diversity in the treatment of minerals, mines, oil and gas wells, pipelines, railways, and public-utility distribution systems. PROPERTY AND RELATED TAXES 6:5

Newfoundland and Labrador defines real property as land or an interest arising from land and includes land under water and buildings, structures, improvements, building service systems and storage facilities, and fixtures erected or placed on, in, over, or under and affixed to land. In Prince Edward Island, real property includes land, buildings, and machinery and equipment that contribute to the utility of the land and/or buildings. Bulk storage tanks and their connecting supply lines and mobile homes are included. The underground portions of mines are excluded from the tax base. Nova Scotia uses a broad definition of real property that primarily includes land, buildings and structures. The business occupancy assessment tax is being gradually phased out and will be completely eliminated in 2013. In New Brunswick, machinery and equipment are included only to the extent that they provide service to the land and/or buildings. Real property also includes all installations, machinery, equipment, apparatus, structures, pipes, or pipelines forming part of a gas holding, storage, transportation, transmission, or distribution system. The definition also includes oil pipelines; mobile homes; and cable television, electric power distribution, and telegraph and telecommunication systems. Underground improvements at mine sites and minerals and crops are excluded from real property. Also excluded from the definition of real property are public rights-of-way, public squares, water pressure tanks owned by a municipality, electric power distribution systems used for operating processing machinery and equipment, and foundations for machinery and equipment. Quebec defines real property as all immovables not explicitly excluded from the assessment rolls. This includes land, buildings, machines or equipment that service buildings (for example, elevators and furnaces), and permanently attached equipment used or intended for commercial purposes (for example, food and restaurant equipment or storage). It excludes, however, movables related to the activities of hospitals, public libraries, schools, places of worship, etc., even if they are permanently attached. All machines, apparatus, and accessories that play, or are intended to play, an active role in the industrial or antipollution process (monitoring, reducing, or eliminating) are not entered on the assessment rolls. Similarly, machines, apparatus, and accessories used in agricultural operations are not assessed. Immovables owned, administered, or managed by a public body (for example, waterworks, sewer systems, public roads, and those used for the protection of wildlife) are not assessed. This also applies to structural components of publicly owned wharves or port facilities. Immovables considered part of a gas distribution, telecommunication, or electric power system are subject to special taxation and therefore are not entered on the assessment rolls. Minerals, underground improvements at mine sites, railway properties other than land forming the bed of such an immovable, and other specific immovables are not entered on the assessment rolls. Ontario real property includes land, buildings, machinery, fixtures, and structures. By statute, machinery and equipment used for manufacturing, 6:6 FINANCES OF THE NATION 2009 farming, and mineral processing are also assessable but are not liable to property taxation. This also applies to mine site improvements used directly in mining activities. Land and improvements are included in real property in Manitoba. Improvements are defined as buildings and fixtures or structures that include plant, machinery, equipment, and containers used in the retail marketing of oil and oil products, pipelines, railway roadway and track, and unlicensed mobile homes. As defined, real property does not include mines and minerals. Gas distribution systems, railway spurs and sidings, and oil, natural gas, and salt production equipment are defined as personal property in provincial legislation and form part of the tax base. Municipalities may also pass bylaws to assess and tax other personal property (for example, machinery and equipment). Real property in Saskatchewan includes land and improvements, pipelines (excluding pipeline machinery and equipment), mine resource production equipment for the purposes of extraction and primary production (not for processing and refining), and oil and gas well resource production equipment for the purposes of production, enhanced recovery, storage, transport, and compression. Minerals are not included. Alberta defines real property as land and improvements that are assessed at market value except for farmland, machinery and equipment, linear property, and railways. Linear property, which is part of the tax base, includes electric power systems, telecommunication systems, and pipelines but not the related land or buildings. Properties classified as machinery and equipment are defined and assessed according to regulation. British Columbia defines real property as land and improvements. Improvements include buildings, fixtures, and structures other than production machinery. Real property for the purpose of assessment is defined in the Northwest Territories and Nunavut as the land and everything that, without special reference, would be conveyed if the real property were sold. Real property includes any machinery, equipment, appliance, or other thing forming an integral part of any activity on, or any use of, the land. The definition of real property in Yukon includes land, buildings, and anything affixed to land and/or other improvements, as well as public utilities, trailers, and mobile homes. Coal, minerals, oil and natural gas, and unsurveyed, unoccupied Crown land are excluded.

Assessment Assessment is the valuation of the tax base for property tax purposes. All provinces and territories assess property at some percentage of its “actual,” “real,” “fair,” or “market” value in a base year. This value generally is defined as the price at which the property would sell for in a transaction between a willing buyer and a willing seller with neither party under undue stress to participate in the transaction. Differences in the frequency of reassessment, the base year used, and valuation methodologies do, however, lead to substantial PROPERTY AND RELATED TAXES 6:7 variations in the assessed value of similar properties across the country. In some provinces, assessed values are multiplied by provincially prescribed factors to calculate taxable assessed values. These factors may vary by property class and are used primarily to control tax shifts between classes. In most provinces, farm property is assessed using criteria that accord it favourable treatment. In general, alternative uses for the land are excluded from consideration when assessing a property’s value, or the property is assessed at a fixed value. Most provinces and territories also provide special assessment rules for the machinery and equipment of electrical, telecommunication, and natural gas distribution systems; railway property other than land and buildings; and pipelines. Assessed values are generally based on criteria such as the length of wires, cables, and railway tracks. For pipelines, assessed value is a function of both pipe length and diameter. Property is assessed at its fair market value in Newfoundland and Labrador, with consideration given to its location and present use. The Municipal Assessment Agency (MAA) was established to give greater control to municipalities over the assessment function. The agency provides property assessment services for the 232 municipalities, other than the city of St. John’s, that impose real property tax. The remaining 52 municipalities in the province operate under a poll tax system. The operation of the agency is overseen by a 12-member board of directors, 4 of whom are appointed by the province. The board is composed of 6 municipal representatives, 1 representative from the Newfoundland and Labrador Federation of Municipalities, 1 representative from the Newfoundland and Labrador Association of Municipal Administra- tors, 2 taxpayer representatives, and 2 government representatives. All board members serve two-year terms. The city of St. John’s, which has a three-year reassessment cycle, conducts its own assessments. Real property is classified as commercial, residential, or part commercial and part residential and is assessed at fair market value. Property in Prince Edward Island, which includes provincial Crown land, is assessed at market value. There are two classes of property: commercial and non-commercial. Commercial property excludes farm property and buildings, nurseries and market gardens, and timberland. Farms are assessed at their farming value as indicated by the capabilities of the land and the utility of related buildings. In Nova Scotia, the assessed value of property is market value. Effective April 1, 2008, property assessments in the province are the responsibility of the Property Valuation Services Corporation, a municipally owned non-profit corporation. Property is classified as residential, commercial or resource property, or both. Reassessments are conducted on an annual basis. Resource property includes farm property, forest property if less than 50,000 acres, community buildings used for commercial fishing boats, and the land of municipal water utilities. Farm land is exempt from property taxation. The province pays a farm acreage grant to municipalities that is indexed to the annual CPI. Owners of recreational land must pay a recreation property tax to the municipality in which the land is situated. Machinery and equipment are not assessable. 6:8 FINANCES OF THE NATION 2009

All real property in New Brunswick is classified as either residential or non- residential and is assessed annually on the basis of its real and true value. Special provisions are in place for the assessment of farmlands, farm woodlots, freehold timberland, golf courses, charitable and not-for-profit organizations, and horse-racing parks: they are assessed at value in present use. Farm properties in excess of five hectares are assessed at their value as farmland; freehold timberland is assessed at a fixed value of $100 per hectare; and farm woodlots are assessed at a value that will realize a tax rate of $1.00 per hectare on the combined provincial and municipal tax for the previous year. Property in Quebec is assessed at its market value and is entered on the local municipality’s roll. Assessment rolls are based on a triennial system that reflects market conditions 18 months earlier. Subject to some conditions, agricultural operations (for school tax purposes only), golf courses, timber producers, telecommunication systems, gas distribution and electric power systems, trailers, trapping camps, and rectories of certain churches have their own special taxation schemes. Municipalities may apply various measures to minimize tax. Ontario’s Fair Municipal Finance Act 1997 established an assessment system based on current value. The legislation also ensured regular province- wide updates of assessed values. Municipalities may set different tax rates for each of seven standard property classes. The province may prescribe more classes by regulation. There are six optional classes, which are further defined by five specific subclasses. The classes are optional, and municipalities may decide which, if any, will apply within the municipality. Upper- and single-tier municipalities may establish two or three bands of assessment in order to implement graduated tax rates for commercial and industrial properties. Municipalities may create subclasses of real property in order to reduce tax. Ontario’s Municipal Property Assessment Corporation (MPAC), a provincial statutory corporation, is governed by a 15-member board of directors, all of whom are appointed by the minister of finance: 8 board members represent the municipality, 5 represent property taxpayers, and 2 represent the province. All Ontario municipalities are members. Ontario’s 2007 budget introduced a property assessment system based on a four-year cycle, commencing with the 2009 assessment. Any increase in value resulting from a reassessment will be phased in over four years. Manitoba legislation provides that all assessable property be assessed on its market value in the reference year, which is defined as the year following the last reassessment. Properties are reassessed every four years. The provincial municipal assessor assesses all property in the province except in Winnipeg, where the city conducts its own assessments. Railway roadway assessment is based on gross tonnes of freight per mile; gas distribution systems are assessed at depreciated replacement cost; and pipeline assessment is based on the outside diameter of the pipe. There are 10 property classes and taxable assessments are calculated as a portion of market value in order to control tax shifts between classes. PROPERTY AND RELATED TAXES 6:9

The Saskatchewan Assessment Management Agency (SAMA) manages the province’s property assessment system in consultation with municipalities, school divisions, and the provincial government. Some larger municipalities, such as Saskatoon and Regina, provide their own assessment valuation services and, in some areas, private assessment services are used. In 2009, Saskatche- wan moved from an assessment system based on “fair” value to one based on market value. In other words, from 2009 assessment will no longer be based on a regulated approach for the valuation of all properties. Under the new system, multi-unit residential and commercial properties will be assessed based on the rental income approach. Under the market value system, a regulated property assessment valuation standard will be used for agricultural land, oil and gas well production equipment, linear property, and heavy industrial property. In Alberta, the value standard for the majority of property is market value. Regardless of the valuation method the assessor chooses, the quality of the assessment is measured against market value. Some types of property are assessed using a regulated process: farmland assessment is based on a regulated productivity value, and linear property (electric power systems, telecommunication systems, oil wells, pipelines), machinery and equipment, and railway property are assessed on a regulated cost approach to value. Under the Alberta Municipal Government Act, assessments are assigned to one or more of the following property classes: residential, non-residential, farmland, and machinery and equipment. A municipal council may divide the residential class into subclasses on any basis it considers appropriate and may divide the non-residential class into vacant and improved subclasses. In British Columbia there are nine classes of assessable property: residential, utilities, supportive housing, major industry, light industry, business and other, managed forest land, recreational property/non-profit organization, and farm land. Total property value must be apportioned between land and improvements on the assessment rolls. British Columbia has three rolls or tax bases: school, hospital, and general purpose. Market value is the usual method for assessing properties, but the Assessment Act sets out specific procedures for continuous structures, major industrial improvements, farm land, and forest land. Assessment rolls are revised annually by British Columbia Assessment. Property that is subject to assessment under the Property Assessment and Taxation Act and regulations in the Northwest Territories and Nunavut are land, improvements, mobile units, pipelines, railways, works, and transmission lines. In the general taxation area, land is assessed at a regulated development cost. Improvements are assessed at the depreciated replacement cost. The general taxation area has 16 property classifications. In the municipal taxation area, land is assessed at market value and improvements are assessed at the depreciated replacement cost. Each municipal taxation area, through bylaw, may adopt any number of property classifications. Improvements in the Northwest Territories include buildings, structures, and machinery and equipment and do not include items such as home 6:10 FINANCES OF THE NATION 2009 furnishings and vehicles. A general assessment must be carried out at least every 10 years. Land in Yukon is assessed at its fair (similar to market) value. Buildings and machinery and equipment are assessed at depreciated replacement cost. Public utilities, railroads, and pipelines are assessed as prescribed by regulation.

The Assessment Function Assessment is a provincial responsibility in Prince Edward Island, Nova Scotia, New Brunswick, the Northwest Territories, and Yukon. Newfoundland and Labrador’s Municipal Assessment Agency, an independent body that is made up of both municipal and provincial representatives, administers property assessments. The city of St. John’s, however, conducts its own assessments. Service New Brunswick, a Crown corporation, assesses all real property in the province. In Quebec, the assessment function is assumed by either a local municipality or a regional county municipality. In Ontario, MPAC is responsible. Assessment activities in Manitoba are performed by the provincial assessor, except in Winnipeg, where the city assessor performs those duties. In Saskatchewan, SAMA sets policies and, except for 18 urban municipalities (seven cities and 11 towns and villages), undertakes assessment in the province. Assessment in Alberta is a local responsibility, except for linear property, which is carried out by an assessor designated by the province. BC Assessment, a provincial Crown corporation, administers assessment in British Columbia.

Exemptions Further diversity is introduced into the property tax system through the extensive exemptions from property tax liability that are provided in all provinces. One exemption is the exclusion from the tax base and/or tax liability regarding certain property or type of property that would otherwise be subject to tax. Many exemptions are mandatory under provincial legislation; in other jurisdictions, municipalities have the permissive authority to exempt specified types of property from taxation. Although there is a great deal of variety in provincial/territorial property tax exemptions, some types of property are exempt in all or most provinces and territories, as follows. • Property owned and occupied by federal, provincial, and municipal governments is exempt in all provinces. In Prince Edward Island and New Brunswick, provincially owned real property is exempt from the provincial portion of real property tax; municipal taxes must, however, be paid. Municipally owned real property is exempt from the municipal portion of the real property tax, but the provincial portion must be paid. In most provinces, where government property is leased to a third party, the lessee is subject to the property tax. • Colleges and universities are exempt in all provinces and territories except Yukon. PROPERTY AND RELATED TAXES 6:11

• Churches and cemeteries are exempt in all provinces. • Public hospitals are exempt except in New Brunswick and Yukon. • Exemptions are available to various charitable organizations (for example, girl guides and boy scouts) and societies in all provinces and territories except Yukon. Grants in lieu of taxes are paid by the federal and provincial governments to the municipal governments to compensate, at least in part, for the forgone property tax revenue on government-owned property. Some provincial governments also provide grants to make up for the revenue lost from schools, colleges and universities, and public hospitals. See chapter 7 for a discussion of these intergovernmental transfers. As well as the exemptions discussed above, Newfoundland and Labrador exempts all productive farmland, designated woodlots, and the buildings associated with both from all property tax. Since 2005, qualifying non-profit low-income housing corporations in New Brunswick do not pay the provincial component of property taxes for their low-rental housing facilities. In addition to complete exemptions, New Bruns- wick classifies many types of property as residential for property tax purposes, which makes them eligible for lower tax rates. These types of property include schools, farmland and associated buildings, freehold timberland and farm woodlots, hospitals, senior citizen and nursing homes, and community halls. In addition, crude oil storage tanks, railway right-of-way infrastructure, major cargo ports, airports, and qualifying not-for-profit low rental housing accommodation are exempt from provincial property taxes but remain subject to municipal property taxes. As well, the four publicly funded universities, excluding property or portions thereof that are used for commercial purposes, are exempt from property tax. The province does, however, pay the municipal portion of the tax on exempt university property to the municipality. Univer- sity property or portions of property that are commercial in nature are classified as non-residential property and subject to both provincial and municipal non-residential property tax rates. Nova Scotia exempts conservation property from property tax. Artists whose net annual earnings from artistic works do not exceed $5,000 are exempted from both the business occupancy tax and commercial property tax. In Quebec, the main exemptions from property taxation are government- owned immovables and immovables owned by institutions that provide education, health, or social services. Immovables belonging to religious institutions are also exempt. Immovables belonging to agricultural or horticultural societies are exempt if they are used for exhibition purposes. In Ontario, exemptions from taxation are given to machinery and equipment used for manufacturing or farming, buildings, and plant and machinery under mineral lands that are used to obtain minerals, as well as the property of various social agencies. Eligible small theatres, water power generating stations and related lands, and conservation lands are also exempt from taxation. 6:12 FINANCES OF THE NATION 2009

In Manitoba, certain property is fully exempt from taxation, including public and private schools, hospitals, religious institutions, and non-profit day- care facilities. Manitoba also provides a number of exemptions from school taxes, including personal-care homes and housing for the elderly and infirm, agricultural societies, charitable institutions, museums, and buildings used by war veterans. Residential and farm property (land and buildings) is also exempt from the provincial education support levy. Buildings used for farm purposes in rural municipalities are exempt in Saskatchewan. Residences in rural municipalities outside organized hamlets may also receive a full or partial property tax exemption if the owner of the residence also owns or leases land used for agricultural purposes in the rural municipality or an adjacent one. Municipal councils are authorized to exempt property from taxation for economic development purposes for up to five years without having to make up the school division’s share of the lost revenue. Exemptions in Alberta include farm residences and buildings in rural municipalities, rural gas distribution systems, minerals, most Crown and municipal property, property held by educational and religious institutions, and property held by non-profit charitable or benevolent organizations. Electric power-generation facilities receive a full exemption from the education property tax. The province does not requisition education taxes from properties classified as machinery and equipment. The Municipal Government Act also provides property tax exemptions for most property held by agricultural societies, libraries, cemeteries, regional services commissions, health regions, nursing homes, public lodges, and airport authorities. In Alberta, the community organization property tax exemption regulation is applied, at the discretion of municipalities, to a wide range of service- oriented non-profit organizations, including non-profit day-care centres, certain sports and recreation facilities, thrift shops, and sheltered work- shops. British Columbia has several exemptions from assessment or taxation that may vary over the three assessment rolls. The Community Charter defines both mandatory exemptions and permissive exemptions, which are at the discretion of local council. Typically, these exemptions are carried over from the general roll onto the provincial school tax roll and hospital roll by cross-reference. In the Northwest Territories, the property of churches, specific hospitals and health facilities, specified child-care facilities, places for custody of young offenders, homes for the aged, government funded public museums and libraries, and places used by societies may be exempt from taxation. Nunavut’s 2004 budget eliminated the education component of the territory’s property tax. All property is assessed in Yukon. There are exemptions from assessment for unsurveyed, unoccupied Crown land, improvements to beautify residential property (including fences, sidewalks, and driveways), and improvements to beautify other property (excluding fences, sidewalks, and driveways). PROPERTY AND RELATED TAXES 6:13

Tax Rates The method for determining property tax rates differs from that associated with other taxes. The local government first determines what revenue it needs to realize from property taxes and then divides this amount by the total taxable assessed value of real property. Generally, this ratio multiplied by 1,000 is referred to as the mill rate and is applied to all taxable property. Several provinces use percentage rates in place of mill rates. Provincial property tax rates are either set in this fashion or determined legislatively. The various mill rates are combined and levied against the owners of the taxable property. Residential property bears a lower property tax burden than non-residential property in most provinces. This is achieved by levying lower rates on residential property or by applying lower percentages to the assessed value of residential property to determine its taxable assessed value. Although actual mill rates or percentage rates for individual municipalities are readily available, direct comparisons are meaningless because the taxable assessment on comparable properties can differ widely from municipality to municipality: using local improvement charges can distort the comparison; property tax relief measures must be taken into account; and the form of business taxes is seldom consistent. In St. John’s, Newfoundland and Labrador, the real property tax is levied as a percentage of the assessed value of real property, but different rates apply for commercial and residential property. Elsewhere in Newfoundland and Labrador the tax is also levied as a percentage of assessed value. Although, like St. John’s, all other municipalities have the same authority to impose different rates for residential and commercial property, most impose a single rate. Provincial property tax rates in Prince Edward Island are levied at fixed rates. The rate for both commercial and non-commercial property is $1.50 per $100 of assessed value. Two municipal tax rates—one for each type of property—are determined in each municipality. Owner-occupied residential property assessments have been frozen for a three-year period beginning in 2007 and continuing to 2010. Municipal property tax rates in Nova Scotia are differentiated by property class. For forest property classified as resource property (less than 50,000 acres), the property tax is levied at $0.25 per acre. For forest property classified as commercial property (more than 50,000 acres), the tax is $0.40 per acre. Municipalities may levy a fire protection tax (which cannot vary by class) on the value of all assessable property and business occupancy assessment in the area served by a water system in the municipality. Munici- palities may establish a minimum tax per dwelling unit as part of their budget process. The minimum applies only to residential property. In New Brunswick, residential property classified as owner-occupied receives a tax credit against the full amount of provincial tax owing. Owner-occupied residential properties located in local service districts or 6:14 FINANCES OF THE NATION 2009 unincorporated areas are, however, subject to a special provincial levy of $0.65 per $100. Individual municipalities and rural communities determine municipal property tax rates during their annual budget process. These rates cover the cost of services provided by the municipalities and rural communities. The province establishes the local property tax rate to be levied on all property within local service districts and in rural communities. The non- residential rate is 1.5 times the rate on residential property. There is an additional provincial rate of $0.02 per $100 of assessed value charged to all taxpayers to help defray the cost of assessing properties. On behalf of the Office of the Rentalsman, there is also a fee of $0.05 per $100 of assessed value imposed on residential property that is not owner-occupied and is capable of such use. Since January 1, 2001, Quebec municipalities are allowed to set five different tax rates for the following categories: industrial immovables, other non-residential immovables, immovables consisting of six or more dwellings, other residential immovables, and serviced vacant land. When a proposed local school board tax will be greater than $0.35 per $100 of assessed value or a certain amount determined by provincial regulation, the levy must pass a public referendum. Immovables that are part of a telecommunication network, a natural gas distribution network, or an electrical power production, transmission, or distribution network are excluded from the regular property tax system and subject to an alternative system. Under this alternative system, the operator of any of these networks must pay a public utilities tax to the ministère du Revenu that is calculated on the net value of the assets that are part of a network. The rate of the public utilities tax depends on the activity sector and the amount of the net value of the assets. Municipalities in Ontario have the option of setting different tax rates for the different property classes. Tax ratios reflect the relationship that the tax rate for each property class bears to the residential/farm property tax rate. They are established by upper- and single-tier municipalities. Municipal flexibility in establishing tax ratios is limited by the ranges of fairness established by the province. Property used solely for farming is taxed at 25 percent of the residential rate, but municipalities may set the rate for farmland below that threshold. In order to ensure that all farmland is treated consistently, government-owned farmland occupied by tenant farmers will also be included in the farmland property class. The farm residence and one acre of land surrounding it is taxed as part of the residential class. Railway rights-of-way and power utility transmission and distribution corridors are taxed at a fixed rate per acre. The province sets rates per acre for nine geographic regions and indexes them to average provincial commercial tax rate changes. Education taxes are levied as a component of the property tax, but the province, which is responsible for education funding, sets the education tax rates. The Education Quality Improvement Act, 1997 stipulates a uniform province-wide rate for the residential/farm and multiresidential classes. In Manitoba, land and buildings are taxed at their respective portioned assessed values. Property taxes are levied at the mill rates established by municipal councils. Municipal councils may also apply local improvement PROPERTY AND RELATED TAXES 6:15 taxes and/or special service levies to some or all of the properties in the municipality. The same mill rate is applied to all properties. Local school division levies apply the same mill rate to all properties. In 2006, Manitoba eliminated the provincial education support levy (ESL) for residential properties. Farm property was already exempt from ESL. Manitoba’s 2005 Municipal Assessment Amendment Act extended to all municipalities in the province the authority to vary the percentage portion applied to property classes for municipal tax purposes. Previously, only Winnipeg had such authority. In Saskatchewan, municipalities establish property taxes by applying their own mill rate to the assessed value for each property. Local councils may set a base and/or a minimum amount of tax to be levied on any property. The assessed value is determined by taking the fair value assessment determined by the assessor and adjusting it by the percentage of value provided by the provincial government. School boards and library boards establish mill rates to meet their own financial requirements. Municipalities collect property taxes for themselves, school boards, and library boards. In addition to the annual property tax levy, any Alberta municipality may impose a business tax, business revitalization zone tax, special tax, well- drilling equipment tax, or local improvement tax. Alberta legislation states that the municipal tax rate may vary among various property assessment classes or subclasses. The provincial education property tax is based on a uniform provincial education tax rate formula and a formula that mitigates the impact of rapid assessment growth. Subsequently, each municipality establishes a local tax rate based on the municipality’s requisition amount and its taxable assessment base. The education property tax revenues are then remitted to the province for distribution among all school boards. The 2009 uniform rate is 3.39 mills on residential and farm property and 4.98 mills on non-residential property. The provincial uniform rate set for properties assessed as machinery and equipment is zero mills. British Columbia sets province-wide tax rates for each property class in rural areas under the Taxation (Rural Area) Act and sets province-wide school tax rates for both municipal and rural areas under the School Act. Different residential school tax rates are set for each of 59 school districts using a formula that reduces the effect of the local differences in average assessed values. The province may set more than one residential school tax rate within a school district where there is significant variation in assessed property values. Municipalities set tax rates for each property class using a variable tax rate system. For all other local governments, British Columbia establishes one set of tax rate ratios. The 2008 British Columbia budget reduced the provincial school tax rate on major industrial properties to the same rate as that applied to commercial businesses. Property taxes are levied using a separate mill rate for each property class in the Northwest Territories. The education mill rate is uniform for all assessed property in the general taxation area. At the request of a municipal council, the minister of finance may, however, establish by order an education mill rate for 6:16 FINANCES OF THE NATION 2009 each property class in the municipal taxation area. The 2009 Northwest Territories budget adjusted property tax rates on mining, oil, gas, and pipeline properties to increase revenues by 15 percent. Mill rates for properties in the general taxation area will be set to similarly increase revenue by 15 percent. Property tax rates in Yukon are levied as percentages of assessed value. The tax rates may vary by class of real property and between regions.

Property Tax Relief As well as the property tax relief provided through differential mill rates, exemptions, and preferential assessment practices, various direct property tax relief programs are offered in most provinces. Direct relief is offered in three major ways: property tax deferrals, grants or rebates, and measures delivered through the income tax system. Direct property tax relief is allocated almost exclusively to residential property, usually as grants or credits delivered through the income tax system. For a discussion of the various property tax credits offered through the personal income tax system, see chapter 3. In some provinces, direct property tax relief is broadly available, whereas in others, it is targeted primarily at particular groups, usually senior citizens. Interprovincial comparisons of the availability of property tax relief should not be made in isolation because the extent to which property taxes are relied on as a revenue source varies from province to province. Generally, the more heavily the property tax is depended on, the more generous the province is in providing relief. Newfoundland and Labrador has no systemic property tax relief measures in place. Municipal councils do, however, have authority to offer tax relief on an individual basis. Prince Edward Island provides a deferral of up to 100 percent of property taxes for senior citizens with annual household incomes of less than $30,000. The deferred taxes must be paid when the property is sold or transferred to someone other than a spouse. The Real Property Tax Act provides the following tax credits for resident owners of non-commercial property: $0.66 per $100 of assessment in Charlottetown; $0.96 per $100 of assessment in Summerside; $0.20 per $100 of assessment in Cornwall and Stratford; and $0.10 per $100 of assessment in other municipalities that provide their own police services. Local councils in Nova Scotia provide a partial tax exemption to any person whose family income is below an amount established by council. Council may also choose to adopt tax reduction or deferral programs. The provincial property tax rebate program is extended to all seniors receiving the guaranteed income supplement and still residing in their own homes. Each qualifying recipient receives a rebate of 50 percent of property taxes paid the previous year, to a maximum of $800. Nova Scotia’s cap assessment program (CAP) protects property owners from dramatic increases in market value by limiting annual taxable assessment increases in eligible properties. Properties that receive market value assessments greater than the annual CPI index are eligible for CAP. For 2009, the CAP rate is set at 3.4 percent. PROPERTY AND RELATED TAXES 6:17

In New Brunswick, relief is provided for owner-occupied property through a property tax allowance to low-income homeowners with incomes below $20,000. The allowance is credited against property tax, up to a maximum of $200. Provincial property tax and, in some instances, a portion of the municipal tax, on registered agricultural land and farm outbuildings may be deferred as long as the land is used for agricultural purposes or is capable of such use. In 2007, Quebec introduced a new agricultural property tax regime to replace the former system, under which a portion of property taxes was reimbursed to owners of farmland. Under the new regime, those credits that are applied to the property tax accounts of farmland owners are paid directly to municipalities. The amount of the tax credit is established on the basis of taxes that would normally have been collected from the agricultural land of each municipality. Owners of farmland are responsible for any difference between the amount of tax assessed and the tax credit paid. Ontario offers several property tax relief and rebate programs that include an income tax credit to defray property taxes paid by low- and modest-income homeowners and tenants. Beginning in 2009, Ontario provides a property tax grant of up to $250 (rising to $500 in subsequent years) to eligible senior homeowners. Eligible farmland in Ontario is taxed at 25 percent of the municipal residential tax rate. Eligible managed forests and conservation lands may be reassessed similar to farmland and taxed at 25 percent of the residential tax rate. Municipalities may also provide property tax relief to owners of heritage buildings and owners who build or modify a residence to accommo- date a senior or a disabled person. Manitoba provides property tax relief to residential homeowners through tax credits and the elimination of the provincial education support levy on residential property. Manitoba’s education property tax credit is delivered partly on municipal property tax bills and partly through the income tax system. The basic amount of $650 is available to every homeowner and tenant who pays at least $250 in property taxes. Most homeowners see this basic amount as a direct reduction on property tax statements. Other homeowners and tenants may claim the credit on their tax return. An income-related top-up is also available and must be claimed on the income tax return. The maximum credit is $675 ($800 for seniors), reduced by 1 percent of net family income. Additional property tax relief is available through the homeowner’s school tax assistance for homeowners and tenants program, which provides a maximum benefit of $175 (minus 2 percent of family income in excess of $15,000) to homeowners 55 years of age and over. Manitoba introduced the farmland school tax rebate in 2004, which provided a 33 percent rebate of the school division special levy on farmland. In 2006, the rebate was increased to 60 percent. The 2007 provincial budget increased the rebate to 65 percent, and rebate rates for 2009 and 2010 are 75 and 80 percent, respectively. Saskatchewan’s 2009 budget announced that the province will cut and cap education property tax rates by setting province-wide tax rates for each of the three major property classes. As a result of this change, the overall amount of 6:18 FINANCES OF THE NATION 2009 tax paid by property owners will be reduced by $103 million (14 percent) in 2009, making it the largest property tax cut in Saskatchewan history. The province is increasing its share of pre-kindergarten to grade 12 education funding to 63 percent, up from 51 percent in 2008. In 2010, provincial funding for elementary education will rise to 66 percent. With the implementation of the new province-wide mill rates, the education property tax credit program is terminated. Alberta’s property tax assistance for seniors program was incorporated into the Alberta seniors’ benefit program. The Alberta seniors’ benefit is an income-tested program wherein a portion of the cash benefit paid to eligible senior homeowners can be used to help cover expenses including property taxes. Beginning in 2005, Alberta began rebating a portion of school taxes to assist all senior homeowners, regardless of income. The rebate is equal to any education property tax increase that occurs after the baseline year, which is the year prior to a senior’s 65th birthday. British Columbia provides a homeowner grant program that reduces property tax liability for owner-occupied principal residences. A regular grant of $570 is available to reduce provincial and local government property tax. For 2009, the basic homeowner grant is reduced by $5 for each $1,000 of assessed value over $1,050,000. The grant is eliminated on homes assessed at $1,164,000 or more (2009). The province also provides an additional grant, maximum $275 (for a total grant of $845) for homeowners 65 years of age and older, permanently disabled, or in receipt of certain war veterans’ allowances. The additional grant is eliminated on homes assessed at $1,219,000 or more. British Columbia’s 2009 budget announced that, beginning in 2011, the industrial property tax credit will be increased from 50 to 60 percent. The province created a temporary two-year property tax deferment program in November 2008 to assist those hurt by the economic downturn. The 2009 budget introduced a new northern and rural homeowner benefit, beginning in 2011, when the temporary tax deferment program expires. The annual grant will be increased by $200. The homeowner grant is provided to some low-income homeowners who, but for the high assessed value of their home, would heve received the additional grant. Homeowners with a permanent disability are eligible for the total $845 grant if they incur direct costs for structural modifications to their home exceeding $2,000. Disabled applicants who purchase a home already modified also qualify for the grant. The property tax deferment program allows seniors, surviving spouses, and the disabled to postpone payment of property tax until the property is sold. A homeowner may begin to defer property taxes on a principal residence at 55 years of age. BC farmers have the option of delaying payment of rural property taxes until October 31, which allows those who harvest later in the year to sell their crops before paying their property taxes. The Northwest Territories may give senior citizens and disabled persons living in the general taxation area 100 percent property tax relief. For those living in municipal areas, the municipality generally exempts 50 percent of the taxes, and the territorial government pays the other 50 percent. PROPERTY AND RELATED TAXES 6:19

Nunavut may also give senior citizens and disabled persons living in the general taxation area 100 percent property tax relief. For those living in the municipal area of Iqaluit, the municipality may exempt 100 percent of the tax. Yukon has a general homeowners’ grant program that provides 50 percent of the general tax levy to a maximum of $450 per household. Yukon senior citizens are eligible for a grant of 75 percent of the general taxes, maximum $500. A seniors’ property tax deferral program applies to senior homeowners outside incorporated municipalities, where the territory is the taxing authority. Municipalities have the authority to adopt similar programs.

BUSINESS TAXES Business taxes are the second largest source of tax revenue for local governments. Unlike property taxes, business taxes are levied on the occupier rather than the owner of real property. The most common tax bases are the assessed value for property tax purposes and the gross annual rental value. Square footage of floor space and storage capacity are also used. Municipalities in Newfoundland and Labrador (including St. John’s) that impose property taxes levy business taxes as percentages of the assessed value of business property. These percentages may vary by type and/or category of business. Municipalities that do not impose property tax levy business tax as a percentage of gross revenue. In Prince Edward Island, property is assessed at the indicated market value. The total value or a portion thereof may be classified as commercial or non- commercial realty. Nova Scotia’s Municipal Law Amendment Act eliminated the provincial business occupancy assessment tax (BOAT) in stages. In 2006, the tax was eliminated for the 25 percent category of assessment (hotels, motels, restaurants, campgrounds, service stations, and motor vehicle dealerships). For the 50 percent category of assessments (about 85 percent of Nova Scotia businesses), the BOAT will be phased out over five years until 2010, when it will be completely eliminated. The BOAT will be eliminated in 2013 for the 75 percent category of business occupancy assessment (comprised of banks, other financial institutions, and insurance agencies and brokers). Business taxes in Quebec are based on the annual gross rental value of the business properties and can be combined with a tax on non-residential immovables. Municipal revenues from the business tax alone or combined with a non-residential tax cannot exceed limits that vary according to municipal categories. In general, urban municipalities served by public transportation have higher limits. These taxes cannot be levied on farms. Ontario allows municipalities to apply a tax increase of no more than one- half of any increase on homeowners to the business and multiresidential classes. The regulation offsets the impact of residential reassessments by avoiding tax shifts from business onto residential property taxpayers. Ontario’s 2008 budget accelerated the business education tax rate cuts by four years in the northern part of the province so that northern business property tax rates will be a maximum of 1.6 percent in 2010. 6:20 FINANCES OF THE NATION 2009

Manitoba municipalities may levy a business tax. Business tax rates cannot exceed 15 percent of the assessed gross rental value of the property. Winnipeg has legislative authority to establish classes of property for the purpose of business assessment and may set different business tax rates for each class. Other municipalities must set a uniform rate for all businesses if they choose to levy a business tax. Any municipality in Alberta may pass a business tax bylaw. The bylaw must specify one or more of the following methods for preparing the assessments: a percentage of gross annual rental value of the premises, a percentage of the net annual rental value of the premises, storage capacity of the premises, floor area and the area outside the building that is occupied for the purposes of that business, or a percentage of the property assessment for the premises occupied. Municipalities can establish different business classes and levy a different business tax rate for each class. Generally, machinery and equipment that are used for manufacturing or processing, the production or transmission of natural resources, or telecommunication transmissions for public resale are subject to general property tax. A municipality may, however, pass a bylaw that exempts machinery and equipment used for manufacturing or processing from taxation. A business is exempt from a business tax when a property tax has been imposed on any machinery and equipment and/or linear property located on the business premises. A business is not exempt from a business tax when the activities that result from the operation of the machinery and equipment and/or linear property are not the chief business conducted at the premises. In British Columbia, municipal business taxes are relatively unimportant. Instead, municipalities use the variable property tax system for most of their revenue.

SPECIAL ASSESSMENT LEVIES In addition to the general property tax, all provinces authorize municipalities to impose special assessments and charges to recover local improvement costs. The municipal capital expenditures most frequently included in local improvement levies are for streets, sewers, water mains, street lighting, and sidewalks. The types and proportions of local improvement costs that are recovered through special assessment charges rather than through the general property tax vary considerably among municipalities. These costs are usually recovered by allocating the total cost proportionately to individual property frontages in the area benefiting from the expenditure. 7 Transfer Payments

The federal government provides a series of unconditional general purpose cash payments, or transfers, directly to the provinces, territories, and municipalities. The provinces, in turn, provide transfers, primarily for specific purposes, to their municipalities. These transfer payments are examined in this chapter.

FEDERAL TRANSFER PAYMENTS The Department of Finance estimates that general purpose transfers to the provinces, territories, and municipalities for 2009-10 will total $17.4 billion, which includes $14.2 billion for equalization, $32 million for statutory subsidies, $645 million for offshore accords, and $2,498 million for special grants to the territories (as shown in table 7.1). Estimated total cash payments from the federal to provincial and local governments are $59.3 billion in 2009- 10. Table 7.2 summarizes federal transfers to the provinces, territories, and municipalities for selected fiscal years, 1999-2000 to 2009-10. The federal government also provides a number of specific purpose transfers to the other two levels of government on the condition that the lower levels carry out specified programs or commit to making comparable or matching expenditures. These transfers are discussed briefly here, but are considered federal expenditures on the activities financed (such as medicare or social services) and are described in detail in the relevant chapters. The Canada health and social transfer (CHST), which first came into effect for the 1996-97 fiscal year, replaced transfers to the provinces under the established programs financing (EPF) and Canada Assistance Plan (CAP) arrangements. The Canada health transfer (CHT) and the Canada social transfer (CST) were formerly included in the CHST, which was restructured as part of the 2003 health accord. The CHT and the CST came into effect on April 1, 2004. The separate transfers for health and other social programs enhanced the transparency and accountability of federal support for these programs. Specific purpose transfers under the CHT and the CST, as defined under the financial management system (FMS) analysis, total $42.0 billion for 2009-10. In the late 1960s, Ottawa offered all provinces the opportunity to opt out under the EPF arrangements to allow them more autonomy over conditional grant and shared-cost programs. Quebec, for example, receives a combination of tax room and additional cash transfers, as described in this chapter. It was the only province to opt out of a number of the conditional grant programs. To put federal assistance into perspective, table 7.3 shows estimated total federal cash transfers as a percentage of provincial/territorial revenue for the fiscal year 2009-10. Prince Edward Island is expected to rely on these transfers 7:2 FINANCES OF THE NATION 2009

Table 7.1 Estimated Federal Payments to the Provinces, Territories, and Municipalities, 2009-10 millions of dollars Cash transfers General purpose transfers Equalization ...... 14,185 Offshore accords ...... 645 Statutory subsidies...... 32 Territorial financial agreements ...... 2,498 Total general purpose cash transfers ...... 17,360 Specific purpose transfers Canada health transfera ...... 24,237 Canada social transfer...... 10,868 Otherb ...... 6,883 Total specific purpose cash transfers...... 41,988 Total cash transfers...... 59,348 Tax transfers Canada health transfer...... 14,000 Canada social transfer...... 8,600 Total tax transfers ...... 22,600 Total cash and tax transfers...... 81,948 a Includes wait times reduction transfer. b Includes labour market training infrastruture and other targeted payments. Source: Department of Finance calculations, January 2009.

Table 7.2 Summary of Federal Contributions to the Provinces, Territories, and Municipalities, Selected Fiscal Years Ending on March 31, 2000 to 2010 1999- 2008-9 2009-10 2000 2005-6 2006-7 2007-8 (est.) (est.) millions of dollars Payments to provinces, territories, and local governments General purpose transfers Equalization ...... 9,898.9 10,900.0 11,535.1 12,924.7 13,619.9 16,086.1 Statutory subsidies . . 30.1 31.8 31.8 31.8 32.0 32.0 Territorial financing . 1,401.7 2,000.0 2,118.3 2,221.3 2,312.9 2,497.9 Other ...... aaaaaa Total general purpose transfers ...... aaaaaa Specific purpose transfers Canada health and social transfer..... 15,891.5b 27,225.0b 28,639.9b 31,064.5b 33,187.0c 34,847.9c Total specific purpose transfers ...... aaaaaa Total transfer payments . aaaaaa a The data are not available. b Health, health reform transfer (in 2005-6), social assistance, and post-secondary education transfer (CHST). c Canada health transfer and Canada social transfer. Sources: Estimates and public accounts, various years. TRANSFER PAYMENTS 7:3

Table 7.3 Federal Transfers as a Percentage of Provincial/Territorial Revenue, Estimated Data for the Fiscal Year Ending on March 31, 2010

Federal transfers Provincial/ General Specific territorial revenue Province/territory purpose purpose from own sources Newfoundland and Labrador ...... 8.0 13.7 78.3 Prince Edward Island...... 24.3 19.8 56.0 Nova Scotia...... na na na New Brunswick ...... 23.7 15.7 60.5 Quebec...... 13.4 10.4 76.1 Ontario...... 0.4 19.7 79.9 Manitoba...... 20.4 17.0 62.7 Saskatchewan ...... — 13.7 86.3 Alberta...... — 14.8 85.2 British Columbia ...... — 19.3 80.7 Northwest Territories...... 66.4 7.1 26.5 Nunavut...... 83.9 8.9 7.2 Yukon ...... 77.2 9.0 13.8 Sources: Provincial and territorial budgets for 2009-10. for 44 percent of its total revenue in 2009-10, while Ontario, Alberta, and British Columbia will receive only 20.0, 14.8, and 19.3 percent, respectively, of their revenue from Ottawa. Saskatchewan’s dependence on federal transfers, 14.8 percent in 2008-9, is expected to drop to 13.7 percent in 2009-10. Quebec’s dependence on federal-provincial fiscal arrangements is understated because the value of the additional tax abatement under the opting-out arrangements is considered own-source revenue. The federal-provincial fiscal arrangements are usually renegotiated every 5 years. Beginning in 2004-5, fundamental changes to the equalization system apply for the period April 1, 2004 to March 31, 2009. The new framework increased support to the provinces and territories under the equalization and territorial financing formula programs by $33 billion over 10 years. New initiatives included fixed payment levels, a minimum funding floor of $10.9 billion for equalization and $2.0 billion for territorial formula financing in 2005-6, and an annual growth rate of 3.5 percent until 2009-10. The 2009 federal budget noted that, without action, payments under the equalization program will grow to $16 billion in 2009-10 and $20 billion in 2010-11 and stated that this rate of growth is unsustainable. Noting that equalization payments have increased by 56 percent since 2003-4, the budget proposed to make adjustments to the program so that equalization grows in line with the economy. Changes to the equalization program ensure that growth will reflect a three- year moving average of nominal gross domestic product growth to ensure stability and predictability. Reflecting the inclusion of Ontario as an equalization recipient, the federal government announced that all equalization- receiving provinces will receive the same per capita CHT cash payment, and no province with a high fiscal capacity will receive more than the average of the receiving provinces, subject to transition protection. This protection ensures that any province with a high fiscal capacity and currently receiving 7:4 FINANCES OF THE NATION 2009 more CHT cash will be protected against real declines in CHT cash from amounts already announced for 2008-9. The Expert Panel on Equalization and Territorial Formula Financing was established by the federal government in 2005 to undertake an independent review of the equalization and formula financing programs. The report of the panel, released in 2006, is discussed later in this chapter. Changes made to the equalization framework included updating a number of tax bases, reflecting the changes to various provincial tax systems and access to new data. The property tax base was changed to reflect the use of real market value in the residential property sector. Special consideration was made for British Columbia because of the province’s high property values. Because the property tax change will have significant impact across provinces, it will be phased in, and only 50 percent of the proposed new property tax base will be used for the next five years. The personal income tax base was reformed to take into account the provincial move to a tax-on-income system in 2001. Other changes to the tax base reflect modifications to the revenue sources used in the equalization formula: changes to hospital and medical insurance premiums reflect the changes made to health-care premiums in Alberta and British Columbia; changes to water power rentals incorporate electricity production from the Columbia River; and changes to the taxation of minerals reflect the removal of certain minerals from the base. The present system can best be understood with the knowledge of how it evolved over the past decades. A complete history of federal-provincial fiscal arrangements is available in The Financing of Canadian Federation: The First Hundred Years1 and Financing the Canadian Federation, 1867 to 1995: Setting the Stage for Change.2 This should be supplemented with articles in the Canadian Tax Journal3 and relevant chapters in editions of The National Finances.

General Purpose Cash Transfers Equalization The formal system of equalization began in 1957, although the principle of providing additional resources to provinces with pressing needs dates back to Confederation. The Constitution Act, 19824 incorporated equalization as a federal responsibility.

1 A. Milton Moore, J. Harvey Perry, and Donald Beach, The Financing of Canadian Federation: The First Hundred Years, 2d ed., Canadian Tax Paper no. 43 (Toronto: Canadian Tax Foundation, 1966). 2 David B. Perry, Financing the Canadian Federation, 1867 to 1995: Setting the Stage for Change, Canadian Tax Paper no. 102 (Toronto: Canadian Tax Foundation, 1997). 3 David B. Perry, “Federal-Provincial Fiscal Relations: The Last Six Years and the Next Five” (1972) vol. 20, no. 4 Canadian Tax Journal 349-60; “The Federal-Provincial Fiscal Arrangements Introduced in 1977” (1977) vol. 25, no. 4 Canadian Tax Journal 429-40; and “The Federal-Provincial Fiscal Arrangements for 1982-87” (1983) vol. 31, no. 1 Canadian Tax Journal 30-47. 4 Being schedule B of the Canada Act 1982 (UK), 1982, c. 11, section 36(2). TRANSFER PAYMENTS 7:5

The principle underlying equalization is that the federal government has a responsibility to ensure that each province has adequate revenue to provide a minimum level of public service without recourse to exceptionally high levels of taxation. The federal government accomplishes this through unconditional grants that make up the difference between actual provincial taxes or revenues and some measure of the highest, average, or representative levels of the same taxes or revenues. One of the key changes to equalization introduced in 2004 was the introduction of a moving average, under which payments are based on an average of payments for the three previous years. This provision introduces more payment stability by blunting the effects of data revision and reducing the number of times payments must be revised. The new system was phased in between 2004-5 and 2008-9. The 2007 federal budget introduced a new program to renew and strengthen equalization. The program is based on recommendations of the Expert Panel on Equalization and Territorial Formula Financing (Expert Panel). A summary of the Expert Panel’s recommendations appears later in this chapter. Under the new program, equalization payments are determined using a 10-province standard; 50 percent of natural resource revenues are excluded in the determination of each province’s fiscal capacity and the standard; and a cap ensures that a receiving province’s total per capita fiscal capacity does not rise above that of any non-receiving province. In addition, the measurement of fiscal capacity has been simplified, and the number of tax bases was reduced from 33 to 5: personal income tax, business income tax, consumption tax, property tax, and natural resources. Fiscal equalization payments to the provinces for 2009-10 are as follows: Prince Edward Island, $340 million; Nova Scotia, $1.4 billion; New Bruns- wick, $1.7 billion; Quebec, $8.4 billion; Ontario, $347 million; and Manitoba, $2.1 billion. The cash payments under the CHT and CST are calculated by deducting the value of the tax points and associated equalization from the total entitlement. In February 2003, the federal government agreed to permanently remove the equalization ceiling, beginning with the 2002-3 fiscal year. It remains in effect for earlier years. Previously, the ceiling set out a maximum amount for annual payments that protects the federal government from unusually fast growth beyond that level. An equalization floor was introduced in 1982 to provide protection against large reductions in payments to individual provinces. Currently, a formula limits the decline to 1.6 percent of the per capita value of the equalization standard. The Canada-Newfoundland Atlantic Accord provides Newfoundland and Labrador protection from large reductions in equalization resulting from increased provincial revenue from the economic development of offshore oil reserves. In 2005, the federal government agreed to provide additional offset payments to Newfoundland, effectively allowing the province to retain 100 percent of its offshore resource revenues. Beginning in 2006-7 and continuing 7:6 FINANCES OF THE NATION 2009 until 2011-12, annual offset payments are equal to 100 percent of any reductions in equalization resulting from offshore resource revenues. The 2007 federal budget noted that the federal government will respect the offshore accords with Newfoundland and Labrador and Nova Scotia, and both provinces can continue to operate under the previous equalization system until the existing offshore agreements expire. The two provinces may permanently opt into the new program at any time prior to the expiry of the offshore accords. The federal budget noted that, in order that every province benefits under the new equalization program, provinces will receive the greater of the amount they would receive either by fully excluding natural resource revenues or by including 50 percent of such revenues. The Newfoundland and Labrador government was not pleased with the new equalization program, and the provincial finance minister issued a press release in April 2007 charging that the province would receive $1 billion less under the new plan over a 13-year period. The federal finance minister responded by noting that Newfoundland and Labrador will continue to be eligible for equalization under the previous program and the corresponding offset payment until the accord expires. Newfoundland and Labrador may opt into the new plan at any time but, in order to ensure fairness to all other provinces, 50 percent of natural resource revenues are included in equalization calculations, which is designed to ensure that the fiscal capacity of a receiving province is never higher than that of a non-receiving province. The federal government makes no equalization payments to the territorial governments because the special payments described below take into account both their needs and resources.

Report of the Expert Panel on Equalization and Territorial Formula Financing: Equalization Formula Recommendations The panel agreed that the equalization program prior to the new framework introduced in 2004 was preferable because it was formula-driven and rules- based. The panel therefore called for a return to such a system, albeit with a less complex formula. The report stated that equalization should be the primary vehicle for equalizing fiscal capacity among provinces and recommended that the representative tax system (RTS) approach for assessing provincial fiscal capacity be retained but simplified. It was further recommended that a new measure for residential property taxes, based on market value assessment, should be implemented and that the equalization formula should not include user fees. On the contentious issue of the treatment of resource revenue, the panel noted that, in principle, the revenue from natural resources should provide a net fiscal benefit to the provinces that own them and made several recommendations, including the following. 1. Include 50 percent of provincial resource revenue in determining the equalization pool. 2. Use actual resource revenue in the equalization formula as a measure of provincial fiscal capacity. TRANSFER PAYMENTS 7:7

3. Treat all resource revenue equally. 4. Implement a cap to ensure that no equalization-receiving province is left with fiscal capacity greater than the lowest non-receiving province. Finally, the report recommended that the determination of equalization entitlements be replaced with one estimate, one entitlement, and one payment, which would result in a more predictable and stable system. In addition, the report recommended using a three-year moving average combined with two- year lagged data to mitigate the effects of any year-over-year changes. In order to improve transparency, communications, and governance of the equalization program, the report recommended that the federal government adopt a more rigorous process to track fiscal disparities across provinces and report them publicly.

Stabilization Since 1957 the federal government has made a formal commitment to ensure that provincial governments are protected from precipitous declines in revenue through stabilization payments to bring a province’s yield from equalization and the standard taxes up to a specified minimum. The stabilization provisions were changed in 1987 to redefine provincial revenue sources subject to stabilization and to stipulate that stabilization entitlements in excess of $60 per capita of provincial population will be considered interest-free, five-year loans, not outright grants. Between 1967 and 1990, only two payments were made under the program: to British Columbia in 1983-84 and to Alberta in 1986-87. The recession in the early 1990s and falling inflation triggered stabilization payments to almost all the provinces. In 1990-91, Ontario made a claim for stabilization and received a payment related to that claim. The 1995-96 federal budget announced that because the program was originally intended to play a role only in times of severe economic shock, the program threshold for eligibility will be restored to that which prevailed between 1967 and 1972. The threshold, a year-over- year revenue decline exceeding 5 percent, applies to claims in respect of 1995- 96 and subsequent years.

Statutory Subsidies As well as payments under the current federal-provincial fiscal arrangements and the CHT and CST, the federal government provides statutory subsidies to the provinces. They include allowances for government, population, and interest on debt, as well as special grants. The present level of statutory subsidies, $32.0 million in 2009-10, is dwarfed by most of the other transfer programs described in this chapter.

Revenue Guarantee Payments In 1972, the federal government introduced a major reform of the personal and corporate income tax systems that affected provincial tax collections. The 1972-77 fiscal arrangements guaranteed that for five years the provinces would 7:8 FINANCES OF THE NATION 2009 not suffer a loss of income tax revenue as a result of adopting income tax acts modeled on the 1972 federal Act, provided that their rates were equivalent to those levied under the old Act. Revenue was guaranteed at a level equal to the projection of 1971 rates. In 1975, the Act was amended to remove from the guarantee provisions federal compensation for (1) provincial revenue losses resulting from indexation or provincial changes in the personal income tax and (2) provincial corporate income tax measures to offset the federal disallowance of provincial natural resource royalties as deductions from income. A concomitant result of tax reform was that the provinces received 20 percent of the 15 percent tax on special distributions of corporate income surplus built up before January 1, 1972 and paid out after that date. This latter measure became redundant by 1987 and was eliminated in the legislation for the 1987-92 period. The guarantee expired at the end of the 1972-77 period. At the insistence of the provinces, the EPF formula was revised to transfer permanently a portion of the resources made available under the 1972-77 guarantee. In addition, the federal government provided a limited revenue guarantee effective for only the first year after a federal tax change and only to the extent that the provincial loss exceeded 1 percent of basic federal tax in the province.

Reciprocal Taxation Under the constitution, both federal and provincial governments are exempt from each other’s taxes. Reciprocal taxation agreements negotiated in 1977 and 1983 between the federal and provincial governments were nullified by the goods and services tax (GST) legislation, effective January 1, 1991. Provincial governments are not subject to the GST on their purchases, and the federal government is exempt from provincial retail sales taxes. To replace the earlier agreements, three new types of agreements were negotiated. Under the first type of arrangement, both the provinces and the federal government pay each other’s specific commodity taxes (such as gasoline, tobacco, and alcohol taxes), but not the GST or retail sales tax. All indirect government purchases, such as travel and accommodation expenses for employees, are subject to both the general and specific taxes. Newfoundland and Labrador, Prince Edward Island, Nova Scotia, Quebec, Ontario, Manitoba, and British Columbia have concluded agreements using this model. The second type provides that neither level of government pays any specific commodity taxes imposed by the other level. Saskatchewan and the territories operate under this arrangement. The third type of agreement, unlike the first two, involves no formal arrangements: administrative decisions provide exemptions. In New Brunswick, each level pays the other’s specific commodity taxes. In that province and Alberta, indirect purchases are taxable. Because the amounts payable by the two levels are approximately the same under all three types of arrangements, there are no federal payments under the new arrangements.

Grants in Lieu of Property Taxes The system of federal grants to local and provincial governments in lieu of real property taxes on federal property is set out in the federal Municipal Grants TRANSFER PAYMENTS 7:9

Act (RSC 1985, c. M-13, as amended). The grants in lieu of taxes are calculated so that federal property is valued as if it were taxable and taxed at the applicable rate. No preferential rates are used unless they are also available to other property owners. Grants are not payable in respect of federal property used for urban parklands, Indian reserves, and structures such as canal locks, jetties, and aircraft runways. The federal government also pays grants in lieu of taxes on certain lands leased to private sector tenants. The act includes a list of Crown corporations required to pay grants in lieu of property taxes.

Transfers to Territorial Governments The federal equalization and stabilization programs do not apply to the territorial governments. The Northwest Territories, Nunavut, and Yukon levy personal and corporate income taxes and have collection agreements with the federal government. In 2005, the federal government established a new funding arrangement for the territorial formula financing program. The agreements with the Northwest Territories, Nunavut, and Yukon were renewed for the period April 1, 2004 to March 31, 2009. Additional funding totaling $300 million over five years is included to support territorial health and economic development. The health transition funding provided in 2003 became an annual $20 million transfer beginning in 2006-7. The territorial formula financing (TFF) ceiling was removed in 2004-5. Following consideration and review of the Expert Panel’s report (summarized below), the 2007 federal budget returned the TFF program to a principles- based program that recognizes the unique circumstances of each territory. The amount of a territory’s TFF grant will again be based on the difference between assessed expenditure needs and its capacity to generate revenues. Each territory’s gross expenditure base will be adjusted annually. Territorial revenue capacity will be measured by using a representative tax system, similar to that used by the equalization program. The system will use 7 of the largest own-source territorial revenues, and a revenue block will be established for the remaining 11 own-source revenue sources. The new TFF excludes 30 percent of territorial measured revenue capacity, thereby improving incentives to increase own-source revenue. Natural resource revenues continue to be treated outside TFF.

Report of the Expert Panel on Equalization and Territorial Formula Financing: Territorial Formula Financing Recommendations The report of the Expert Panel noted the enormous and unique challenges faced by Canada’s three territories but questioned whether one solution was effective in addressing the differences between the territories. Recommenda- tions to improve the TFF program include the following. 1. Replace the “fixed pool” of equalization funding in the new framework with a formula-driven approach and provide three separate gap-filling grants. 2. Adjust the current gross expenditure bases for the territories to reflect 2005-6 framework funding levels for the TFF program. 3. Simplify TFF by measuring revenue capacity using the RTS. 7:10 FINANCES OF THE NATION 2009

4. Simplify the measurement of revenue capacity by establishing a revenue block that includes personal income tax, corporate income tax, payroll tax, gas and diesel tax, tobacco tax, and alcohol tax revenues. 5. Include only 70 percent of the territories’ measured revenue capacity in the TFF. In this way, the territories can keep more of the financial benefits from economic development without a corresponding drop in TFF funding. 6. Exclude resource revenues from the calculation of revenues in TFF. 7. Review the significant expenditure needs and higher cost of providing public services in Nunavut. There are currently serious disparities in the provision of health care, education, social services, and housing, and the TFF is not sufficient for the territory’s expenditure needs. Additional funding should be provided through targeted programs rather than by adjustments to the TFF. 8. Use a three-year moving average to improve stability and predictability.

Specific Purpose Cash Transfers Conditional grants, which began in 1900, reached their zenith in the 1960s with the introduction of major programs such as hospital insurance, medicare, and federal assistance for post-secondary education. Since then, the provincial desire for more flexibility and federal concern over rising expenditures has resulted in different arrangements. By the mid-1970s, the federal government found that its expenditures under the main conditional grant programs—hospital care, medicare, and post- secondary education—were growing very quickly and that it had no control over that growth. The provinces, on the other hand, were committed to spending on the joint programs without regard for their own priorities. Under the 1977 EPF arrangements, both concerns were met. (For details on the evolution of the arrangements, see The National Finances 1994.)

Canada Health Transfer and Canada Social Transfer The 1995 federal budget further reformed the system of federal transfers to the provinces and territories. Federal transfers for health and post-secondary education, previously provided under the EPF system, and transfers for social assistance, previously made under CAP, were merged into a single, block transfer, the CHST, which was provided through cash payments and tax points. The CHST was not tied to provincial spending on health, post-secondary education, and social assistance. The provinces allocated their financial resources as circumstances and priorities dictated. Provinces were required to provide social assistance without minimum residency requirements, and the principles of the federal Canada Health Act continued to apply. In response to continuing provincial charges that the federal government’s share of health-care spending had decreased precipitously over the past few decades, the federal government changed the CHST. In order to emphasize the federal share of spending on health care, social assistance, post-secondary education, and early childhood development, effective April 1, 2004, the CHST TRANSFER PAYMENTS 7:11 became two separate transfers. The Canada health transfer supports health care and the Canada social transfer supports post-secondary education, social assistance, and social services. The federal government estimates that provincial health spending represents about 62 percent of the programs supported by federal transfers. In 2009-10, provinces and territories will receive $24.2 billion under the CHT. The CST will provide $10.9 billion to the provinces in 2009-10 in support of post-secondary education, social assistance, and social services, including early childhood development, early learning, and child care. The 2007 federal budget restructured the CST to provide equal per capita cash payments to provinces and territories, effective 2007-8. Similar changes will be made to the CHT, effective 2014-15, when its current legislation is renewed. CST funding was increased by $687 million in 2007-8. The CST was extended to 2013-14 and, effective 2009-10, will grow by 3 percent annually.

Health Reform Transfer As part of the federal-provincial 10-year plan, the health reform transfer (HRT) was integrated into the CHT beginning in 2005-6. The HRT supports health-care reforms in primary health care, home care, and catastrophic drug coverage.

Wait Times Reduction Transfer In 2005, the federal government established a wait times reduction transfer to provide funding to the provinces to reduce wait times for medical care, train and hire more health professionals, and expand ambulatory and community care programs and other initiatives. The federal government provided $4.25 billion for the transfer. The federal government may make cash contributions of $250 million each fiscal year beginning in 2009 and ending in 2014. Payments will be made on a per capita basis. The federal 2007 budget provided $612 million to the patient wait times guarantee trust.

Opting-Out Arrangements The first opting-out arrangements were concluded in 1960 when the federal government provided Quebec with an abatement of 1 percentage point of corporate income tax in lieu of federal university grants. The abatement was enriched by cash payments to ensure that Quebec received the same amount it would have received had it not opted out of the federal program. This special provision was replaced by the general provision of tax abatements for post- secondary education (described below). A federal scheme to provide allowances for 16- and 17-year-olds who remained at school or were incapacitated was introduced in 1964. Because Quebec was already in the field of school allowances and wished to continue its own program, the federal government agreed to provide the province with an additional abatement of 3 percent of basic federal personal income tax to finance the provincial program. The national program was replaced by an 7:12 FINANCES OF THE NATION 2009 expanded family allowance in 1974, and the opting-out provision was no longer applicable. The federal government continued the abatement to avoid the complete revision of the Quebec income tax rate structure, with the stipulation that it recover 100 percent of the abatement from the province. Under the Established Programs (Interim Arrangements) Act of 1965, the federal government provided the provinces with a framework to opt out of specified federal conditional grant programs. Quebec was the only province that made use of this option. Tax points provided to Quebec now total 16.5: 13.5 points for the CHT and CST and 3 for youth allowances.

Other Specific Purpose Cash Transfers The federal government funds a number of joint programs operated by the provincial and territorial governments which include the Canadian agri stability program (described in chapter 13) and bilingualism education (described in chapter 9). The provinces administer these shared-cost programs according to federal guidelines and standards and, in exchange, the federal government provides a certain percentage of the provincial costs.

TRANSFERS TO LOCAL GOVERNMENTS Transfers from the provinces to their local governments provide the bulk of the transfers (about 95 percent) received by municipalities. Provincial-to-local transfers almost equal federal-to-provincial transfers; however, the nature of the two levels of transfers is quite different. Whereas 30 to 35 percent of federal transfers to provincial governments are general purpose and the remainder are specific purpose, provincial transfers to municipalities are predominantly specific purpose: roughly 80 percent specific purpose and 20 percent general purpose. Federal transfers to local governments are evenly divided between general purpose and specific purpose transfers. General purpose transfers to municipalities are unconditional grants from federal and provincial governments and from federal and provincial government enterprises in lieu of taxes on their property. The federal Municipal Grants Act provides three basic grants: (1) annual grants in lieu of real property taxes levied for general and school purposes, described above; (2) transitional grants, where taxable property is acquired by the federal government and withdrawn from the tax roll (applicable to the restricted kinds of property that do not qualify for annual grants); and (3) grants in lieu of special assessments for local improvements. Federal specific purpose transfers to local authorities include payments for general government services, public works, sanitation, waterworks, and similar community services provided to federal properties. Some federal grants are also given directly to local authorities where the province does not choose to pass the grants on under one of its own programs. These federal grants are for purposes such as sewage works assistance and housing and urban renewal programs. Federal and provincial general purpose and specific purpose transfers to local governments for 2006 to 2008 are shown in table 7.4. TRANSFER PAYMENTS 7:13

Table 7.4 Transfers from the Federal and Provincial Governments to Local Governments,a 2006 to 2008 2006 2007 2008 millions of dollars General purpose transfers Grants in lieu of taxes Federal government ...... 443.6 435.9 447.9 Federal government enterprises ...... 85.0 83.6 85.5 Provincial and territorial governments ...... 659.3 668.0 684.5 Provincial and territorial government enterprises . 132.8 136.7 141.6 Local government enterprises and others ...... 157.1 183.8 194.2 Total grants in lieu of taxes...... 1,519.2 1,549.4 1,596.7 Other general purpose transfers from provincial governments ...... 2,336.0 2,207.5 2,476.8 Total general purpose transfers...... 3,855.2 3,756.9 4,073.5 Specific purpose transfers Federal government General services...... 53.3 56.4 41.4 Protection of persons and property...... 17.9 28.6 22.6 Transportation and communications...... 518.4 613.5 475.1 Environment...... 168.2 247.6 119.5 Housing...... 362.9 375.4 401.4 Recreation and culture...... 42.1 66.3 48.5 Other services...... 99.5 118.9 103.9 Total specific purpose transfers from federal government ...... 1,262.3 1,506.7 1,212.4 Provincial governments General services...... 270.2 189.8 265.2 Protection of persons and property...... 215.5 275.2 395.2 Transportation and communications...... 2,312.5 2,361.9 2,985.3 Environment...... 987.8 940.5 873.6 Health ...... 802.2 1,007.8 1,170.9 Social services ...... 3,701.8 4,181.7 4,814.9 Recreation and culture...... 470.6 522.4 675.3 Housing...... 340.0 340.7 447.7 Debt charges...... 39.5 40.4 71.5 Other services...... 408.6 434.2 437.2 Total specific purpose transfers from provincial governments ...... 9,548.7 10,294.6 12,136.8 Total specific purpose transfers ...... 10,811.0 11,801.3 13,349.2 Total transfers...... 14,666.2 15,558.2 17,422.7 a Includes the territories. Source: Statistics Canada, June 2009. Xxxxxxxx 8 Social Services

Governments acknowledge responsibility for the well-being of their citizens by providing social service programs. Social assistance lessens, removes, or prevents the causes and effects of poverty and child neglect and ensures a minimum standard of living for all Canadians. This commitment is costly: expenditures on social services account for the largest portion of federal program spending—about 37 percent of total expenditures in 2008-9. For the same year, consolidated provincial, territorial, and local spending on social services and social assistance accounted for almost 15 percent of total spending. At the time of Confederation, government involvement in social welfare was so negligible that it was not included in section 91 or 92 of the Constitu- tion Act, 1867. Welfare became primarily a provincial responsibility that was usually delegated to local authorities. Today, all three levels of government share in the provision of welfare services; however, the primary responsibility has shifted from the local to the federal and provincial governments. Some programs are carried out by a single level of government, while others are cooperative programs that involve two or all three levels. Every province and territory offers services to families and children, senior citizens, and the disabled and cooperates with local governments in other programs. Because it is not possible to cover in detail all the services offered within each province and territory, this chapter focuses only on the major social service programs in Canada. Federal expenditures on social services in 2008-9 are estimated at $88.8 billion. Consolidated provincial, territorial, and local government expenditures on social services for 2004-5 to 2008-9 are shown in table 8.1.

EMPLOYMENT INSURANCE PROGRAM The employment insurance (EI) program is a federal responsibility. It has been reformed and amended many times since its inception in 1941. Origi- nally, the federal government met all administrative expenses and provided the employment insurance account with a grant equal to one-fifth of combined employer-employee contributions. Since 1990, the EI system has been financed entirely by employer-employee contributions. When the account is in a deficit position, the federal government may authorize repayable advances. The Canada Revenue Agency (CRA) collects the EI premiums. All premiums are allowable credits in the determination of personal income tax. All benefits except special benefits are taxable and recoverable from high- income beneficiaries. The benefit repayment, or clawback, threshold is set at 8:2 FINANCES OF THE NATION 2009

Table 8.1 Consolidated Provincial, Territorial, and Local Government Expenditures on Social Services, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador . . . 605 611 654 735 758 Prince Edward Island...... 88 120 120 124 130 Nova Scotia...... 767 866 923 1,159 1,189 New Brunswick ...... 712 732 762 829 891 Quebec...... 17,709 20,004 22,185 23,704 24,516 Ontario...... 17,266 17,413 18,630 19,374 20,374 Manitoba...... 1,517 1,586 1,641 1,835 1,901 Saskatchewan ...... 1,070 1,078 1,114 1,121 1,137 Alberta...... 3,666 3,971 4,189 4,808 5,344 British Columbia ...... 4,741 5,305 6,161 6,272 7,242 Northwest Territories...... 118 114 129 148 153 Nunavut...... 88 88 96 103 103 Yukon ...... 92 100 109 112 114 Total...... 48,432 51,980 56,705 60,316 63,843 Source: Statistics Canada, June 2009.

$51,375 of net income in 2008, with a repayment rate of 30 percent of a person’s net income in excess of that amount. Costs of the EI program that are allocated as social service expenditures are EI benefits and administration expenses. In 2009-10, they are estimated at $20,603 million.

Employment Insurance Benefits General Benefits The benefit period is based on hours of paid work and the regional rate of unemployment. Claimants may receive benefits for 14 to 45 weeks. The 2009 federal budget increased the maximum benefit period to 50 weeks for two years, after which it will revert to 45 weeks. All claimants receive at least 55 percent of their maximum insurable earnings. For modest-income individuals with dependants, the maximum benefit rate in 2009 is 80 percent; however, the actual weekly benefit amount cannot exceed the maximum, $447. There is a 2-week waiting period for all claimants before benefits can be received, and no claimant may receive benefits for more than 45 weeks (50 weeks in 2009 and 2010) in a 52-week period. Claimants who have committed EI fraud are subject to higher entrance requirements. The minimum hours of work required may increase to twice the normal requirement, depending on the degree of violation. Workers aged 65 years and over are required to pay EI premiums and may receive benefits as long as they meet the qualifying conditions. Table 8.2 shows a detailed breakdown of employment insurance benefits paid in 2007 and 2008. SOCIAL SERVICES 8:3

Table 8.2 Employment Insurance Benefits, 2007 and 2008 2007 2008 millions of dollars Part I Employment benefits Regular ...... 8,445.7 8,380.9 Fishing ...... 259.9 265.0 Worksharing...... 8.2 14.9 8,713.8 8,660.7 Special benefits Maternity...... 778.4 835.5 Adoption and parental ...... 1,763.2 1,913.7 Sickness...... 885.3 928.1 Compassionate care ...... 8.9 9.3 3,435.8 3,686.6 Part II Employment benefits Skills development ...... 398.1 263.4 Self-employment ...... 87.6 40.6 Job creation partnerships...... 49.3 27.1 Targeted wage subsidies ...... 35.8 23.0 570.8 353.9 Support measures Employment assistance services...... 286.9 152.3 Labour market partnerships ...... 158.4 158.3 Research and innovation ...... 14.8 14.5 460.1 325.1 Transferred to provinces ...... 1,056.0 1,416.9 Total...... 14,236.5 14,443.3 Source: Public Accounts.

Fishers’ Benefits Special regulations under the Employment Insurance Act provide coverage for both year-round and seasonal self-employed fishers. The benefit rate depends on earnings from fishing and the regional rate of unemployment. All fisher claims have a 31-week maximum qualifying period and a maximum entitlement of 26 weeks of benefits. Fishers must earn a minimum of between $2,500 and $4,200, depending on the regional unemployment rate, to qualify for benefits. Fishers are the only self-employed workers covered by the EI program.

Special Benefits Special benefits include maternity, parental and adoption leave, sickness, and compassionate care. Eligibility for special benefits is based on 600 insured hours of work in the previous 52 weeks or since the last claim. Parental leave of 35 weeks is available for biological and adoptive parents in addition to 15 weeks of maternity benefits. A combination of maternity and parental leave and sickness is available for a maximum of 50 weeks. If parental benefits are shared with a partner, in most cases only one waiting period is served. 8:4 FINANCES OF THE NATION 2009

Claimants of parental benefits may earn up to $50 or 25 percent of their weekly benefits (whichever is higher) without penalty. Claimants living in 1 of 23 specified economic regions may earn up to $75 or 40 percent of weekly benefits without penalty. Income earned above that amount is deducted from benefits paid. Any earnings of claimants receiving maternity or sickness benefits are deducted dollar for dollar from benefits. No recipients of special benefits are required to repay those benefits. Compassionate care benefits are available for a maximum of 6 weeks for those who must be absent from work to provide care and support to a gravely ill family member at risk of dying within 26 weeks. To be eligible, an applicant must show that his or her weekly work earnings have decreased by more than 40 percent. The qualifying period for benefits is 600 hours. Benefits may be shared between family members.

Quebec Parental Insurance Plan Effective January 1, 2006, Quebec pays maternity, parental, paternity, and adoption benefits to Quebec residents. The federal government reduces the EI premiums of Quebec workers and employers to allow the province to collect premiums for its own program.

Rates Effective January 1, 2009, the employee rate for contributions is $1.73 for every $100 of insurable earnings, and the employer rate is $2.42 per $100 of insured earnings up to the annual maximum of $42,300. The 2009 maximum contribution for an employee is $732, and for an employer, $1,025. See table 8.3 for employee and employer contributions and maximum annual insurable

Table 8.3 Employee and Employer Annual Contributions to Employment Insurance and Maximum Annual Insurable Earnings, 1999 to 2009 Maximum Premium rate per $100 Maximum annual annual of insurable earnings contribution insurable Year earnings Employee Employer Employee Employer dollars 1999 ...... 39,000 2.55 3.57 995 1,392 2000 ...... 39,000 2.40 3.36 936 1,310 2001 ...... 39,000 2.25 3.15 878 1,229 2002 ...... 39,000 2.20 3.08 858 1,201 2003 ...... 39,000 2.10 2.94 819 1,147 2004 ...... 39,000 1.98 2.77 772 1,081 2005 ...... 39,000 1.95 2.73 761 1,065 2006 ...... 39,000 1.87 2.62 729 1,021 2007 ...... 40,000 1.80 2.52 720 1,008 2008 ...... 41,100 1.73 2.42 711 995 2009 ...... 42,300 1.73 2.42 732 1,024 Source: Human Resources Development Canada, 2009. SOCIAL SERVICES 8:5 earnings, 1999 to 2009. The 2009 federal budget froze EI premium rates for 2009 and 2010. In Quebec, contributions for 2009 are $1.38 for employees and $1.93 for employers for every $100 of insurable earnings because the province operates its own plan for maternity, parental, paternity, and adoption benefits.

Entrance Requirements Most claimants require 420 to 700 hours of work during their qualifying period, from either full- or part-time work. Parents who are returning to the workforce after an extended absence to raise children require the same number of hours as other workers to qualify for benefits. Those entering the workforce for the first time or re-entering after an absence of two years require a minimum of 910 hours of work to qualify for benefits. Table 8.4 records the operations of the EI account for selected years, as well as contributions to the account, benefits paid out, and the surplus or deficit for the year.

INCOME SECURITY PROGRAMS Like the employment insurance system, the major income security programs—old age pensions, guaranteed income supplement, the allowance, and child tax benefit—are federal responsibilities. Provinces may, however, have income security programs of their own. Many provinces have programs that provide financial supplements to old age security/guaranteed income supplement (OAS/GIS) recipients whose xxxxxx Table 8.4 Employment Insurance Account for Selected Fiscal Years Ending on March 31, 1942 to 2008 Contributions Surplus EmployerFederal government Payment or and EI Fishers’ Other Total of deficit Year employeea account benefits revenueb revenue benefitsc (–) millions of dollars 1942 .... 36 7 — — 44 — 44 1950 .... 104 21 — 14 140 86 54 1960 .... 229 46 — 9 283 415 –132 1970 .... 492 98 — 33 623 542 81 1975 .... 1,622 871 23 1 2,544 2,521 23 1980 .... 2,860 2,187 72 24 5,143 4,202 941 1985 .... 7,777 2,788 159 2 10,726 11,702 –976 1990 .... 10,969 2,424 251 91 13,735 12,773 962 1995 .... 19,371 — — 61 19,432 16,669 2,763 2000 .... 18,825 — — 1,142 19,967 12,742 7,225 2005 .... 17,655 — — 1,046 18,701 16,385 2,316 2008 .... 16,877 — — 2,018 18,896 16,063 2,833 a Includes contributions for armed forces. b Largely income from investments. c Includes interest on loans from the minister of finance and, since June 27, 1971, administrative costs. Source: Public Accounts. 8:6 FINANCES OF THE NATION 2009 income falls below a specified level. Payments are delivered through the federal Department of Public Works and Government Services, Receiver General for Canada.

Old Age Pensions The old age security pension is available to anyone over the age of 65 who meets the residency requirements. The pension benefits are taxable and are subject to a partial or full recovery from high-income recipients. Pensions are adjusted quarterly in accordance with the cost-of-living increase. As of January 1, 2009, the maximum old age security pension is $516.96 per month, as shown in table 8.5.

Eligibility To be eligible for OAS, an applicant must have resided in Canada for at least 10 years immediately preceding the date on which an application is approved. Those who have been absent from the country during that period can become eligible if they have 3 years’ prior residence for every year that they were out of Canada during the last 10 years and if they resided in Canada for a full year immediately prior to their application. Alternatively, anyone will qualify

Table 8.5 Maximum Monthly Pension Under Old Age Security Act, Selected Periods from Inception of Program to Present Guaranteed Effective Basic income Maximum date pension supplementa pensiona dollars 1/1/52...... 40.00 — 40.00 1/1/67...... 75.00 30.00 105.00 1/4/71...... 80.00 55.00 (95.00) 135.00 (255.00) 1/1/75...... 120.06 84.21 (149.58) 204.27 (389.70) 1/1/80...... 182.42 149.76 (249.04) 332.18 (613.88) 1/1/85...... 273.80 325.41 (423.86) 599.21 (971.46) 1/1/90...... 340.07 404.13 (526.46) 744.20 (1,206.60) 1/1/95...... 387.74 460.79 (600.28) 848.53 (1,375.76) 1/1/00...... 419.92 499.05 (650.12) 918.97 (1,489.96) 1/1/05...... 471.76 560.69 (730.42) 1,032.45 (1,673.94) 1/1/06...... 484.63 593.97 (779.34) 1,078.60 (1,748.60) 4/1/06...... 484.63 593.97 (779.34) 1,078.60 (1,748.60) 7/1/06...... 487.54 597.53 (784.02) 1,085.07 (1,759.10) 10/1/06...... 491.93 602.91 (791.08) 1,094.84 (1,774.94) 1/1/07...... 491.93 620.91 (820.08) 1,112.84 (1,803.94) 4/1/07...... 491.93 620.91 (820.08) 1,112.84 (1,803.94) 7/1/07...... 497.83 628.36 (829.92) 1,126.19 (1,825.58) 10/1/07...... 502.31 634.02 (837.38) 1,136.33 (1,842.00) 1/1/08...... 502.31 634.02 (837.38) 1,136.33 (1,842.00) 4/1/08...... 502.31 634.02 (837.38) 1,136.33 (1,842.00) 7/1/08...... 505.83 634.46 (927.45) 1,140.29 (1,939.11) 10/1/08...... 516.96 652.51 (933.21) 1,169.47 (1,967.13) 1/1/09...... 516.96 652.51 (933.21) 1,169.47 (1,967.13) a Amounts in parentheses are those payable to a married couple, both pensioners. SOCIAL SERVICES 8:7 provided that he or she resided in Canada after attaining 18 years of age, for an aggregate period of at least 40 years. Certain employment abroad also may be counted as equivalent to residency in Canada. When a recipient’s 2009 net world income exceeds $66,335, old age security benefits are withheld from monthly OAS payments. The OAS pension is completely eliminated when a pensioner’s annual net income is $107,692 or above.

Guaranteed Income Supplement In 1967, the federal government introduced the guaranteed income supplement (GIS) program, which ensured a minimum monthly income of $105 to old age security recipients. The GIS was subject to a cost-of-living adjustment, maximum 2 percent. Full escalation was provided in 1972 and quarterly adjustments were added in 1973. As of January 1, 2009, the GIS payment is eliminated when annual family income reaches $15,672 for a single person aged 65 years or over and $20,688 for a couple, both aged 65 years or over. For January 2009, the maximum monthly GIS is $652.51 for a single person and $430.90 for a person whose partner also receives an old age security pension and for a person whose partner receives the allowance. Table 8.5 shows the GIS and the maximum monthly pension payable to old age security recipients for selected years.

Allowance The allowance, an income-tested pension introduced in 1975, was originally paid to spouses (aged 60 to 64) of recipients of the old age security pension. In 1985, the allowance was extended to all eligible needy widowed people between the ages of 60 and 64 whether or not their spouses received the GIS. Benefits under the allowance and the allowance for the survivor are also payable to same-sex common-law partners. As of January 1, 2009, the maximum monthly allowance is $947.86. The maximum monthly allowance for the survivor is $1,050.68. The allowance decreases as family income rises and, as of January 1, 2009, the allowance begins decreasing when annual family income reaches $28,922 for a couple (where one spouse is a non-pensioner) and $21,120 for a widow or widower aged 60 to 64.

Child Care The March 19, 2007 federal budget announced an investment of an additional $250 million annually, beginning in 2007-8, to create child-care spaces with the provinces. The 2006 federal budget introduced the universal child-care plan under which, effective July 1, 2006, all families receive $100 per month ($1,200 annually) for each child under 6 years of age. 8:8 FINANCES OF THE NATION 2009

Child Tax Benefit The Canada child tax benefit (CCTB) is a tax-free monthly payment made to low- and middle-income families to help with the costs of raising children under age 18. The CCTB may include the national child benefit supplement (NCBS), a monthly benefit for low-income families, and the child disability benefit, which provides a monthly benefit for families caring for children with severe and prolonged mental or physical impairments.

National Child Benefit System In 1997, the federal government expanded and redesigned the child benefit system and integrated it with provincial, territorial, and First Nations programs. The national child benefit (NCB) system is intended to ensure that families will always be better off when parents are working. Under the revised system, the federal government increased amounts payable under the child tax benefit, augmenting it with the NCBS. The provinces decreased social assistance to families with children up to, but not exceeding, the amount of the national child benefit supplement and redirected the freed-up social assistance funds to benefits and services for low-income families with children. The enriched and integrated system commenced in July 1998 when families receiving payments under the child tax benefit program began receiving payments under the CCTB program. As part of the NCB initiative, provinces, territories, and First Nations provide complementary benefits and services, such as child benefits, support for child care, and health benefits. Entitlements are calculated by the CRA every July after it receives tax information. Because Quebec has assumed control of income support for children in the province, it does not participate in the NCB system but operates a similar program, described below. The CCTB is composed of a basic benefit plus the NCBS. There is a supplement for the third and subsequent children and for children under age 7. For the period July 2009 to June 2010, the basic benefit is $1,340 for each dependant, plus a $93 supplement for the third and each additional dependant. The maximum national child benefit supplement is $2,076 annually for the first dependant, $1,837 for the second, and $1,747 for the third and subsequent dependants. For the period July 2009 to June 2010, the annual CCTB will be reduced by 2 percent of family net income over $40,726 for a one-child family or 4 percent for families with more than one child. The NCBS payment will be reduced by 12.2 percent for a one-child family, 23.0 percent for a two-child family, and 33.3 percent for a family with three or more children of the family’s net income exceeding $23,710. Benefits from provincial and territorial programs are combined with the CCTB into a single monthly payment. The CRA administers the child benefit programs in Newfoundland and Labrador, Nova Scotia, New Brunswick, SOCIAL SERVICES 8:9

Ontario, British Columbia, the Northwest Territories, Nunavut, and Yukon, as well as the Alberta family employment tax credit and the British Columbia family bonus. Families with children qualifying for the child disability benefit receive an annual maximum of $2,395, reduced for families with incomes higher than $37,885. The Newfoundland and Labrador child benefit provides $326 annually for the first child, $345 for the second, $371 for the third, and $398 for each additional child. Families with income between $17,397 and $22,397 may receive part of the benefit. The mother-baby nutrition supplement is an additional benefit of $60 per month for each child under the age of 1 if family net income is below $22,397. The Nova Scotia child benefit is combined with the CCTB into a single monthly payment of $37.08 per month for the first child, $53.75 for the second child, and $60.00 for each additional child. Families with net income between $16,000 and $20,921 may receive part of the benefit. The New Brunswick child tax benefit and the New Brunswick working income supplement are combined with the CCTB into a single monthly payment. A basic benefit of $20.83 per month is calculated for each child under 18 and is reduced if net family income is more than $20,000. The working income supplement is phased in once family earned income exceeds $3,750 and reaches the maximum benefit at $10,000 earned family income. Families with net income between $20,921 and $25,921 may get a partial supplement. In Quebec, effective January 1, 2005, the child assistance program replaced the family allowance, tax reduction for families, and tax credit respecting dependent children. The program is non-taxable and available to all families with children under 18. Families receive assistance of up to $2,166 per year for one child, $3,249 for two children, $4,332 for three children, $5,955 for four children, and $7,578 for five children. For each additional child, $1,623 is added to the maximum. The child assistance is paid by cheque four times per year. Single-parent families are entitled to up to $2,924 for one child, $4,007 for two children, $5,090 for three children, $6,713 for four children, and $8,336 for five children. For each additional child, $2,382 is added to the maximum. The amount of child assistance is based on family income, number of children under age 18, type of family (single or two-parent), and child custody arrangements (that is, whether shared or not). The supplement for handicapped children is $171 per month, regardless of family income or type of handicap. Quebec recipients of the CCTB are automatically registered with the provincial Régie des rentes du Québec. The Quebec integrated child allowance is paid monthly to low-income families through the Régie des rentes du Québec. Families not considered low-income are paid quarterly. The Ontario child benefit (OCB) is a non-taxable monthly benefit paid to qualified families with children under 18 years of age. The benefit 8:10 FINANCES OF THE NATION 2009 amount was scheduled to increase over five years until July 2011, when the maximum annual payment would be $1,100 for each eligible child. The 2009 Ontario budget increased the rate to $1,100 two years earlier, effective July 2009. Ontario’s child-care supplement for working families provides benefits to qualifying low- to middle-income families that receive the federal CCTB. For each child under age 7, qualifying two-parent families may receive a monthly payment based on net income and qualifying child-care expenses. Since 2008, the Manitoba child benefit (MCB) program provides benefits ranging from $420 for one child to $2,520 yearly for families with six children and are payable at annual family incomes under $15,000. Benefits begin to be phased out at family income over $15,000 and are eliminated for families with incomes over $25,864. Saskatchewan has a number of income supplement programs for low- income families with children. The Saskatchewan employment supplement is for families with income in excess of $125 per month from a job, farming, self-employment, or from child or spousal support. The amount of the supplement is based on the number of children in the family and their ages. The minimum supplement is $25 per month and increases as family income increases to $1,125 monthly. Families with income over $1,820 per month receive a reduced supplement. The Saskatchewan rental housing supplement provides a monthly supplement to families with children and persons with disabilities for access to quality and affordable housing. For rents of $488 monthly and over, a single parent with one or two children receives $247 and a married couple with two children receives $120. Monthly payments under the CCTB in Alberta depend on the age of the child. The Alberta family employment tax credit is a tax-free, semi-annual payment. Alberta’s 2009 budget increased benefits for recipients of the credit. Effective July 2009, payments are $694 for one child, $1,325 for two children, $1,704 for three children, and $1,830 for four or more children. The basic benefit is reduced by 4 percent of the amount of family net income that exceeds $33,873. The British Columbia family bonus program includes the basic family bonus and the earned income benefit. Benefits from the program are combined with the CCTB into one monthly payment and are based on family net income and the number of children in a family. In the Northwest Territories and Nunavut, the child benefit payment is also combined with the CCTB. In both territories, the basic benefit is $27.50 per month for each child. Families with earned income of more than $3,750 may also receive the territorial worker’s supplement of up to $22.91 a month for one child and up to $29.16 for two or more. Benefits are reduced if net family income exceeds $20,921. The Yukon child benefit is combined with the CCTB in a single monthly payment. The benefit provides $57.50 per month for each child under age 18 in families with net income below $30,000. SOCIAL SERVICES 8:11

SOCIAL WELFARE The provinces are responsible for providing social assistance to needy citizens. Spending on social services, health, and education accounts for the largest proportion of provincial expenditures.

Canada Social Transfer Once a single block transfer, the Canada health and social transfer (CHST) was restructured into two transfers in 2004. Transfers for health were separated from transfers for post-secondary education and social services. The Canada social transfer (CST) is a block transfer to the provinces and territories in support of post-secondary education, social assistance, and social services, including early childhood development. Legislated amounts under the former CHST were apportioned between the CST and CHT on the basis of provincial and territorial spending patterns in the two areas. CST support is about 38 percent of the former CHST allocation. The 2009-10 Estimates of the Department of Finance provide $10.9 billion for cash payments to the provinces and territories under the CST.

Welfare Reform Stubborn deficits and declining federal cash transfers in the past decade forced many provinces to reform their welfare systems. Provincial initiatives included reducing assistance levels and removing the disincentives to employment by offering low-income supplements and child benefits. Table 8.6 shows the estimated annual basic social assistance available by type of household, by province and territory, in 2007.

Table 8.6 Provincial and Territorial Annual Welfare Income Available,a by Type of Household, 2007b Single Single Single Couple, employable disabled parent, two Province/territory person person one child children dollars Newfoundland and Labrador .... 9,348 10,878 18,788 21,662 Prince Edward Island...... 6,577 8,623 15,781 22,906 Nova Scotia...... 6,247 9,088 14,725 20,464 New Brunswick ...... 3,574 8,275 15,451 18,849 Quebec...... 7,099 10,500 17,068 21,890 Ontario...... 7,204 12,382 16,439 21,058 Manitoba...... 5,827 9,026 14,664 21,177 Saskatchewan ...... 9,105 9,772 16,545 22,544 Alberta...... 5,059 12,762 13,703 20,319 British Columbia ...... 7,365 11,125 16,230 20,283 Northwest Territories...... 14,888 18,942 20,425 31,560 Nunavut...... 12,639 14,924 24,399 37,736 Yukon ...... 12,470 15,503 20,861 29,069 a Includes basic social assistance, additional benefits, federal child tax benefit, goods and services tax credit, and provincial child benefits and tax credits. b Estimate. Source: National Council of Welfare, Welfare Incomes 2006 and 2007, Winter 2008. 8:12 FINANCES OF THE NATION 2009

Federal The 2007 federal budget created a $550 million per year working income tax benefit (WITB) to assist families and individuals when they leave welfare by ensuring that they do not lose income and benefits as a result. The WITB is available when working income is greater than $3,000. In 2009, the maximum benefit available to an individual (based on his or her 2008 income tax return) is $510 and to a family, $1,019. Eligible individuals and families may apply for advance payments of up to 50 percent of the WITB.

Newfoundland and Labrador Among the social initiatives contained in Newfoundland and Labrador’s 2009 budget was a provincial plan to restructure the home support financial assessment process. The budget announced that the liquid asset exemption limit for couples receiving home support and those receiving services from community residential programs or personal care or residing in long-term care homes will be doubled to $10,000. The budget also provided $16.5 million to increase rates for home support workers and, effective April 1, 2009, the subsidy amount for individuals who qualify was raised to $1,644 per month. The rental rate for Newfoundland and Labrador housing tenants with employment income was reduced to 25 percent of net income from 30 percent. The budget also announced the creation of a new government department responsible for child, youth, and family services. The 2007 Newfoundland and Labrador budget provided a $10,000 increase in the low-income seniors’ benefit threshold for married couples. The 2008 provincial budget extended the increase to single seniors. The maximum benefit available to single seniors with net incomes up to $25,275 is $776 annually. The benefit is phased out at incomes of $31,930. In order to nurture population growth, the 2008 Newfoundland and Labrador budget provided $12.4 million to make a payment of $1,000 for each child born or adopted in the province as of January 1, 2008. In addition, the budget also introduced a parental support benefit of $100 per month for the first 12 months following a birth or adoption, also effective January 1, 2008.

Prince Edward Island Prince Edward Island’s 2009 budget announced that, effective April 1, 2009, emergency ambulance fees for seniors are eliminated. In addition, the budget provided about $1 million to increase funding for food and shelter for those receiving social assistance. The province’s 2007 budget increased room and board rates for foster families and the monthly fee for the care of foster children. In 2006, Prince Edward Island increased the per diem rate provided to eligible social assistance clients living in community-care facilities from $9 per day to $45.

Nova Scotia Nova Scotia’s 2008 budget provided $768,000 to increase income assistance rates, beginning October 2008. The budget provided $19 million for child SOCIAL SERVICES 8:13 care and noted that, of the total, $6 million was allocated to create 250 new day-care spaces. The budget announced the creation of a heating assistance rebate program to assist low-income taxpayers with the rising costs of home heating. Individuals earning less than $15,000 and families with incomes of $25,000 or less will receive a rebate of $200 if they are heating with oil, propane, or natural gas and those using wood, coal, or pellets will receive $150. Seniors receiving the GIS will automatically be eligible for the program. The 2007 Nova Scotia budget expanded respite programs for caregivers and the home repair and adaptation program that helps seniors make home repairs and renovations.

New Brunswick The 2009 New Brunswick budget increased the low-income seniors’ benefit from $200 to $300 and announced that it would be further increased to $400 in 2010. The budget increased the hourly rate paid to home support workers from $13.61 per hour to $14.26 per hour, effective April 1, 2009. The maximum daily rate for nursing home residents was raised to $83 from $70. Among the programs eliminated as part of the province’s expenditure restraint was the court social worker program. New Brunswick’s 2008 budget provided funds to hire 43 social workers, increased social assistance payments by 3 percent, and increased nursing home care to 3.1 hours per day.

Quebec Quebec’s 2009 budget increased the province’s minimum wage by 50 cents per hour and announced an improvement in the tax credit for child-care expenses. The 2009 budget noted that, as a result of tax credit improvements, the cost of child-care services will be the same for both subsidized day-care centres and unsubsidized private centres, up to a family income of $125,000 (changed from a family income of $80,000 in 2008). The budget also increased the amount eligible for the tax credit for children under 7 years of age from $7,000 to $9,000. In addition, the minister of finance noted that the province will reach its target of 220,000 $7 per day child-care spaces by the end of 2010. The budget further noted that to date the province has created 24,000 new social housing units and provided for an additional 3,000. Quebec’s 2008 budget announced the creation of a $200 million fund over 10 years to improve and develop services for informal caregivers. In order to encourage social assistance recipients to enter the job market, in 2009 Quebec pays a quarterly work premium of up to $530.18 annually for a single adult, $819.98 for a couple without children, $2,272.20 for a single- parent family, and $2,928.50 for a couple with at least one child.

Ontario Prior to tabling its 2009 budget, Ontario announced that the province will increase the annual child benefit from $600 to a maximum of $1,100 per 8:14 FINANCES OF THE NATION 2009 child. The province also announced a joint provincial-federal investment of $1.2 billion over two years to renovate 50,000 social housing units and build 4,500 new affordable units. Ontario will spend $352 million on repairs and renovations to social housing units, $185 million to create housing for low- income seniors and persons with disabilities, and $87.5 million to extend the Canada-Ontario affordable housing program. Ontario will also make permanent the $5 million rent bank, which helps keep low-income citizens in their own homes. Ontario’s 2008 budget announced that in 2009 the property tax grant for low- and moderate-income seniors will provide grants of $250, rising to a maximum of $500 in subsequent years. The budget noted that the province’s uploading of the Ontario drug benefit and disability support programs will save municipalities about $900 million annually by 2011. In October 2008, Ontario announced that the province will upload the cost of all social assistance benefits by 2018 and pay the portion of Ontario Works benefits that is currently paid by municipalities. Currently, municipalities pay 20 percent of Ontario Works benefits. Ontario will begin uploading the costs of these benefits by 3 percent in 2010, increasing to 100 percent in 2018. Ontario’s 2007 budget made dealing with child poverty a high priority and introduced the Ontario child benefit (OCB), which provides similar benefits to all children under age 18 in low-income families, whether parents work or receive social assistance. The OCB consolidated social assistance benefits for children with the Ontario child-care supplement (OCCS) for working families into one, income-tested payment. Once the OCB is fully implemented, the OCCS will be phased out over seven years. The Ontario Works Act requires all able-bodied welfare recipients to seek employment, receive training, or perform some community service in order to continue receiving benefits. Regional welfare call centres throughout the province streamline the process for those making welfare applications. Seven municipally operated call centres screen applicants for all municipalities within the region.

Manitoba Manitoba’s 2009 budget identified an increase in the province’s social and low-income housing as a priority and announced the largest-ever provincial expenditure, $357 million, on such housing. The budget also increased funding for renovations to and improved security for women’s shelters. The budget announced the creation of the rebound program, which will provide training and employment opportunities to reduce the need for income assistance. Effective July 1, 2009, the budget announced a 3 percent increase in wages for child-care staff. Manitoba’s 2008 budget noted that, between 1999 and 2005, there was a 25 percent reduction in the province’s child poverty rate, and the number of low-income single female parents declined by over 40 percent. Additionally, SOCIAL SERVICES 8:15 the number of people receiving employment and income assistance in the province is at a 20-year low. Under the Employment and Income Assistance Amendment Act, Manitoba is responsible for all provincial income assistance programs. Manitoba’s 2007 budget introduced “rewarding work,” a four-year plan to assist social assistance recipients move from welfare to work. One of the components of the program in the first year is a new Manitoba child benefit payment of $420 each year for every child in a low-income working family. Monthly payments began January 2008. Additionally, the province reduced child-care fees by $104 per year per subsidized child, and more parents now qualify for child- care subsidies because the budget provided a 13 percent increase in eligible income levels. An incentives and skills component of the program includes a $300 job-seekers allowance and a work clothing and bus pass stipend of $100 per month for those working their way off welfare. Persons with disabilities on income assistance receive an annual $300 increase to enhance job preparation and volunteerism and mental health supports, and the amount of allowable exempt cash assets of an individual was doubled. Beginning in January 2008, an increase of $25 per month for employment supports is provided to childless couples and singles receiving income assistance.

Saskatchewan Saskatchewan’s 2009 budget announced that the province will create 1,000 new child-care spaces and contribute over $12 million to expand the number of child-care spaces, provide more training programs, and increase the pay of early learning and child-care workers. Saskatchewan redesigned the provincial welfare system to reduce family and child poverty, decrease welfare dependence, and return welfare to its original purpose as a short-term program of last resort. Additional programs focus on social housing, family support, early childhood development, and other areas. Saskatchewan’s provincial training allowance provides grants to assist with the costs of living for low-income adult clients enrolled in basic education and bridging programs. The flat-rate living allowances are intended to pay for rent, utilities, food, clothing, personal items, and transportation. The allowance does not pay for tuition, books, or supplies.

Alberta The Alberta works program brings together the employment and training services, income support, health benefits, and child support programs under one umbrella. Levels of assistance vary according to individual situations, financial resources, ability to work, and number of children. Those not expected to work because of chronic health problems or multiple barriers to employment, those unable to work, and those requiring academic upgrading or training are eligible for benefits. Benefits under the Alberta works program include grants of $1,000 to victims of abuse or violence by a spouse or partner to set up a new home and 8:16 FINANCES OF THE NATION 2009 payments of up to $150 per month for babysitting by relatives while a client is working, training, or looking for a job. Alberta’s 2009 budget reiterated the province’s commitment to create 14,000 child-care spaces by 2011. The budget provided a $100 increase in the maximum monthly benefit under the assured income for the severely handicapped (AISH) program and raised the maximum monthly seniors’ benefit by $40 for singles and $60 for couples. In addition, the budget announced that Alberta will build 1,200 affordable, supportive living units for seniors over the next three years and provided $468 million over three years to complete 11,000 affordable housing units, $400 million over three years to develop 2,700 housing units for the homeless, and $41 million for 3,600 spaces in emergency shelters.

British Columbia Among the expenditures on social services in British Columbia’s 2009 budget was $110 million in new funding for income assistance, $73 million for adults with developmental disabilities, $25 million for child-care subsidies, and $38 million in additional funding for children with special needs. In 2008, British Columbia provided a $2 million, one-time grant to the British Columbia Non-Profit Housing Association for tenant starter kits, worth about $570 each. The kits are designed to help ease the transition for tenants moving into new accommodations and include essential items such as cooking sets, cutlery and utensils, bedding, towels, toiletries, first aid supplies, and a tool kit. British Columbia’s 2007 budget focused on housing initiatives. The budget provided $27 million over three years to convert about 300 cold- and wet-weather beds for the homeless to year-round shelter beds. British Columbia’s rental assistance program assists families with annual incomes below $28,000. A family of four is eligible for rental assistance of up to $563 per month, and the benefit is portable.

Northwest Territories The Northwest Territories’ 2009 budget included $2 million in additional funding to improve care for the territory’s seniors. The previous year’s budget provided $1 million to enhance child-care subsidies and $695,000 to address the problem of homelessness.

Nunavut Nunavut’s 2008 budget noted that the Family Abuse Intervention Act, which came into force on March 1, 2008, allows communities to holistically intervene at the earliest stages of family abuse. All communities are provided with funding to hire a full-time community justice outreach worker. The budget also increased the senior citizens’ supplementary benefits from $135 to $175 per month, effective January 1, 2008. SOCIAL SERVICES 8:17

Yukon The 2009 Yukon budget increased the child-care subsidy, wages for child- care workers, and the Yukon seniors’ income supplement. Social assistance in the territory was reformed by indexing items of basic need to the Canadian consumer price index each fall. The budget also announced that the territory will build a new social housing complex for single parents. The Yukon Housing Corporation includes provisions in the rent supplement program to allow seniors in rental accommodations to remain in their homes if they wish. The corporation excludes child support payments in the calculation of income used to assess tenant rents in social housing units.

Minimum Wage Rates The general minimum wage rates in Canada are as follows: Province/territory Minimum wage Newfoundland and Labrador ...... $9.50a Prince Edward Island ...... $8.40 Nova Scotia...... $8.60b New Brunswick...... $8.25 Quebec ...... $8.50 Ontario ...... $10.25 Manitoba...... $9.00 Saskatchewan...... $9.25 Alberta ...... $8.80 British Columbia ...... $8.00 Northwest Territories...... $8.25 Nunavut...... $8.50 Yukon ...... $8.58

a Increases to $10.00 on July 1, 2010. b Increases to $9.65 on October 1, 2010. After March 31, 2011, mimimum wage will be adjusted annually based on the consumer price index.

Labour Market Agreements for Persons with Disabilities In December 2003, the federal and provincial governments approved a multilateral framework for labour market agreements for persons with disabilities. In 2009-10, the Main Estimates of the Human Resources and Skills department provide $217.1 million in payments to provinces and territories under the agreement. Also under the labour market agreements, the Estimates provide $501.3 million in payments to provinces and territories to enhance labour market participation among underrepresented groups and low-skilled workers.

Local Government Responsibilities The net cost of social welfare programs to local governments represents only a minor part of the total cost of programs over which the provinces have 8:18 FINANCES OF THE NATION 2009 given local governments some responsibility. There is no cost to Prince Edward Island municipalities for social assistance. In 1998, Nova Scotia assumed responsibility for the administration of social assistance programs. The Ontario Works Act (1997) ended the province’s two-tiered welfare system. About 80 percent of the costs of social assistance programs and child-care services are paid for by the province; municipalities pay the remaining 20 percent. Administration costs are shared equally between the province and local governments. Manitoba has had a single-tiered social service system since 2004. Pre- viously, except in Winnipeg where the province had been responsible for social assistance since 1999, local governments were responsible for income assistance for clients other than single parents and the disabled. In Saskatchewan, municipalities contribute about 1 percent of assistance costs, and the province funds and administers all family and children’s services. In British Columbia, various municipalities and private organizations provide local family and children’s services, and the costs are shared between the province and local governments. Table 8.1 shows consolidated provincial, territorial, and local expenditures on social services for 2004-5 to 2008-9.

Eligibility Requirements Eligibility for social assistance is based on some general rules, which include the determination of fixed and liquid assets and the shortfall in household income as defined by a needs test. Applicants are usually required to be between 18 and 65 years of age. Single parents must try to secure any court- ordered maintenance support to which they are entitled; individuals who are disabled must provide medical certification of their condition; and immigrants must try to obtain financial assistance from their sponsors. Full-time post-secondary students may qualify under certain conditions. The amount of assistance an individual receives is determined by a needs test and varies from province to province. Every province has various types of special assistance. Some are determined on a case-by-case basis, thereby making straight comparisons impossible. Assistance must meet an individual’s basic requirements, which are defined as food, shelter, clothing, fuel, utilities, household supplies, and personal requirements. Applicants for social assistance must meet requirements concerning their fixed and liquid assets. The determination of these assets is part of the needs test. Rules regarding the treatment of fixed assets vary, but most provinces consider a principal residence and personal effects such as furniture and clothing to be exempt. Limits on liquid assets depend on household size and employability.

OTHER The social service programs outlined below are federal programs. Other programs not mentioned here are, however, included in total federal expendi- SOCIAL SERVICES 8:19 tures shown in the tables. Although the Canada Pension Plan (CPP) is an important social program, its expenditures are not included in the tables, in order to conform to Statistics Canada’s financial management system, which treats the CPP and QPP (Quebec Pension Plan) as separate entities. The CPP and its estimated expenditures for 2008-9 are described below.

Veterans Affairs Over three-quarters of federal expenditures on veterans’ programs are for war pensions and health care. Other benefits include allowances for needy veterans, loans and grants to help veterans re-establish themselves, and insurance. Disability pensions are graduated in proportion to the degree of disability. An additional “attendance allowance” is available to veterans whose disabilities are so severe as to render them in need of attendance. The three types of pensions are disability; pensions to spouses, dependants, and survivors; and prisoner-of-war compensation. The Estimates provide $1,743.6 million for pension payments in 2009-10. Canada’s first veterans’ ombudsperson, appointed by the federal government in 2007, operates at arm’s length from government and raises awareness of the needs and concerns of veterans.

Indians and Inuit Expenditures of the Indian and Inuit affairs program, except for those directly related to other functions, have been classified by Statistics Canada as social services. Social services provided to Indians and Inuit are generally joint federal- provincial responsibilities. In most cases, Indian agencies within the native community deliver a range of child and family programs and general welfare assistance. Indian bands and associations are encouraged to participate in their own social and economic improvement. To meet this objective, the Indian Act is under comprehensive review by the Indian community. The federal government assists Indian communities in their drive for self-government within the Canadian constitutional framework. Band economic development committees assess the economic potential of their reserves and plan for the development of natural resources, Indian arts and crafts, and other industries. Assistance is provided to native people to identify past grievances and carry out research into claims under their rights and treaties. The federal government contributes to Indian and Inuit program funding, land claims administration, community funding, and various other programs. The Indian Affairs and Northern Development department will spend an estimated $5,213.7 million on social services in 2009-10. 8:20 FINANCES OF THE NATION 2009

THE CANADA PENSION PLAN The Canada Pension Plan (CPP), a comprehensive contributory pension plan, came into effect January 1, 1966, and pension payments began in January 1967. It operates in all parts of Canada except Quebec, which operates the Quebec Pension Plan (QPP). CPP benefits supplement rather than replace private retirement plans and are paid in addition to the old age security program. Under the CPP, the federal and provincial governments must review the CPP every five years to ensure the plan’s continuing financial security. Concern that the CPP fund would be exhausted by 2015 and that contribution rates of 14 percent would be necessary by 2030 to cover escalating costs led to the introduction of a gradual increase in the combined contribution rate, from 5.6 percent in 1996 to 9.9 percent in 2003, where it has remained. The 9.9 percent rate is the lowest that can sustain the plan indefinitely without further increases. The CPP reserve fund is invested in a diversified portfolio of securities and, since 1998, has been managed by the Canada Pension Plan Investment Board. An Act to Amend the Canada Pension Plan and the Old Age Security Act (SC 2007, c. 11), which received royal assent on May 3, 2007, amended the CPP so that more individuals will qualify for disability benefits. Applicants with 25 years or more of CPP contributions will now require valid contributions in three of the last six years, instead of the former requirement of four of the last six years. Another key amendment requires that benefit increases or new benefits be fully funded so that costs are not passed on to future generations.

Contributions Coverage under the Canada and Quebec Pension Plans is compulsory for most employees and self-employed persons. Contributions are not required from persons under 18 or over 69 years of age, pensioners, armed forces personnel, certain provincial government employees, casual or migratory workers, and certain other employees. In 2009, the CPP is financed by employee contributions of 4.95 percent of pensionable earnings and a matching contribution by employers. Self- employed people pay 9.9 percent on the contribution base. Pensionable earnings are earnings between $3,500 and $46,300 per year; the maximum is escalated in accordance with increases in the average industrial wage. The maximum employee and employer contribution for 2009 is $2,118.60 ($4,237.20 for the self-employed). Table 8.7 provides information on exempt earnings, maximum pensionable earnings, and maximum CPP contributions for selected years. Non-refundable federal income tax credits are available for contributions to the plan, unlike the deductions provided for contributions to private plans. CPP and QPP benefits are fully taxable. SOCIAL SERVICES 8:21

Table 8.7 Canada Pension Plan Monthly Contributions and Benefits for Selected Years from Inception of Program

Yearly Maximum Maximum monthly pension maximum contributions, Surviving Effective Exempt pensionable employers and Retire- spouse Dis- date earnings earnings employeesa ment under 65 Orphanb ability dollars 1/1/66..... 600 5,000 79.20 — — — — 1/1/70..... 600 5,300 84.60 43.33 67.16 26.53 92.88 c 1/1/75..... 700 7,400 120.60 122.50 88.31 37.27 139.35 1/1/80..... 1,300 13,100 212.40 244.44 148.92 57.25 240.58 1/1/85..... 2,300 23,400 379.80 435.42 250.84 87.56 414.13 1/1/90..... 2,800 28,900 574.20 577.08 324.37 107.96 709.52 1/1/95..... 3,400 34,900 850.00 713.19 392.24 161.27 854.74 1/1/97..... 3,500 35,800 969.00 736.81 405.25 166.63 883.10 1/1/99..... 3,500 37,400 1,186.50 751.67 414.46 171.33 903.55 1/1/00..... 3,500 37,600 1,329.90 762.92 421.09 174.07 917.43 1/1/02..... 3,500 39,100 1,673.20 788.75 437.99 183.77 956.05 1/1/03..... 3,500 39,900 1,801.80 801.25 444.96 186.71 971.26 1/1/04..... 3,500 40,500 1,831.50 814.17 454.42 192.68 992.80 1/1/05..... 3,500 41,100 1,861.20 828.75 462.42 195.96 1,010.23 1/1/06..... 3,500 42,100 1,910.70 844.58 471.85 200.47 1,031.05 1/1/07..... 3,500 43,700 1,989.90 863.75 482.30 204.68 1,053.77 1/1/08..... 3,500 44,900 2,049.30 884.58 493.28 208.77 1,077.52 1/1/09..... 3,500 46,300 2,118.60 908.75 506.38 213.99 1,105.99 a Because self-employed persons contribute both as employer and employee, their contributions are double the amount shown. b Reduced by one-half for each orphan in excess of four. c Effective February 1970. Source: Statistical Bulletin, Canada Pension Plan.

Benefits The CPP provides an earnings-related pension to any contributor aged 60 years and over. Payments are increased annually in accordance with the average 12-month increase in the consumer price index on October 31 of the preceding year. The maximum monthly pension for contributors who begin receiving retirement benefits in 2009 is $908.75 ($10,905.00 per year). In addition to the regular pension benefits, the CPP provides supplementary benefits to surviving spouses, orphans, disabled contributors, and dependent children of disabled contributors. The CPP also pays a lump- sum benefit on the death of a contributor. The maximum payment is frozen at $2,500. No death benefit is payable unless the deceased contributed to the plan for at least two years. See table 8.7 for maximum monthly retirement, survivorship, and disability pensions under the CPP for selected years. Benefits under the QPP are slightly different because the two plans varied for a time.

Revenue and Expenditure Funds necessary to meet the benefits and administrative expenses for five years are maintained in the CPP account. Excess funds accumulated under the 8:22 FINANCES OF THE NATION 2009 plan are available on a monthly basis to the participating provinces in proportion to the amounts paid into the fund by contributors in each province. The available monthly amounts are borrowed, through the issue of securities, by the provinces and Canada at the beginning of the following month. Provinces pay the same interest rate on these loans as they do on their market borrowing. There are no restrictions on the use to which the borrowings may be put. 9 Education

Because each province and territory is responsible for developing and running its own education system, some characteristics of the education systems vary from province to province while others are similar. All provinces and territories require children between certain ages to attend school, and all provinces and territories provide funding for continuing, evening, and adult education academic courses. In most systems, courses of study, textbooks, and teachers’ qualifications are regulated at the provincial/territorial level. Elementary and academic education is completed after 11 or 12 years of study, depending on the province or territory. The federal government is, however, responsible for the elementary and secondary school education of Indians and Inuit, armed forces personnel and their families, and inmates of federal penitentiaries.

PROVINCIAL/TERRITORIAL EDUCATION SYSTEMS In every province/territory, grants play a large part in financing all public schools. Quebec, Ontario, Saskatchewan, and Alberta provide for tax- supported public and separate school systems that cover both elementary and secondary education. The first tax-supported school established in an area is referred to as the public school. Quebec transformed its dual system of Protestant and Roman Catholic schools to a dual system based on language. In the Northwest Territories, the Education Act provides for separate denominational schools and a Roman Catholic system (kindergarten to grade 12) in the city of Yellowknife. The federal government provides assistance for post-secondary education through the Canada social transfer (CST), which supports post-secondary education, social assistance, and social services. Local school boards are responsible for school management, which generally entails establishing and maintaining schools, appointing teachers, purchasing equipment, handling details of school construction, and preparing budgets. The boards are required to finance schools within their areas from provincial grants and locally imposed taxation, usually a real property tax (see chapter 6 for more information). Most school boards require provincial/territorial government approval before capital outlays can be made or capital debt incurred. In some provinces/territories, the government builds the schools and arranges related financing; in others, provincial/territorial approval is required only if the province/territory participates in the financing. 9:2 FINANCES OF THE NATION 2009

Quebec, Manitoba, Saskatchewan, Alberta, and British Columbia fund private schools if certain criteria, which vary from province to province, are met. No public funding is provided for private schools in the other provinces. The provinces that do not carry out school construction from their own budgets (such as New Brunswick) use one of two methods to fund the major capital expenditures of local governments and school boards. The province provides either one grant to cover the entire capital expenditure or grants to cover the debt charges that result from borrowing by local governments or school boards to fund initial expenditures. Provincial funding is available for transportation costs incurred by school boards in both rural and urban areas. Depending on provincial legislation, student transportation is optional or mandatory. In the latter case, a minimum walking distance is usually specified. Provincial transfers may cover all transportation costs or may be calculated at a rate that is consistent with the level of provincial support for other school board expenditures. Table 9.1 shows the estimated expenditure on education in Canada, by province/territory and education level, for 2008-9. In recent years, most provincial governments have struggled to cut expenditures on education without increasing taxes. Many provinces, as a result of tight budget considerations, have streamlined their education systems. Newfoundland and Labrador, Nova Scotia, Quebec, Ontario, and British Columbia, for instance, have decreased the number of school boards, and New Brunswick has abolished school boards altogether in favour of provincially run administrative bodies. A description of the education program in each province and territory follows.

Table 9.1 Provincial/Territorial Expenditures on Education, by Province and Territory and Level of Education, Fiscal Year 2008-9 Elementary- Post- Province/territory secondary secondary Other Total millions of dollars Newfoundland and Labrador ...... 851 344 60 1,255 Prince Edward Island...... 218 67 13 298 Nova Scotia...... 1,023 706 105 1,833 New Brunswick ...... 1,130 257 113 1,499 Quebec...... 8,116 4,848 1,448 14,412 Ontario...... 13,910 5,888 673 20,472 Manitoba...... 1,276 580 126 1,983 Saskatchewan ...... 1,224 890 130 2,245 Alberta...... 6,215 3,197 489 9,901 British Columbia ...... 5,766 2,299 150 8,215 Northwest Territories...... 163 51 49 263 Nunavut...... 180 29 32 241 Yukon ...... 105 25 16 146 Total...... 40,177 19,181 3,404 62,763 Source: Statistics Canada, June 2009. EDUCATION 9:3

Newfoundland and Labrador The education system in Newfoundland and Labrador is comprised of four regional school districts and one francophone district. There are also seven private schools, three First Nations schools, and two institutional schools within the province. School boards receive 100 percent of their funds from the provincial governments. Students in rural and remote areas have access to a wide variety of learning opportunities through the Centre for Distance Learning and Innova- tion, which offers 34 high school courses at 103 schools. Broadband Internet is brought to previously unserviced areas of the province through a $26 million partnership with private industry. Newfoundland and Labrador’s post-secondary education system is comprised of Memorial University, the College of the North Atlantic, and 27 private colleges. Memorial University has four campuses, including one in Harlow, England, and the College of the North Atlantic has 17 campuses, 1 in the State of Qatar. Newfoundland and Labrador spending on post-secondary education has increased from $272 million in 2006-7 to $344 million in 2008-9. The province has also invested in initiatives to help reduce student debt. Newfoundland and Labrador’s 2009 budget provided $5 million to eliminate the interest on the provincial portion of student loans and raised the needs-based grant from $70 to $80 per week. The province is maintaining the freeze on tuition fees. Educational infrastructure was provided with $155 million in Newfound- land and Labrador’s 2009 budget, which includes $19 million for a new francophone school in Happy Valley-Goose Bay and two new kindergarten to grade 12 schools in Port Hope Simpson and L’Anse au Loup. The budget expanded the School of Nursing by 10 seats, the School of Pharmacy by 20 seats, the School of Social Work by 15 seats, and the masters of social work program by 15 seats. Additionally, the budget provided $450,000 to create a social worker fast track program. Newfoundland and Labrador’s 2008 budget expanded the cap on class size to include kindergarten. Grades 4 and 7 followed in September 2008. Class size in other grades will be capped over two years. The province will continue the tuition freeze at Memorial University and the College of the North Atlantic and will allocate $56 million for this purpose over the next four years.

Prince Edward Island The school system in Prince Edward Island is organized into three regional administrative units. All public schools are non-sectarian and no legislative provision has been made for a separate or dual school system. Four private schools operate in the province, as well as a school operated by the Depart- ment of Indian and Northern Affairs. 9:4 FINANCES OF THE NATION 2009

The Department of Education administers a program for hearing-impaired children in the province. For PEI students with visual, hearing, and other handicaps who receive educational services from an interprovincial cooperative agency in Nova Scotia, the province pays a proportional cost of the program, up to 100 percent. The minister of education uses a provincial funding program financed from the general revenues of the province to provide a basic standard of education for grades 1 to 12 through a system of financial grant formulas. A free textbook program provides authorized material for grades 1 to 12 in public and private schools. Under the School Act, a board can establish supplementary programs that must be financed through a local levy within the particular administrative unit. To date, no board has used this provision. Funding is not available for private schools. The 2009 Prince Edward Island budget invested $250,000 to include kindergarten in the public school system, beginning September 2010. Prince Edward Island has one university, the University of Prince Edward Island (UPEI), that also operates the Atlantic Veterinary College. Holland College is the single community college of applied arts and technology, and the Société Éducative de l’Île du Prince Édouard is the francophone college. Funding for these institutions is provided through grants from the province and individual tuition fees. A bachelor’s degree in education with specializa- tion in French immersion is offered at UPEI in collaboration with the Univer- sité de Moncton. The 2008 provincial budget noted that every first-year PEI student entering a provincially funded post-secondary institution will receive a bursary of up to $2,000 beginning in 2008.

Nova Scotia The public school system consists of seven regional school boards, one francophone board, and one First Nation board. School board members are elected for four-year terms. School board elections are held concurrently with the municipal elections. There is no separate school system in Nova Scotia. A small number of independent schools operate within the province, but no formal system of accreditation of their educational programs has been established. Public schools are financed from a combination of the general revenues of the province and a mandatory education tax levied on municipal property assessments. Approximately 83 percent of total public education funding comes from the province; the remaining 17 percent comes from the municipal level. School boards receive their funding through an operating grant (approximately 92 percent of the total funding) with the remainder coming from a series of restricted grants. The restricted grants cover costs associated with special education, learning materials, and school bus purchases. The cost of EDUCATION 9:5 major capital construction is provided directly by the province. Since September 2008, class sizes are capped at 28 up to grade 4. The Nova Scotia School of Adult Learning was established in 2001 and funded by the departments of Education and Community Services and the federal government. The school provides opportunities for adults to improve their reading and writing skills, obtain a high school diploma, and broaden their employment opportunities. Nova Scotia has nine degree-granting institutions that receive operating and capital assistance from the province. The community college system in Nova Scotia is made up of 13 campuses. A French university college, the Collège de l’Acadie, provides post-secondary courses to members of the Acadian and French-speaking communities through seven learning centres. All students who receive Nova Scotia student loans in the academic year, who study in Canada, and who successfully complete a full-time course load are eligible for a student debt-reduction program. Under the program, student debt is reduced 15 percent for the first year, 25 percent for the second, 35 percent for the third, 45 percent for the fourth, and if there is a fifth year, 15 percent. University and college graduates who graduate on or after January 1, 2006, may apply for the post-secondary graduate tax credit. The 2008 provincial budget doubled the tax credit to $2,000. There are additional incentives for students to remain in the province after graduation. Students who work for 50 weeks within three years of graduation will be eligible for a bonus of 25 percent of their debt reduction, and students who make 12 loan payments within three years of graduation will receive an extra 10 percent reduction. Nova Scotia’s 2008 budget noted that, beginning in September 2008, the first 20 percent of a provincial student loan will be a non-repayable grant, to a maximum of $1,560. Students with dependent children will be eligible for up to $1,040 in supplementary non-repayable assistance. The budget also noted that the province will provide additional loans of up to $5,655 or $140 for each week of study for students studying medicine, dentistry, or law. The budget announced the establishment of a $66 million university student bursary trust that will provide a maximum per-student benefit of $761 in 2008-9, $1,022 in 2009-10, and $1,283 in 2010-11. The budget provided $180 million to freeze tuition fees over three years. Nova Scotia’s 2009 budget replaced the province’s graduate tax credit with a graduate retention rebate, effective January 1, 2009. Graduates with a degree may deduct up to $2,500 per year over six years and graduates with a diploma or certificate may deduct up to $1,250 per year over six years.

New Brunswick The New Brunswick public education system is based on linguistic duality. Two deputy ministers of education, one francophone and one anglophone, 9:6 FINANCES OF THE NATION 2009 report directly to the minister of education. There are 14 school districts (9 anglophone and 5 francophone: each school district is independent, with its own superintendent and full staff. Curricula and services are provided under two separate linguistic sectors. The English system offers French as a second language through grade 12 and French immersion beginning in grade 1 or 6. The French system offers English as a second language. The province assumes full responsibility for all public elementary and secondary education costs. Financing for professional salaries is determined according to standards that relate to the required programs and school organization. Operating budget components are set primarily on the basis of a formula that is determined largely on historical cost and pupil enrolment. The province is responsible for the location, construction, and financing of public school buildings. New Brunswick makes interprovincial arrangements for some specialized needs, particularly in regard to exceptional students, through the Atlantic Provinces Special Education Authority (APSEA). The New Brunswick Education Act provides for elected district education councils that operate within provincial standards and policies to manage and control school districts. At the school level, parent school support committees have responsibilities that include providing input into the performance evaluation of the vice-principal and principal and communicating with district education councils on issues related to their duties under the act. The minister of education and Department of Education officials meet with the district education council chairs and their superintendents a minimum of twice a year to facilitate information sharing and consultation and permit the department and districts to identify and discuss areas of concern. Several provisions of the amended Education Act support the commitment to greater local decision making. The provincial Department of Post-Secondary Education, Training and Labour operates 10 New Brunswick community colleges and the New Brunswick College of Craft and Design. Collectively, these institutions form the special operating agency charged with all non-university, post-secondary training in the province. Programs offered include academic upgrading and occupational, technical, and technological training. The province has four universities and one technology-oriented forest ranger school that receive public funding, which is distributed through the Maritime Provinces Higher Education Commission. Noting that New Brunswick is the province with the lowest percentage of people who have completed some post-secondary education, the 2008 provincial budget increased funding to universities by 6 percent and announced a tuition freeze for the 2008-9 academic year. The province’s 2009 budget continued the tuition freeze for the 2009-10 academic year. EDUCATION 9:7

New Brunswick’s 2009 budget announced that the province will add 500 community college seats in 2009-10 and provide extra funds for additional apprenticeship training and support. The budget froze tuition costs for the academic year 2009-10. The province also initiated a measure to assist students with high debt loads. Under the new measure, a student may be forgiven up to 100 percent of his or her provincial student loan in excess of $26,000 upon completion of a first undergraduate degree, certificate, or diploma earned after April 1, 2009. Another initiative is the repayment assistance plan that provides for both income-based repayment options and forgiveness of loan balances that are outstanding after 15 years of repayment. Under the New Brunswick Tuition Tax Cash Back Credit Act, graduates of post-secondary institutions who decide to live and work in New Brunswick are eligible for a rebate of up to $10,000 of their tuition costs. The provincial 2009 budget doubled that rebate from $10,000 to $20,000 (lifetime maximum) of tuition costs. The tuition rebate may be claimed at any time, up to 20 years from the first year that the tax credit is earned, and the maximum rebate that may be claimed in any given year is $4,000. Application may be made for a rebate of up to 50 percent of tuition costs paid to qualifying post- secondary institutions after January 1, 2005. The rebate is issued as a tax credit against New Brunswick personal income tax otherwise payable.

Quebec The education system in Quebec is divided into four main levels of instruction: elementary, secondary, collegiate, and university. Both public and private sectors are recognized at each level. There are 72 school boards in the province, 69 of which are organized on a language basis (French or English). All school boards except 1 are administered by a council of commissioners elected for a four-year term and by parent representatives appointed for a one-year term. School boards are responsible for public preschool, primary, and secondary education and for professional training for youth and adults. They also offer manpower training activities and services such as recreation and day- care centres. School boards are financed from essentially three sources: provincial transfers, school tax, and other revenues. School tax is used mainly to finance management activities, the operating expenditure of school equipment, and part of the school transportation expenditures. Post-secondary education in Quebec includes college and university education. At the college level, pre-university and career or technology programs are offered in 48 public institutions (CEGEPs – collèges d’enseigne- ment général et professionnel) and 58 private colleges, of which 24 are subsidized. This number does not include the 11 public college-level institutions that come under the jurisdiction of other ministries: conservatories; the 9:8 FINANCES OF THE NATION 2009

Institut de tourisme et d’hôtellerie, which offers programs relating to the tourism and hotel industries; and schools offering career programs in the field of agri-food technology. All private educational institutions are subject to the same basic regulations applied to public schools and must hold permits issued by the province. There are about 354 elementary and secondary private schools in Quebec, of which over 230 are subsidized. About 50 percent of their budgets comes from the province. Quebec has 9 universities, including the École polytechnique (an engineering school) and the École des hautes études commerciales (a business administration school), both of which are affiliated with the Université de Montréal. Six of the Université du Québec’s 10 branches are universities that offer a variety of undergraduate and graduate programs. The other branches are specialized institutions, which include one research institute, two schools of higher learning, and Télé-université, which provides education outside classrooms and campuses. Quebec offers a number of programs to assist students. Post-secondary full-time students with employment income below a specified amount are eligible for the loans and bursaries program and part-time students are eligible for loans. Students with dependants are eligible for the tax credit in respect of child-care expenses. Students unable to repay student loans are eligible for the deferred payment plan, and taxpayers who wish to return to school may withdraw funds from their registered retirement savings plans (RRSPs) without paying tax. There is also a tax credit equal to 20 percent of the interest paid on student loans. Quebec’s 2008 budget provided an additional $250 million over five years for the province’s universities and a further $150 million over five years to develop vocational and technical training.

Ontario In Ontario, tax-supported public and separate school systems cover both elementary and secondary education. The separate school system provides Roman Catholic education in the province. There are 72 district boards, including 12 French-language district boards, as well as 30 smaller (isolated and hospital) school authorities. School boards provide an honorarium of at least $5,900 per year to nearly 700 school board trustees. The school program has four divisions: primary, junior, intermediate, and senior. Junior kindergarten and senior kindergarten are funded for half days only. Legislation permits school boards to establish classes or entire schools for French-language education: French-language district school authorities must offer French-language education whenever francophone parents elect to have their children taught in French. EDUCATION 9:9

Ontario operates three provincial schools for the deaf, one school for the visually impaired and the hearing/visually impaired, and four demonstration schools (three English-language and one French-language) for children with learning disabilities. Ontario provides foundation grants (pupil foundation and school foundation grants) to cover the costs associated with the basic educational requirements of all students. A series of special purpose grants addresses individual and board-specific needs such as special education, second-language education, transportation, and additional costs faced by urban school boards and school boards that cover large rural or isolated geographic areas. School boards are funded through a combination of provincial general grants and education property taxes (residential and business assessments). Municipalities collect education property taxes, the rate for which is a province-wide standard set by the minister of finance: these revenues remain in the community to support district school boards. School boards are not permitted to levy taxes or collect tax revenue above the level set by the province. Provincial grants are determined from the difference between the yield of the education property tax and the boards’ revenue allocation generated under the funding formula. Ontario’s 2009 budget announced that the province’s grants for student needs (GSN) funding will rise to $19.8 billion in 2009-10, or an estimated $10,450 per student. There are spending restrictions for boards on the use of funding for special education, and construction, repair, and renovation of facilities. There is also a spending limitation on school board administration and governance funding. Reporting classroom spending relative to classroom allocations is required. As per the Education Act, Ontario school boards are responsible for presenting balanced budgets. Ontario has 19 provincially supported universities and the Ontario College of Art and Design, as well as 24 colleges of applied arts and technology (CAATs), which include three college institutes of technology and advanced learning. In addition, there are three agricultural colleges, the Dominican university college supported partially by the province, a college of health science, and a military college supported by the federal government. The Northern Ontario School of Medicine (NOSM), the province’s first new medical school in over 30 years, opened its doors to 56 first-year students in September 2005. It has campuses in Sudbury and Thunder Bay and graduated its inaugural class in 2009. The current university tuition fee framework was announced in April 2006 and is a multi-year policy that expires in 2009-10. The policy allows universities to increase tuition fees for all publicly funded programs, including graduate and professional, within set guidelines. An institution’s tuition fee increases are subject to an overall tuition fee cap of 5 percent per year, 9:10 FINANCES OF THE NATION 2009 adjusted for enrolment. CAATs establish program-specific tuition fees for high-demand programs and regular programs, subject to certain criteria. As well as one-year certificate programs and two- or three-year diploma programs, several CAATs offer four-year applied degree programs. CAATs offer many special programs at more than 100 campuses. The CAATs also deliver the apprenticeship in-school portion of many regulated trades. Cooperative education programs in conjunction with business and industry are available in secondary school, college, and university programs. Colleges and universities receive a very small portion of their funding from the province, based on their results on key performance indicators. The Ontario apprenticeship training tax credit provides employers with up to $15,000 for the first 36 months of training per apprentice in designated trades. Under the cooperative education tax credit program, Ontario businesses may claim up to $1,000 per student for expenses incurred in providing qualified co-op work placements. There are over 500 private career colleges in the province operating under the Private Career Colleges Act. Although the schools are not publicly funded, students may, under certain circumstances, be eligible for financial assistance. Ontario’s Ministry of Training, Colleges and Universities is also responsible for labour market development adult education.

Manitoba Manitoba has 37 public school divisions. The province provides funding to both the public school system and independent (private) schools that offer a standard of education equivalent to that in public schools. No provision is made for a separate or dual public school system. Some services are shared between the public and independent school systems. Public divisions also have the ability to set a property tax (special levy) on the ratepayers within their school division boundaries for their own purposes. Independent schools charge tuition fees because they do not have access to the property tax base. Manitoba eliminated the provincial education tax (education support levy) on residential property in 2006. Parents may send a deaf or hard of hearing child to a local school or to the Manitoba School for the Deaf, where the province pays all tuition, room and board, and transportation costs for provincial students. All children and youth with special needs may attend a local school. Manitoba’s public school funding formula is based largely on per-pupil grants structured around common (for example, instructional support, textbooks) and specific (for example, transportation, special needs) elements. More equalization is allocated to school divisions with high taxation and below average property assessment. Additional support is provided to school divisions in sparsely populated rural and northern areas of the province. EDUCATION 9:11

The council on post-secondary education provides funding to Manitoba’s public post-secondary institutions; approves programs; and manages the accountability framework, including financial reporting and indicators. The council is also responsible for the development of a systemwide tuition fee policy, facilitates credit transfer arrangements, develops strategic plans, and coordinates systemwide initiatives. The council reports to the province through the Department of Advanced Education and Training. In September 2009, tuition fees, previously frozen, will gradually increase back to the 1999 level. There are about 50 private vocational institutions in Manitoba operating under the Private Vocational Institutions Act. These institutions deliver entry-level vocational training and can be for-profit or not-for-profit organizations. Although these institutions are not publicly funded, students may be eligible for government financial assistance if the programming meets specified criteria and administrative conditions. Students who attended private vocational institutions are eligible for Manitoba’s 60 percent income tax rebate if the institution has registered with the Department of Finance. Manitoba’s Public Schools Finance Board manages the schools’ capital program, including approving and financing new schools, approving major renovations and repairs, monitoring the acquisition and disposition of land and buildings, and ensuring that school divisions undertake long-term planning. Senior years technology education programs are offered in over 40 schools. Industrial arts and home economics programming are offered in over 100 senior years schools. Business education programming is offered in virtually every senior years school. An independent school may qualify for provincial financial support if it has been in existence for three years and, in each of those years, has implemented the provincial curriculum with certified teachers, provided audited financial statements to the province, and conformed to applicable legislation and policy. Manitoba’s 2009 budget increased funding for literacy and adult learning programs, and funding for colleges and universities was increased by 6 percent. Physician training seats were increased to 100 from 70, and the number of scholarships available for first- and second-year aboriginal medical students was doubled.

Saskatchewan In Saskatchewan, 29 school divisions (18 public, 10 separate, and 1 francophone) are responsible for pre-kindergarten to grade 12 education. Financing the public education system in Saskatchewan is a shared responsibility. School divisions are given the authority by the provincial government to access the local property tax base (by setting a mill rate that is 9:12 FINANCES OF THE NATION 2009 applied to property assessment in a school division), and the provincial government directly provides the balance of funds on an equalizing basis. Property tax is the traditional method by which Saskatchewan boards of education raise the local share of the costs of providing education services in their school divisions. Provincial funding for kindergarten to grade 12 education is distributed through the foundation operating grant formula. The grant is unconditional and adheres to four principles: equality, simplicity, transparency, and accountability. It is intended to create a balance between stability and responsiveness and to provide incentives for local boards to use resources efficiently and effectively. The grant formula considers both the costs of providing educational services and the school division’s relative ability to pay. The school division’s recognized expenditures minus the school division’s recognized local revenues equal the grant to be allocated. Enrolment is the key element in determining the level of recognized expenditures. To the extent that enrolment increases, the level of recognized expenditure increases. Similarly, the level of recognized expenditure declines with enrolment. The basic rates reflect expenditures for administration, instruction, plant operation and maintenance, non-capital furniture and equipment, non-capital renovations and repairs, current interest expenses and bank charges, and special events transportation. The grant formula recognizes the higher costs associated with isolated schools in rural divisions, transportation, and students with special needs associated with physical or mental disabilities, behaviour problems, learning disabilities, and schools with low enrolment where it is not feasible to transport students to other similar schools. Saskatchewan also supports pre-kindergarten to grade 12 capital construction. A portion of the total construction cost, based on ability to pay, is borne by the local school division; the remainder is borne by the province. On average, the province pays 65 percent of approved capital costs. Saskatchewan’s 2009 budget cut and capped property tax rates on education: the 2009 rates are 14 percent lower than the 2008 rates. The province also increased its share of funding to school divisions, and the budget noted that the province will fund 63 percent of operating costs for pre-kindergarten to grade 12. The province will reduce the education property tax by a further $53 million in 2010, at which time the province will be paying about 65 percent of education costs. The budget noted that Saskatchewan was moving to uniform rates across the province. Provincial post-secondary education and skills-training programs are delivered through two universities and their federated and affiliated colleges, the Saskatchewan Institute of Applied Science and Technology (SIAST), nine regional colleges, the Saskatchewan Indian Institute of Technologies (SIIT), an interprovincial agreement with Alberta’s Lakeland College, the Gabriel EDUCATION 9:13

Dumont Institute of Training and Employment (DTI), private vocational schools, and employers. The Saskatchewan Apprenticeship and Trade Certification Commission is an industry-led agency with a legislative mandate for apprenticeship renewal. The commission is working to increase its partnerships with industry, institutions and organizations, students, and communities in order to improve access to apprenticeship training and certification programs. The University of Regina and the University of Saskatchewan and their affiliated colleges are autonomous but receive operating and capital budget allocations from the province through the annual budget process. SIAST is managed by a board of directors and receives an operating grant from the province through the annual budget process. The 2008 Saskatchewan budget provided $25.5 million to maintain university tuition rates at their current levels. Saskatchewan has frozen tuition fees since 2004. The nine regional colleges are managed by boards of trustees and receive annual operating and program grants and may receive capital grants from the province. DTI is managed by a board of trustees and receives an annual operating and program grant from the province. Lakeland College is managed by an Alberta-appointed board, with one Saskatchewan representative, and receives its annual operating and capital budget allocations from Alberta. SIIT is under First Nation control and receives no provincial funding. It is funded by the federal government and tuition fee revenues. Saskatchewan provides funding for First Nations students to attend the institute. Post- secondary private vocational schools provide employment-oriented programs and receive no provincial funding. Students attending these schools may, however, apply for student loan funding. Saskatchewan’s graduate retention program provides tuition rebates of up to $20,000 for post-secondary graduates who stay in the province for seven years after graduation.

Alberta The province fulfills its responsibility for funding kindergarten to grade 12 education through the Ministry of Education and post-secondary education through the Ministry of Advanced Education and Technology. There are 76 public system school authorities in Alberta: 42 public jurisdictions, 17 separate jurisdictions, five francophone regional authorities, and 12 charter schools. Alberta took over the responsibility for setting the assessment rate and distributing education property taxes in 1994 in order to provide equal access to quality education for all students and equitable taxation for all Albertans. Every year the province calculates, on the basis of assessment value, the amount each municipality must contribute toward the public education 9:14 FINANCES OF THE NATION 2009 system. Municipalities collect the education property tax from ratepayers and then forward it to the province for deposit into the Alberta school foundation fund (ASFF). The education property tax is pooled in the ASFF and distributed among Alberta’s public and separate school boards on an equal per-student basis. All separate school boards in the province have opted out of the ASFF, which means that they requisition and collect property tax directly from the municipalities. Any difference between what opted-out school boards collect in requisitions and the funding they are entitled to is adjusted, so there is no financial gain to opting out of the ASFF. Alberta provides funding to school boards on the basis of their specific circumstances. The province’s funding framework is based on the premise that, beyond the base costs of operations, jurisdictions should receive funding for significant cost factors that vary among school boards. Over and above the base funding provided for every student, additional funding is provided to address unique circumstance (such as English as a second language (ESL) programs; First Nations, Metis, and Inuit education; northern allowance; and small schools) by necessity. Additional targeted funding is provided for specific initiatives, such as the Alberta initiative for school improvement (AISI), children and youth with complex needs, the small class initiative, and student health. Alberta’s 2009 budget increased provincial spending on kindergarten to grade 12 by about 5.4 percent, to $6.3 billion. Within the budget, basic student instruction grants were increased by 4.8 percent. For the 2009-10 school year, all eligible grade 1 to 9 students receive a base level of funding of $5,971. Funding for secondary school students is based on credit enrolment units of $170.60 each. A full-time secondary school student is considered to be taking 35 credit enrolments, equivalent to $5,971. In addition to the base, funding of $15,750 is available for severely disabled students; $1,155 for First Nation, Metis, and Inuit (FNMI) students; and $1,155 for ESL students. For early childhood services (ECS) children, the base level of funding is $2,985 per child. Thus funding is equivalent to 50 percent of the grade 1 rate. In addition to base funding, ECS children are eligible for severely disabled, FNMI, and ESL funding. A further $2,438 per child is provided for ECS children who are identified as moderately disabled, developmentally delayed, or gifted. All boards have the authority and responsibility to provide early childhood services and elementary, junior, and senior school education. Charter schools, which have been in existence since the 1995-96 school year, are fully funded public schools that offer a unique method of delivering education services and governance. Provincial support is given to private schools that provide an acceptable standard of education, employ certified teachers, follow Alberta education curriculum, and administer achievement tests at grades 3, 6, and 9. Funding EDUCATION 9:15 for private schools is 60 percent of the per-student base instruction grant provided to public schools. The Post-secondary Learning Act 2004 governs public post-secondary education in Alberta. The act establishes provincial authority for establishing public post-secondary institutions and approving their mandates and programs of study. In the case of degrees, the Campus Alberta Quality Council (CAQC) makes recommendations to the responsible minister on the quality of new degree proposals and approved degrees. The Post-secondary Learning Act 2004 also provides a framework for tuition fees to ensure that increases are manageable and predictable and limited to the provincial inflation rate. A student loan relief program also provides Alberta post-secondary students with debt reduction through automatic loan relief payments. Alberta provides funds to publicly funded institutions through operational and envelope funding as well as grants to community adult learning councils, consortia, adult literacy, and family literacy programs. The province also provides grants to post-secondary institutions to support the technical training of apprentices. There are 26 publicly funded post-secondary institutions in Alberta, including four universities, 13 public colleges, two arts and culture institutions, two technical institutes, and five private colleges accred- ited to grant degrees. The Alberta centennial education savings plan encourages planning for children’s post-secondary education. Children born in 2005 or later are eligible for a $500 grant. A child must have a registered education savings plan (RESP) account and an application submitted on his or her behalf. Grants of $100 are available to children enrolled in an Alberta school at ages 8, 11, and 14. The grants require that a minimum of $100 be invested in the child’s RESP within one year prior to application.

British Columbia British Columbia’s public education system is administered by 60 locally elected boards of education, including one francophone board, the Conseil scolaire francophone de la Colombie-Britannique. All boards operate under the guidelines of the School Act and regulations and ministerial orders. Boards of trustees are elected for each public school district. An overall provincial funding allocation is provided to boards of education for programs and services, including classroom resources, programs, district administration, salaries, and school operating expenses. The funding allocation recognizes unique student needs, as well as geographic factors unique to provincial school districts. Teachers and boards bargain provincially through the BC Teachers Federation and the BC Public School Employ- ers Association. The provincial allocation of funds for kindergarten to grade 12 is determined each spring. The total amount reflects economic adjustments, new 9:16 FINANCES OF THE NATION 2009 mandates, and changes in school district enrolments. The School Amendment Act, 2002 allowed boards of education to engage in entrepreneurial activity and provided for a new funding formula that removed specific targets and caps to provide flexibility for boards to allocate resources on the basis of students’ needs and local priorities. Further amendments to the act in 2007 gave these board of education companies many of the same rights, powers, and obligations as companies established under the Business Corporations Act. Boards may use these companies to carry on activities to raise funds that may be used to enhance educational programs. In addition to disbursing funds, the province provides funding for capital construction and specific programs such as the provincial learning resources programs, distance education, and technology. The provincial allocation of funds is distributed to boards of education using the funding allocation system. This system provides equal access to educational services across the province and recognizes the relative costs of providing programs in each district. The majority of every board’s funding is accounted for through the base operating grant, which allocates a standard amount for each student. Additional funding is provided to recognize differences in student makeup (for example, students enrolled in higher-cost programs such as ESL and special education), teacher salary levels attributable to salary grids and experience levels, and district enrolment and geographic factors. School residential and non-residential property taxes are set by the lieutenant governor in council, except for additional taxes that are approved by local school board referendums. Taxes are collected by municipalities (or the surveyor of taxes in unincorporated areas) and forwarded to the province. The province may set more than one residential school tax rate within a school district where there is considerable variation in assessed property values. Residential and non-residential property taxes account for about 30 percent of provincial funding for kindergarten to grade 12 programs. Independent schools are governed by the board of directors of the authority that operates each school. The province partially funds the operating costs of independent schools that meet certain provincial requirements but does not contribute to their capital costs. The province makes a per-pupil grant based on a percentage of the per-pupil operating costs of the public school district in which the independent school is located. The post-secondary education system in British Columbia includes 11 publicly funded universities, 11 colleges, and three provincial institutes, one of which, the Nicola Valley Institute of Technology, has an aboriginal focus. British Columbia’s 2007 budget provided $40 million annually to implement the children’s education fund, which invests $1,000 for every child born in 2007 and beyond and can be used to offset the cost of attending a BC post- secondary institution in the future. The 2007 BC budget provided $6.9 million to institutions as compensation for making adult basic education tuition free. In addition, provincial tuition EDUCATION 9:17 fee increases continue to be limited to the rate of inflation. British Colum- bia’s 2008 budget increased the provincial investment in the preschooler learning centres. By 2009-10 there will be a total of 200 centres. British Columbia’s 2009 budget increased per-student funding in the kindergarten to grade 12 system to $8,206 in 2009-10. The budget announced that full-day kindergarten will be introduced in September 2010. The budget also provided $40 million to expand health education, including the expansion of the three-year Bachelor of Science in nursing, medical technology, and pharmacy programs.

Northwest Territories The funds for the programs and services that the territorial government provides for its residents come from transfer payments from the federal government and territorial income, property, and other taxes. The publicly funded school system provides an elementary-secondary school program and is supported by four divisional education councils, two district education authorities, a community service agency, and the Commis- sion scolaire francophone division. The two district education authorities, both located in Yellowknife, are the only education bodies that receive local property taxes. There are 50 schools in the territory, including two francophone schools. There are no private schools currently operating in the territory. For schools operated by the divisional education councils, the community service agency, and the scolaire francophone division, the Department of Education, Culture and Employment provides all approved operational and capital funds. The operational funds are allocated to the education councils by a school funding formula, which is based primarily on student enrolment on September 30 of the previous year. School taxes levied under the Property Assessment and Taxation Act are credited to the Northwest Territories consolidated revenue fund. The public and public denominational separate school systems in Yellow- knife receive about 80 percent of the school funding formula from the Department of Education, Culture and Employment in the form of contributions. The balance comes from local taxes on assessed property within the respective districts. Approved capital facilities in each system are funded 100 percent by the department. The education districts may borrow additional funds for capital projects by way of debenture or mortgage. The Education Act requires that such borrowings receive territorial government and ratepayers’ approval. Aurora College operates primarily with funds received from the Depart- ment of Education, Culture and Employment. The college provides a variety of programs, including technical and vocational studies, adult and continuing education, post-secondary certificate and diploma programs, and selected undergraduate degree programs. 9:18 FINANCES OF THE NATION 2009

Nunavut Nunavut’s school system is organized under three regional school operations, Qikiqtani, Kivalliq, and Kitikmeot, as well as the Commission scolaire francophone du Nunavut, located in Iqaluit. The regional offices are administered directly by the Department of Education. The territory is faced with the challenge of developing and financing an education system when fully half of the territory’s population is under age 20. Nunavut Arctic College (NAC) is the only post-secondary institution in Nunavut. It is funded by the territorial government. NAC offers a variety of courses leading to certificates and diplomas and also offers degree programs in cooperation with several universities. Partnerships with universities include the University of Regina (bachelor of education program through the Nunavut teacher education program) and Dalhousie University (bachelor and diploma of nursing). Adult programs within the Department of Education are delivered through three regional offices and focus on literacy, career development, apprenticeship training, on-the-job training, and trade education programs. The department promotes quality care for children by inspecting, providing support and guidance to all early childhood programs, and providing support for special needs children. The Nunavut Department of Education supports post-secondary students with a combination of grants, loans, bursaries, and scholarships. The 2009 Nunavut budget provided for a 6 percent increase in education spending and $8.6 million to assist in the implementation of the Education Act, Official Languages Act, and Inuit Language Protection Act.

Yukon The 28 public schools in Yukon, including three Roman Catholic schools, are operated by the Yukon Department of Education. Each school (with one exception) has an elected school council with limited decision-making authority. The francophone school board administers Yukon’s only French first-language school. Provisions to establish school boards are included in the Yukon Education Act. Of the 14 Yukon First Nations, 11 are self- governing and have negotiated clauses in their self-government agreements that provide them jurisdiction over the education of their citizens. To date, none have chosen to exercise this jurisdiction. The “first voices” program supports the Han, Southern Tuchone, and Tagish languages at schools in Dawson City, Whitehorse, and Carcross. Yukon’s kindergarten to grade 12 system follows the British Columbia curriculum. Most schools have elected school councils composed of parents and community members that perform an advisory role. The public schools branch of the Department of Education manages the operation of public schools, including Catholic schools. EDUCATION 9:19

Expansion of full-day kindergarten to all Whitehorse and some rural schools over a two-year period was completed in September 2007. Operating and capital funds for Yukon education come from the consolidated revenue fund of the territorial government. Several federal-territorial agreements provide funds that may be used for education. In addition, Yukon levies a combined tax for school purposes. The revenue from this tax is accrued to the consolidated revenue fund. Yukon’s 2009 budget provided $150,000 for the early years transition learning initiative to help reduce the performance gap between First Nation and other Yukon children. An equal amount was provided to implement a curriculum and special programs training initiative for counsellors, learning assistants, and education assistants. The budget also provided $140,000 for software and related training to support special-needs students. Yukon College is the only post-secondary educational institution in the territory. The college was established as a separate corporate entity governed by an independent, appointed board. The college still receives much of its funding from the Yukon government but also solicits and receives funds from other sources. The college offers numerous upgrading programs, as well as two degree-granting programs. The Yukon native teacher education program offers a four-year bachelor of education degree program at the Ayamdigut campus of Yukon College in conjunction with the University of Regina. The college also offers, in cooperation with Yukon First Nations and the Univer- sity of Regina, a four-year bachelor of social work program. Yukon College also offers a masters in public administration program in cooperation with the University of Alaska South East. A licensed practical nurse program is offered at Yukon College’s Ayamdi- gut campus in Whitehorse. The two-year program is transferable to other institutions if students wish to pursue a registered nursing program. Students are eligible for the health professions education bursary, available from the Department of Health and Social Services.

FEDERAL PROGRAMS The federal government is responsible for financing Indian and Inuit education, providing loans and grants for qualifying students and grants to assist those saving for post-secondary education, as well as assistance for bilingualism development, occupational training, and programs to help the unemployed re-enter the labour market. Expenditures on these and various other programs classified as education are expected to total $3,815.0 million in 2009-10. Payments to the provinces for post-secondary education are made under the CST. See chapter 7 for more details.

Assistance to Students The federal and provincial governments jointly administer student financial assistance through the Canada student loans program. Types of assistance 9:20 FINANCES OF THE NATION 2009 include federal student loans, provincial student loans, Canada study grants, millennium bursaries, and provincial grants and bursaries. Part-time students may not apply for provincial student loans but may apply for assistance under the Canada student loans program.

Canada Student Loans Since 1964, the federal government has guaranteed loans to eligible graduate and undergraduate students in any provincially approved post-secondary educational institution. To be eligible, the student must have attained a satisfactory scholastic standing, actually need the loan, and be a Canadian citizen or landed immigrant within the meaning of the Immigration Act. The first loan payment is due six months after the student leaves school. There is a waiver provision for those who are permanently disabled. Funds issued under the Canada student loans program are issued directly by the federal government through the two divisions of the National Student Loans Service Centre. One division services borrowers attending public educational institutions, and the other serves borrowers attending private vocational institutions. Student assistance offices in each province and territory advise students on eligibility and the amount of the loan they may receive. Loans received before August 1, 2000 must be repaid to the appropriate financial institution. Loans received after August 1, 2000 are repaid to the federal government. The provinces administer the loan plan, specify the institutions that borrowing students may attend, and approve loan applications. Since 2005, the federal government has forgiven loans when a borrower dies or becomes permanently disabled during the repayment period. The provincial allocation is determined by dividing the total loan allocation among the provinces and territories on the basis of population in the 18-to-64-year-old group. A discretionary provision in the act provides additional loans equal to 30 percent of the basic total loan provision, which may be allocated to the provinces as required. Full-time students of Prince Edward Island, Nova Scotia, Manitoba, Alberta, British Columbia, and Yukon may apply for both a federal and provincial student loan but must repay those loans separately. Newfoundland and Labrador, New Brunswick, Ontario, and Saskatchewan administer integrated student loans that must be repaid to the National Student Loans Service Centre. Under the Canada Student Financial Assistance Act, any province wishing to have its own plan receives a sum equal to the amount that it would have received under the federal plan. Quebec, the Northwest Territories, and Nunavut operate their own plans. First-time applicants 22 years of age and over must undergo a credit check. Applicants with poor credit history may be denied assistance. Since 2003, refugees may access the Canada student loans program. EDUCATION 9:21

Taxpayers may claim a 17 percent federal tax credit on interest paid in the current year. The credit applies to interest payments on loans under federal and provincial programs. Effective August 1, 2009, a new federal student loan repayment assistance plan replaced the previous programs for interest relief and debt reduction. The plan has two stages—in the first stage, qualifying borrowers may make affordable (20 percent of income) or no payments toward the loan principal and the federal government will cover the interest amount. Borrowers may be enrolled in stage 1 up to 5 years during a 10-year period. Stage 2 is available for borrowers who continue to experience financial difficulty. It begins once the borrower completes stage 1 or has been in repayment for 10 years. The federal government continues to cover the interest and begins to cover a portion of the principal; that is, the difference between the affordable payment and the required payment. Students experiencing difficulty repaying a loan may apply for a revision of terms, which can extend the repayment period to 15 years. Generally, loans are normally repaid over 9.5 years. Extending the term lowers the required monthly payment. The Human Resources and Skills Development department provides $256.4 million in 2009-10 for student loans, interest payments, and liabilities to lending institutions under the Canada Student Loans Act and the Canada Student Financial Assistance Act. The 2009-10 Estimates also provide $511.5 million for Canada study grants to qualifying full- and part-time students. There are lifetime limits on the amount of financial assistance (including both loans and interest-free periods) a student can receive. Once a lifetime limit is reached, interest begins to accumulate on the loan. For full-time students who received loans on or after August 1, 1995, the lifetime limit is 340 weeks, for full-time doctoral students, 400 weeks, and for students with a permanent disability, 520 weeks.

Canada Student Grants Unlike student loans, Canada student grants are not repayable. They are available to students from low- or middle-income families, students with permanent disabilities, students with dependants, and part-time students. Students from low-income homes may qualify for up to $3,000 per academic year, students from middle-income families may receive up to $1,200 per academic year, students with dependants may receive up to $1,920 per academic year, and part-time students, up to $1,200 per academic year. Students with permanent disabilities may receive up to $2,000 per academic year. Eligibility for grants is automatically assessed on application and qualification for a Canada student loan and is based on assessed need. The Canada millennium scholarship grant was replaced with the simplified Canada student grant in 2009-10. 9:22 FINANCES OF THE NATION 2009

Canada Education Savings Grant The Canada education savings grant (CESG) program is designed to assist parents, grandparents, and others to save for a child’s post-secondary education. Under the CESG, if net family income is below $38,832 in 2009, the federal government will contribute 40 percent on the first $500 saved in the child’s RESP. If net family income is between $38,832 and $77,664 in 2009, the grant is 30 percent, and if net family income is above $77,664, the grant is 20 percent. Regardless of net family income, the CESG will contribute 20 percent for every dollar deposited up to $2,000. The lifetime limit for the grant is $7,200. Only contributions to an RESP made on or after January 1, 1998 are eligible for the grant. A beneficiary must be 17 years of age or less, have a social insurance number, and be a Canadian citizen. If a beneficiary does not attend a post-secondary institution, the grant money must be repaid or the beneficiary may be replaced by a sibling under 21 years of age.

The Canada Learning Bond In order to help low-income families save for their children’s post-secondary education, the federal government introduced the Canada learning bond (CLB) for children born on or after January 1, 2004 in families entitled to the national child benefit supplement. The federal government provides an initial $500 CLB at birth for children in low-income families. The children also qualify for additional payments of $100 per year for up to 15 years. The CLB provides up to $2,000 of education savings by a child’s 18th birthday. The CLB is paid into the child’s RESP and the federal government provides an additional $25 to help families with the initial setup costs.

Education of Indians and Inuit The federal Department of Indian Affairs and Northern Development (DIAND) maintains schools for Indian and Inuit children and for educational services through a provincial or territorial government. Schooling is available in federal government or band schools on reserves and in communities or in provincial schools, with the costs paid by the federal government under federal-provincial agreements. Indians have gradually been taking over more control of their elementary and secondary education. The first agreement in Canada to transfer jurisdiction for education from the federal government to First Nations communities occurred in 1998. The agreement transferred jurisdiction over education to nine Nova Scotia First Nations communities and enables these communities to preserve their culture and traditions and provides funds for the operation, maintenance, renovation, and replacement of existing reserve educational facilities. The department provides daily and seasonal transportation and living allowances for students who must leave home for schooling or counselling EDUCATION 9:23 and, where necessary, allowances for those who must move into group homes or student residences. At the post-secondary level, financial assistance and instructional support are available, within funding limits, for eligible Indian and Inuit people. A federal program assists Indians and Inuit qualify for university and college entrance. DIAND may provide tuition for special programs such as native teacher education, pre-law, and social work courses. Many of these special programs are delivered through Indian-controlled post-secondary institutions. DIAND will spend an estimated $1,571.6 million on Indian and Inuit education in 2009-10. Eligibility requirements for the post-secondary programs stipulate that an applicant must be (1) a registered Canadian Indian or Inuit, (2) a resident of Canada for the 12 months immediately prior to the time of application, and (3) accepted for enrolment in a provincially accred- ited or recognized post-secondary program.

Official Languages Since 1969, the federal government has ensured the equality of status of Canada’s two official languages in federal government institutions and encouraged their continued use and development in Canadian society. The Official Languages Act (1988) sets out the federal government’s commitment to promote both English and French in Canadian society and to enhance the vitality of official-language minorities. The estimates of the Canadian Heritage department include $336.7 million for the official languages program in 2009-10. Federal assistance to the provinces and territories is available to provide anglophones in Quebec and francophones in the rest of Canada with the opportunity to educate their children in their own language at all levels of the educational system and to benefit from contact with their culture. Assistance is also available for Canadians to learn either of the two official languages as a second language, as well as the culture of that language, by way of teacher training and upgrading and student and other bursaries.

Social Sciences and Humanities Research Council The Social Sciences and Humanities Research Council was established in 1978 to administer grants and fellowships that support university research in the social sciences and humanities. The 2009-10 Estimates of the Department of Industry provide $313.1 million for this aspect of the council’s activities. xxxxxxxxxxxx 10 Health

In recent years, no other government program has garnered more attention, generated more heated debate, or witnessed more rapid growth in expenditure than health care. Claiming an ever-larger share of provincial budgets ensures that health care will continue to receive close scrutiny. In the past few years, every provincial and territorial budget has remarked on the growing demands of health care on provincial/territorial finances. Nationally, an aging population means that this trend will continue. Amid growing concern over the future of public health care in Canada, in 2001 the Commission on the Future of Health Care (Romanow commission) examined the state of Canada’s public health-care system. The commission’s final report called for adequate and stable financing of Canada’s health-care system and noted that the medicare system should be adapted to reflect current realities: for instance, doctors and hospitals account for much less spending today than they did at the inception of medicare. Today, drugs account for more than half of total spending. Following the release of the Romanow commission’s final report, provincial concern over the rate of growth in health-care spending and dissatisfac- tion with federal cash contributions through the Canada health and social transfer (CHST) culminated in the health-care renewal accord in February 2003 and the federal-provincial 10-year plan on health care in September 2004. For more detail on the federal-provincial agreements, see the section on the Canada health transfer below. Although health care has been a provincial responsibility since 1867, the federal government has played a major role. Since 1961, all provinces and territories have had agreements with the federal government under which their hospital-care insurance plans qualify for federal financial assistance. Each province and territory operates its own health-care system and has the authority to determine priorities and allocate resources. Financing these systems is, however, a shared federal-provincial/territorial obligation. The federal government also sets national standards for health care that the provinces must meet to qualify for assistance (see below). The federal government provides health services directly to Indians and Inuit, conducts research, enforces national health standards, and provides quarantine and immigration health services. The Canada Foundation for Innovation (CFI), an independent corporation established in 1997, supports research facilities in Canada’s universities, colleges, and hospitals. The CFI funds up to 40 percent of a project’s infrastructure costs, and the public, private, and voluntary sectors provide the balance. 10:2 FINANCES OF THE NATION 2009

The Canadian Blood Services (CBS) is Canada’s blood agency. Quebec created its own agency. The CBS head office is in Ottawa, Ontario, and there are 16 regional centres across the country. The centres collect, process, store, and distribute blood and provide research, training, and teaching facilities. There are also 11 bone marrow centres across the country. Provincial and territorial government expenditures on health are shown in table 10.1 for fiscal years 2004-5 to 2008-9. As shown in the table, provincial/territorial spending is expected to increase to $115.5 billion in 2008-9 from $89.6 billion in 2004-5. Consolidated provincial, territorial, and local government expenditures on health care for 2004-5 to 2008-9 are shown in table 10.2. Provinces and territories often delegate a considerable degree of authority over local health-care administration to municipalities and other public or private bodies. Table 10.3 shows local government expenditure on health, by province and territory, for fiscal years 2004 to 2008. Health services fall into three broad categories: hospital care, medical care, and public health services. Insured health services cover all necessary hospital services, physicians’ services, and surgical dental services performed in hospitals. Extended health-care services include nursing home intermediate care, adult residential care, home care, and ambulatory care.

FINANCING HEALTH CARE Federal Canada Health Transfer Since 2004, federal transfers to the provinces for health have been provided through the Canada health transfer (CHT). The CHT came into being when, xxxxxxxx Table 10.1 Provincial and Territorial Government Expenditure on Health, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador ..... 1,641 1,674 1,964 2,098 2,228 Prince Edward Island...... 375 369 386 433 491 Nova Scotia...... 2,663 2,830 3,036 3,153 3,312 New Brunswick ...... 2,208 2,478 2,781 3,018 3,246 Quebec...... 19,992 20,811 22,858 22,791 24,549 Ontario...... 35,238 36,930 39,667 42,426 44,481 Manitoba...... 3,551 3,767 3,924 4,285 4,429 Saskatchewan ...... 2,905 3,264 3,435 3,724 4,178 Alberta...... 8,896 9,825 10,673 11,987 12,954 British Columbia ...... 11,524 11,776 12,668 13,613 14,877 Northwest Territories...... 289 306 298 341 376 Nunavut...... 208 224 259 286 288 Yukon ...... 106 111 125 128 138 Totala ...... 89,556 94,323 102,031 108,241 115,501 a Where there are revenue and expenditure transactions among provincial and territorial governments, they have been eliminated to avoid double-counting. The Canada totals will, therefore, be less than the sum of the revenue and expenditure of each provincial and territorial government. Source: Statistics Canada, June 2009. HEALTH 10:3

Table 10.2 Consolidated Provincial, Territorial, and Local Government Expenditure on Health, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador ..... 1,637 1,674 1,964 2,098 2,228 Prince Edward Island...... 375 369 386 433 491 Nova Scotia...... 2,665 2,834 3,038 3,156 3,314 New Brunswick ...... 2,207 2,477 2,781 3,017 3,245 Quebec...... 19,996 20,818 22,874 22,793 24,620 Ontario...... 35,880 37,619 40,348 43,158 45,239 Manitoba...... 3,583 3,802 3,961 4,326 4,470 Saskatchewan ...... 2,912 3,270 3,442 3,731 4,189 Alberta...... 9,003 9,945 10,808 12,148 13,119 British Columbia ...... 11,568 11,840 12,732 13,696 14,960 Northwest Territories...... 289 306 299 342 377 Nunavut...... 210 221 260 286 287 Yukon ...... 106 111 125 129 138 Totala ...... 90,390 95,244 102,976 109,269 116,631 a Where there are revenue and expenditure transactions among provincial and territorial governments, they have been eliminated to avoid double-counting. The Canada totals will, therefore, be less than the sum of the revenue and expenditure of each provincial and territorial government. Source: Same as table 10.1.

Table 10.3 Local Government Expenditure on Health, by Province and Territory, 2004 to 2008 Province/territory 2004 2005 2006 2007 2008 thousands of dollars Newfoundland and Labrador . . . 334 104 80 125 128 Prince Edward Island...... 210 210 210 210 210 Nova Scotia...... 1,586 5,017 2,367 2,759 2,870 New Brunswick ...... 1,989 2,201 2,894 2,451 2,385 Quebec...... 4,256 7,402 16,522 1,923 72,649 Ontario...... 1,265,723 1,410,247 1,448,165 1,494,525 1,540,559 Manitoba...... 32,532 34,260 37,111 40,530 41,490 Saskatchewan ...... 8,347 7,436 8,373 9,264 12,234 Alberta...... 107,173 119,248 134,865 160,548 164,642 British Columbia ...... 45,270 65,664 65,453 84,728 84,522 Northwest Territories...... 1,129 1,136 1,055 1,893 1,949 Nunavut...... 2,915 3,436 3,207 3,302 3,206 Yukon ...... 198 161 155 178 201 Total...... 1,471,662 1,656,522 1,720,457 1,802,436 1,927,045 Source: Same as table 10.1. as part of the 2003 federal-provincial health accord, the Canada health and social transfer (CHST) was restructured into separate transfers for health and social programs. The CHT makes federal support for health more transparent. Federal transfers for social programs under the Canada social transfer (CST) are discussed in chapters 7 and 8. Transfers to the provinces and territories under the CHT are about 62 percent of the former CHST, reflecting the proportion the provinces devoted to health spending. For more detail on federal transfers to the provinces for health care prior to the CHST, see The National Finances 1994. 10:4 FINANCES OF THE NATION 2009

In 2009-10, CHT cash and tax transfers to the provinces and territories total $37.9 billion: $24.0 billion in cash transfers and $13.9 billion in tax transfers. CHT cash levels are currently set in legislation until 2013-14 and will reach $30.3 billion in that fiscal year. The federal government’s 2007 budget announced that cash support for the CHT will be on an equal per capita basis for 2014-15 and thereafter.

Federal-Provincial/Territorial: 10-Year Plan on Health Care In September 2004, the federal and provincial governments reached agreement on a 10-year action plan on health that called for a federal commitment of $41 billion over the period, which will augment ongoing federal support through the CHT, meet financial recommendations outlined in the Romanow report, and shorten wait times. The CHT cash transfer is $24.0 billion in 2009-10 and is scheduled to reach $30.3 billion in 2013-14. As of 2014-15, CHT transfers will be allocated on an equal per capita basis. As part of the federal commitment to reduce waiting times for health care, the 2007 federal budget provided $30 million over three years for patient wait-time guarantee pilot projects; $400 million for electronic initiatives such as the development of health information systems and health records, which will result in the reduction of wait times; and a further commitment of up to $600 million to reduce wait times. The federal government announced in April 2007 that all provinces and territories have agreed to establish patient wait-time guarantees by 2010. Timely access to health care will be guaranteed for priority areas, such as cancer care, hip and knee replacement, and cataract surgeries, depending on provincial and territorial priorities, capacity, and starting point. Recognizing the unique challenges involved in delivering health care in Canada’s remote northern communities, the federal government increased funding to the three territories by $150 million over five years through a territorial health access fund. Quebec signed a separate agreement with the federal government to reform its health-care system.

Provincial/Territorial Six provinces and the territories finance their share of the costs of the provincial/territorial health insurance plans from general taxation: two provinces (Ontario and British Columbia) levy premiums augmented by general taxation, and Quebec and Manitoba levy payroll taxes on employers augmented by general taxation. Alberta’s 2008 budget eliminated the province’s health premiums, effective January 1, 2009. Most provinces administer their plans through separate funds or commissions.

Ontario Ontario introduced a health premium in 2004. Premium revenue is targeted to reducing wait times; improving access to doctors, nurses, home care, and HEALTH 10:5 long-term care; and expanding mental health services. Ontario bases its health premium on annual taxable income. Individuals with taxable income of $20,000 or less pay no premium. The maximum premium, on taxable incomes of $200,600 and over, is $75 per month, or $900 annually.

British Columbia Premiums under British Columbia’s medical services plan are $54 for individuals, $96 for couples, and $108 for families of three or more. The province offers both regular and temporary premium assistance. Regular premium assistance offers subsidies at five levels, ranging from 20 percent at net income of $28,000 to 100 percent at net income of $20,000 annually. Temporary premium assistance offers a 100 percent subsidy for a short term, and eligibility is based on unexpected financial hardship. British Columbia’s supplementary benefits program provides benefits to those who qualify for premium assistance, except for medically required eye exams and surgical podiatry services, which are benefits for all medical services beneficiaries. Patients on premium assistance receive $23 per visit for up to 10 visits annually to any combination of acupuncture, physiotherapy, chiropractic, naturopathy, massage therapy, and non-surgical podiatry services. Under British Columbia’s income-based fair pharmacare program, assistance is based on net income. Eligibility is based on residency in the province of at least three months, registration with the medical services plan, and filing an income tax return for the relevant taxation year. Families pay the full prescription costs until the deductible is reached. There is no deductible where net annual family income is less than $15,000. For incomes between $15,000 and $30,000, the deductible is 2 percent of net income; for incomes over $30,000, the deductible is 3 percent of net income, to a family maximum ranging from 2 to 4 percent of net family income. Seniors 65 years and older pay no deductible on net annual family income under $33,000, 1 percent of net income between $33,000 and $50,000, and 2 percent of net income over $50,000, to a family maximum ranging from 1.25 to 3 percent of net family income. Pharmacare pays 75 percent of prescription drug costs for seniors. Families required to pay a deductible may apply to pay it in monthly instalments and receive pharmacare assistance immediately.

PROVINCIAL/TERRITORIAL HEALTH-CARE SYSTEMS In recent years, provincial governments have been unanimous in calling for increased federal assistance with escalating provincial spending on health care. Provincial concern with the level of federal cash transfers for health care and other programs has been voiced in every recent provincial budget and at each federal-provincial meeting to discuss the sustainability of Canada’s health-care system. Health-care expenses that continue to grow faster than revenues have forced the provinces to reorganize and rationalize their health-care systems. In most provinces, emphasis has shifted from high-cost institutional care and 10:6 FINANCES OF THE NATION 2009 treatment to lower-cost community-based services and preventive medicine. When hospital closings and other reorganizations in the health-care field resulted in a shortage of nurses and doctors across the country, most provinces responded by initiating programs to recruit and retain health-care professionals. Although space does not permit a detailed summary of each province and territory’s health-care system, recent programs and initiatives are discussed below.

Newfoundland and Labrador Newfoundland and Labrador’s 2009 budget announced that the province will spend $160 million for health-care facilities and equipment as part of the province’s planned $800 million infrastructure spending. The budget noted that initiatives to make the provincial health-care system more accountable include establishing a provincial director of pathology and laboratory services and a provincial coordinating office to manage reporting adverse events and hiring five patient safety officers and five physician champions. Additional quality improvement initiatives include a provincial accreditation program and hiring 17 new laboratory and quality management personnel. The province will also spend $21.4 million in 2009-10 to enhance laboratory services, cancer care, and health information management in the province. Newfoundland and Labrador’s expenditures on health care in 2008-9 included $4 million to increase spaces for medical students at Memorial University and $1.5 million to increase the number of funded seats at the School of Nursing. The province will spend $2.1 million on incentives to recruit and retain nurses, which include $2,500 bursaries for third- and fourth-year nursing students who enter into one-year return-in-service agreements. The 2008 budget announced that the province will offer reloca- tion allowances averaging $5,000, as well as $3,000 signing bonuses for difficult-to-fill positions.

Prince Edward Island Prince Edward Island’s 2009 budget increased spending on home care by 26 percent over the previous year and provided $800,000 to expand ambulance services and eliminate ambulance fees for seniors. The budget noted that the province will provide 1,500 insulin-dependent individuals with diabetic strips at a cost of $3 million. Noting Prince Edward Island’s continuing efforts to increase the number of practising doctors, nurses, and other health-care workers, the 2008 budget announced the creation of an office of recruitment and retention by the provincial Department of Health. The new agency will have initial funding of $4.7 million. The 2008 provincial budget also introduced a new family medicine residency program, beginning in 2009, with a budget of $1.2 million in its first year. The budget also provided $356,000 for an accelerated nursing program and $192,000 to integrate the nurse practitioner profession into the provincial health-care system. HEALTH 10:7

Nova Scotia The 2008 Nova Scotia budget noted that over the next 10 years the province will invest over $262 million to address the health needs of seniors. The budget also provided an additional $10 million over the next 2 years for the province’s $28 million electronic health record system project. The budget noted that construction has begun on 1,000 new long-term care beds and provided $142 million for home-care services. Other expenditures on Nova Scotia’s health-care system include $630,000 for the addition of nine new first-year residency positions at Dalhousie University, $4 million for the creation of a provincial telecare system, $2.7 million to implement a new colorectal cancer screening program (Nova Scotia has the second highest rate of colorectal cancer in Canada), and $2.8 million to expand the province’s mental health and addictions services. Nova Scotia’s family pharmacare program covers the cost of prescription drugs and supplies for anyone who is a permanent resident and has a valid Nova Scotia health card. No premium is charged under the plan, and the copayment and deductible amounts are determined according to annual family income. Drugs and supplies covered under the plan are listed in the Nova Scotia formulary. The seniors pharmacare program is cost-shared between the province and seniors. There is both a premium and copayment under the plan, which covers seniors who are age 65 years and over and are not covered by any other public or private plan. The maximum annual premium is $424, which is waived if income is below $18,000 for an individual and $21,000 for a couple. Effective April 1, 2009, the copayment for each prescription decreased to 30 percent from 33 percent.

New Brunswick New Brunswick’s 2009 budget increased the province’s prescription drug dispensing fee, effective January 1, 2009. The fee increased by 50 cents on January 1, 2009 and an additional 50 cents on September 1, 2009. The budget also provided $2.5 million to hire and train staff for the provincial trauma system and established a registry and a 1-800 phone line. Access to long-term care services was improved, and home support services are subsidized up to 336 hours per month. In addition, the budget increased the hourly rate of home support workers to $14.26 per hour from $13.61 per hour. The budget noted that, effective July 1, 2009, a new ambulance transport fee will recover $6 million in operational costs annually. New Brunswick’s 2008 expenditures on health care include $7 million for an ambulance enhancement strategy, $1.8 million to address wait times for surgery at the newly constructed Ambulatory Centre at the Moncton Hospital, and a capital budget of almost $58 million. The budget noted that, as part of the province’s new health plan, the eight regional health authorities will be reduced to two. Effective January 1, 2007, the province pays nursing home health-care costs. 10:8 FINANCES OF THE NATION 2009

The New Brunswick prescription drug program provides prescription drug benefits to eligible residents of the province. The eligible beneficiary categories are: seniors, cystic fibrosis, adults in licensed residential facilities, social development, special needs children, multiple sclerosis, organ transplant, human growth hormone deficiency, HIV/AIDS, and nursing home residents. Seniors eligible for the program must be 65 years old, in receipt of the guaranteed income supplement (GIS), or have an annual income of $17,198 or less for an individual, $26,955 for a couple (if both are 65 years or older), or $32,390 (if one person is under 65 years of age). Beneficiaries receiving the GIS must make a copayment of $9.05 for each prescription, to a maximum of $250 annually, and beneficiaries who qualify on the basis of income must pay a copayment of $15 per prescription with no annual maximum. Eligible beneficiaries in the HIV/AIDS, cystic fibrosis, multiple sclerosis, and organ transplant categories pay an annual $50 registration fee. Individu- als under the plan must remit a copayment charge of 20 percent of the cost for each prescription, maximum $20. The maximum in copayment charges is $500 per family per fiscal year.

Quebec In Quebec, all provincial health and social services programs are administered by a single department, the ministère de la Santé et des Services sociaux, which establishes policy, allocates funding, and assesses results. At the regional level, health and social services agencies coordinate services in their respective territories. The local level encompasses family physicians, community-based pharmacies and organizations, medical clinics, and other resources. There are 18 regional authorities in the province. Quebec has two types of prescription drug insurance plans, public and private. All residents must be covered by one of the plans. The public plan is administered by the Régie de l’assurance maladie du Québec. The 2009 Quebec budget noted that the province will continue to establish family medicine groups. Citing the link between a healthy, balanced diet and improved quality of life and fewer health problems, the 2008 budget provided $3 million annually to improve food quality for residents in public residential and long-term care centres. Both the 2006 and 2007 Quebec budgets noted that almost two-thirds of the annual increase in provincial spending is attributable to health-care costs.

Ontario In Ontario’s 2009 budget, stimulus measures to shore up the flagging provincial economy eclipsed health care as the most pressing issue for the province. The 2008 Ontario budget contained a number of health-care expenditure initiatives, including $190 million to increase the prevention and early identification of chronic diseases, $135 million over three years to improve HEALTH 10:9 dental care services to low-income families, $107 million over three years for more personal support workers, and $38 million over three years to expand nurse-practitioner-led clinics. The budget also announced that Ontario was increasing access to health care by adding 50 more family health teams, increasing cancer screening, and extending the human papillomavirus (HPV) vaccination program. Ontario’s 2007 budget announced that pediatric surgeries will be included in the province’s wait-time strategy. The budget also noted that the province will hire 8,000 new nurses. Ontario increased its share of public health costs from 65 percent in 2006 to 75 percent on January 1, 2007. The province is creating an additional 22 community health centres and 17 satellites. Ontario is undergoing a transition to primary care networks in the health- care field. In a family health network, family doctors join together to provide more comprehensive care than they could on an individual basis. The Ontario family health network, created in 2001, is an arm’s-length agency that reports to the minister of health and long-term care. It provides family physicians with information, administration support, and technology funding.

Manitoba Health-care initiatives contained in Manitoba’s 2009 budget included funding to hire more emergency room staff and add new ambulances to the provincial fleet. The budget also doubled the number of scholarships for aboriginal medical students, increased medical student university seats, and increased access for rural students. Manitoba’s 2008 budget included a number of initiatives designed to attract and retain health-care workers. The budget introduced a four-year bachelor of midwifery program at the University College of the North, provided funding to expand nursing training, announced the creation of a graduate program to train 12 new physician assistants over the next two years, and provided bursaries of $7,000 annually to aboriginal medical students. The budget provided $20 million for the new western Manitoba regional cancer centre in Brandon. Because prescription drug costs outpace all other areas of health spending, Manitoba increased the pharmacare deductible by $3-$6 per month for most families in 2006. The 2008 budget subsequently announced an additional increase of 5 percent in the pharmacare deductible to help offset the rising costs of the program. Manitoba’s 2007 budget increased the number of spaces for international medical graduates and provided $3 million in new funding for physician specialist training. The budget announced that the province will assume the full patient cost of interfacility transports. Additionally, the budget introduced the children’s fitness tax credit to complement the federal tax credit. The credit provides up to $132 to assist with the cost of registering children in physical activity programs. 10:10 FINANCES OF THE NATION 2009

Saskatchewan The 2009 Saskatchewan budget provided $200 million over two years for the construction of a new children’s hospital in Saskatoon. The budget also provided $23 million to attract and recruit more nurses and other health- care professionals. Saskatchewan’s 2008 budget increased the budget of the Ministry of Health by over $300 million to over $3.7 billion and provided $200 million for key repairs and upgrades to hospitals and health facilities and to purchase new medical and safety equipment. The budget announced that the province will establish a 10-year capital plan for health care. With regard to the nursing shortage in the province, the budget provided $60 million to the Saskatchewan Union of Nurses partnership to address the problem. The budget also announced a $15 cap on drugs for children 14 years old and under in Saskatchewan’s prescription drug plan. Effective July 1, 2007, the senior’s drug plan has a maximum $15 prescription drug cost for all drugs in the plan. In 2007, supplementary eye-care benefits and enhanced drug coverage for lower-income workers and a dental sealant program for high-risk students in grades 1-7 were also added to the plan.

Alberta Alberta’s 2009 budget increased the province’s health-care budget by $558 million, to $12.6 billion, noting that 40 percent of the total operating increase in 2009-10 was attributable to health care. The 2008 Alberta budget also stated that the biggest part of the budget’s spending increase was for health care. Expenses on health and wellness increased over 9 percent to more than $13 billion from the previous year. The budget announced that, over the next three years, $145 million will be spent to attract and retain physicians and other health-care professionals. Effective January 1, 2009, Alberta health-care premiums are eliminated. Responsibility for ground ambulance services was transferred from the municipalities to provincial regional health authorities in 2004. Alberta’s Health Care Protection Act permits private clinics to perform services paid for by medicare. The province’s nine regional health authorities may enter into contracts with private clinics to perform limited services. The province’s College of Physicians and Surgeons must first approve all clinics. The act bans the establishment of private, full-service hospitals.

British Columbia The 2009 British Columbia budget noted that 90 percent of all new spending in the province’s three-year fiscal plan is for health care. The budget provided $40 million to expand health education in order to meet the need for more nurses and other health-care professionals and $23 million to train more physicians. HEALTH 10:11

British Columbia’s 2008 budget provided $52 million in support of medical research, particularly brain injuries and illnesses; cancer research, prevention, and care; and musculo-skeletal research. In May 2008, British Columbia and New Zealand signed an agreement to share information and innovations in health service. In April 2008, the province introduced a program to assist internationally educated physicians incorporate their skills in the province’s health system. In October 2007, British Columbia announced that medical services plan clients receiving premium assistance will no longer be billed for ambulance services.

Northwest Territories The Northwest Territories’ 2008 budget provided $7 million for electronic health records management, $3.1 million to expand nurse practitioner training, and $25 million for health infrastructure, including $13 million for the Yellowknife dementia facility. In the Northwest Territories, eight regional health and social services (HSS) authorities deliver a wide variety of community- and facility-based services. Community health programs include daily sick clinics, public health clinics, home care, school health programs, and educational programs. Visiting physicians and specialists regularly visit the communities. The territory’s telehealth system partners with HSS authorities, specialists, and southern hospitals to improve health. Services include orthopaedics, internal medicine, diabetes education, psychiatry, and speech therapy.

Nunavut Nunavut’s immense area and remoteness mean that the territory’s health-care costs are higher than elsewhere in Canada. The territory spends about $30 million annually on medical air travel because much of its hospital care is provided in southern cities. Approximately one of every eight dollars in Nunavut’s health-care budget is spent on jet fuel. Nunavut’s first public health strategy, as noted in the territory’s 2008 budget, will promote the education and training of nurses as part of its nursing recruitment and retention strategy. Citing the territory’s anticipated deficit for 2007-8, Nunavut’s 2007 budget promised to hold the line on new spending initiatives. The territory’s 2006 budget noted that Nunavut is working to improve access to essential services, strengthen community capacity, and expand home and community care. The budget announced that Nunavut will subsidize tuition for physiotherapists, social workers, dentists, and other health providers who return to the territory following graduation.

Yukon Yukon’s 2009 budget announced that the territory’s nurse mentorship program will be expanded to include licensed practical nurses (LPNs) and provided $200,000 for a new feature on the 811 Yukon health line: dial a 10:12 FINANCES OF THE NATION 2009 dietician. The budget noted that the three territories are sharing an investment of $865,000 to produce four awareness and education campaigns on smoking, fetal alcohol spectrum disorder (FASD) prevention, elder abuse prevention, and sexual health. The budget also provided $698,000 for a pilot project to improve wait times for cancer care, cardiac care, orthopaedic surgery, and sight restoration. In addition, the territory created three new positions: cancer care navigator, total joint replacement navigator, and travel recourse administrator. Yukon’s 2008 budget provided $6.7 million to improve community health services and $555,237 to develop a two-year licensed practical nursing program at Yukon College.

FEDERAL HEALTH PROGRAMS Indian and Northern Health Services Through the departments of Health and Indian Affairs and Northern Develop- ment, the federal government provides health services to status Indians and Inuit. Responsibility for providing health services in the Northwest Territo- ries, Nunavut, and Yukon has been transferred to the territorial governments. The northern secretariat of the Public Health Agency manages the AIDS community action program and distributes grants and contributions allocated under the program in the three territories. The First Nations, Inuit, and aboriginal health branch of Health Canada manages federal responsibilities for health care, promotion, illness prevention, and delivery of non-insured health benefits in all three territories. The National Aboriginal Health Organization, an aboriginal designed and controlled body that advances the health and well-being of aboriginal peoples and receives core funding from Health Canada for education, research, and knowledge dissemination. Hospitals previously operated by the federal Department of Health for tuberculosis treatment have evolved into acute-care facilities and were transferred to local health boards, First Nations organizations, or joint provincial-First Nations ventures. The federal government operates public health programs on all reserves providing (1) preventive medicine, counselling, and education and (2) medical and dental treatment by means of nursing stations, visiting physicians, and patient evacuations. Full medical and hospital care is available to all native people through the medical services program and under provincial insurance plans (with premiums and non-covered items subsidized as necessary by the federal government). The 2009-10 Estimates of the federal Department of Health provide $2,156.1 million for expenditures on aboriginal health. The Department of Indian Affairs and Northern Development provides grants of $47.3 million to the Northwest Territories and Nunavut for health care of Indians and Inuit in 2009-10. The non-insured health benefits program of the First Nations, Inuit and Aboriginal health branch provides medically necessary goods and services not covered by other governments or third-party health insurance plans. The HEALTH 10:13 program is delivered to over 700,000 eligible registered Indians and Inuit and Innu. Benefits include drugs, medical transportation, dental care, vision care, medical supplies and equipment, and mental health counselling. Challenges facing the First Nations and Inuit health system include a population growing at twice the national average with a higher risk of illness and early death. The infant mortality rate in First Nations communities, for example, is twice the national average, and life expectancy is about seven years less. Contributions in the Main Estimates of the Department of Health for First Nations and Inuit health care include $243.6 million for First Nations and Inuit health services transfer, $47.3 million for First Nations and Inuit health facilities and capital program; $216.2 million to First Nations and Inuit health governance and infrastructure support; $240.8 million for First Nations and Inuit community programs; and $124.1 million for primary health care.

Canadian Institutes of Health Research The Canadian Institutes of Health Research (CIHR) was created in 2000 to support research into improved health for Canadians. The CIHR governs 13 “virtual” health research institutes, of which 4 conduct research on specific health challenges to Canada’s population and aboriginal peoples and 6 investigate healthy life systems (immune system, heart and lungs, muscles and skeleton, the brain, and metabolism). The remaining 3 institutes research population health, genetics, and health services. Each of the 13 institutes, which are networks of researchers, not buildings or research centres, has an advisory board with representation from researchers, government, and private citizens. The Main Estimates provide $924.3 million to the CIHR for research grants and personnel support in 2009-10.

CANADA HEALTH ACT The Canada Health Act ensures that necessary health services are available to all residents of Canada regardless of their financial circumstances. The act sets a national standard for health care. In order to receive full transfer payments from the federal government, the provinces must comply with the act’s guidelines, which specify five criteria and two conditions that must be met. Provincial health plans must meet the following basic criteria: 1) Comprehensive scope. A provincial plan must, at a minimum, cover all medically necessary services provided by physicians, both general practitioners and specialists, regardless of where the services are made available. 2) Universal coverage. A provincial plan must provide insured services on uniform terms and conditions to all insured residents and must cover not less than 95 percent of insurable residents. In addition, the plan must not impose a minimum period of residence or any waiting period in excess of three months before coverage begins. 3) Public administration. A provincial plan must be administered and operated on a non-profit basis by a public authority—that is, the provincial government or a provincial government agency. 10:14 FINANCES OF THE NATION 2009

4) Portability. The benefits under any provincial plan must be available both to insured persons temporarily absent from the province and to persons who move to another participating province until such time as they qualify for medicare benefits in that province. 5) Accessibility. A provincial plan must provide reasonable access, unimpeded by financial or other barriers, to health services for all insured persons. The two conditions are that the provinces (1) provide information that the department needs to administer the act and (2) give recognition to federal contributions in public documents relating to insured health services. Under the act, Health Canada can make deductions from contribution payments if any of the criteria or conditions are not met. Under the legislation, the federal government can withhold payments to provinces that allow extra billing by medical practitioners and user fees for medical services. A deduction of $1 in grants is made for every $1 the provinces allow in extra charges.

Hospital and Medical Care The Canada Health Act provides for physicians’ services and services in hospitals (or other facilities prescribed by regulation) on an inpatient and outpatient basis. Inpatient services include accommodation and meals at the standard or public ward level; necessary nursing services; laboratory, radiological, and other diagnostic procedures, together with the necessary interpretations to maintain health, prevent disease, and assist in the diagnosis and treatment of any injury, illness, or disability; drugs, biologicals, and related preparations when administered in the hospital; use of operating- room, case-room, and anaesthetic facilities; routine surgical supplies; use of radiotherapy and physiotherapy facilities; services rendered by persons who receive remuneration from hospitals; and other services specified by agreement. Insured outpatient services include the above when provided in a hospital as part of outpatient services. Costs of the above services are restricted to normal operating and maintenance costs and do not include any capital charges such as expenditures for land, buildings, and physical plant; capital debt (and other debt incurred before the agreement came into force) and interest thereon; and provisions for depreciation of capital assets. The legislation does not apply to services to which any person is entitled under any federal or provincial act specified in the agreement. Accordingly, the costs for care for patients under veterans’ schemes and workers’ compensation and in tubercular hospitals, sanatoria, mental institutions, nursing homes, homes for the aged, infirmaries, and other institutions of custodial care are not shareable. In general, the scheme applies to care in active treatment or general hospitals (including tubercular and mental patients in general hospitals) and chronic and convalescent hospitals. All provincial and territorial hospitals provide in- and outpatient services on an emergency basis. In addition, some provinces provide other specific outpatient services. HEALTH 10:15

PUBLIC AND COMMUNITY HEALTH Provincial Provincial departments of health provide basic and essential public health programs in the community through schools and other institutional systems. Traditional public health programs include maternal and child health services such as prenatal education and perinatal and post-natal services; communica- ble disease control, which includes sexually transmitted diseases; health promotional activities; and environmental health services. Many provinces have initiated additional community health programs such as children’s dental health, continuing care, community mental health, audiological services, and nutritional services. In some provinces, community health services are delivered jointly with social services; in others they are delivered separately from social services.

Federal Public Health The Public Health Agency of Canada was created in 2004 to strengthen the nation’s public health and emergency response capacity and, in the wake of the SARS (severe acute respiratory syndrome) outbreak, to manage infections and chronic diseases. The agency is headed by a chief public health officer who reports to the federal minister of health. The agency’s two main centres in Ottawa and Winnipeg work with a network of specialized centres across the country. The Ottawa office works closely with other federal departments on responses to national public health emergencies, and the Winnipeg office coordinates research on infectious diseases. Each regional centre specializes in a different area of public health. The centres and their areas of specializa- tion are as follows: British Columbia, environmental health and aboriginal health; the Prairies, infectious diseases; Ontario, public health methodologies and tools; Quebec, public policy and risk assessment; and Atlantic Canada, health determinants. The 2008-9 Main Estimates provide $590.5 million for the work of the agency.

Extended Care Federal assistance to the provinces for extended health services, such as nursing home intermediate care, lower-level residential care for adults, health aspects of home care, and ambulatory health services not covered under the hospital insurance agreements, is delivered through the CHT. xxxxxxxxxxx 11 Transportation and Communications

Provincial legislatures have jurisdiction over local public works. The provincial and territorial governments and municipalities have sole responsibility for constructing, maintaining, and financing most roads and highways within each province, with the exception of roads within national parks, defence establishments, and major airports, which are administered by the federal government. Generally, provincial governments administer major roads running through organized areas and roads in unorganized regions. Driver’s and motor vehicle licences are issued by each province. For the most part, local governments in Canada have jurisdiction over road and street maintenance, construction, and transit. In some provinces, local governments are also responsible for the highways or main roads running through their jurisdiction. Only two revenue sources are available to local governments for road and street spending: the property tax and provincial grants. Local transit is financed in part by fare-box revenues. Provincial legislation precludes local governments from imposing their own motor fuel taxes or licence fees to finance transportation activities and from taxing vehicles as personal property under the property tax system. Exceptions to this situation in British Columbia are discussed later in the chapter. Alberta earmarks gas tax revenues to help finance transportation infrastructure needs in Calgary and Edmonton. See the section on Alberta under “Provincial Transportation Systems” for details. The federal government’s major roles in the transportation field have been (1) to control, regulate, and provide facilities for interprovincial and international travel and (2) to provide transportation subsidies in certain areas and for certain commodities. The federal government has moved away from the latter role. Table 11.1 shows the consolidated provincial, territorial, and local, as well as federal, expenditures on transportation and communications for 2004-5 to 2008-9. A breakdown of transportation expenditures alone is not available. Provincial and territorial expenditures on transportation and communications are shown in table 11.2 for fiscal years 2004-5 to 2008-9. Table 11.3 shows local government expenditure for 2008 on transportation and communications, by type of expenditure. Summaries of the transportation systems in each province and territory follow.

PROVINCIAL/TERRITORIAL TRANSPORTATION SYSTEMS Newfoundland and Labrador The provincial Department of Transportation and Works is responsible for all roads in Newfoundland and Labrador, except those under the jurisdiction of 11:2 FINANCES OF THE NATION 2009

Table 11.1 Consolidated Provincial, Territorial, and Local Government Expenditures and Federal Expenditures on Transportation and Communications, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 352 444 546 541 588 Prince Edward Island.... 102 109 120 129 137 Nova Scotia...... 413 446 552 592 681 New Brunswick ...... 541 576 623 1,152 782 Quebec...... 5,088 5,738 5,896 6,573 8,231 Ontario...... 6,312 8,081 7,723 8,502 7,378 Manitoba...... 520 688 967 958 1,046 Saskatchewan ...... 713 781 902 1,037 1,363 Alberta...... 2,434 2,676 3,321 4,581 5,469 British Columbia ...... 2,430 2,808 3,036 3,289 3,593 Northwest Territories.... 115 132 124 141 166 Nunavut...... 54 61 66 71 70 Yukon ...... 113 124 132 142 165 Total...... 19,187 22,664 24,008 27,708 29,669 ...... Federal expenditures .... 2,299 3,096 3,668 2,636 3,537 Source: Statistics Canada, June 2009.

Table 11.2 Provincial and Territorial Expenditure on Transportation and Communications, 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 274 364 465 486 549 Prince Edward Island..... 85 96 108 119 128 Nova Scotia...... 277 290 383 382 444 New Brunswick ...... 393 400 420 945 591 Quebec...... 2,745 3,109 3,288 3,598 4,635 Ontario...... 3,111 4,359 4,137 4,843 3,495 Manitoba...... 201 357 626 549 587 Saskatchewan ...... 340 378 490 519 729 Alberta...... 1,205 2,003 2,102 3,093 3,779 British Columbia ...... 1,361 1,511 1,755 1,899 1,989 Northwest Territories..... 97 113 101 116 150 Nunavut...... 26 33 33 37 38 Yukon ...... 104 111 118 129 152 Total...... 10,219 13,124 14,026 16,715 17,266 Source: Same as table 11.1. municipalities. Municipalities have jurisdiction over street networks within their boundaries. Roads are maintained by municipalities and local road boards with the help of provincial grants. The seven local road boards, which are in isolated areas and generally have non-motorable roads, each receive one grant annually from the Department of Transportation and Works. The Department of Municipal Affairs also operates a cost-shared program with the municipalities for capital road projects. TRANSPORTATION AND COMMUNICATIONS 11:3

Table 11.3 Local Government Expenditures on Transportation and Communications, by Province and Territory, 2008 Roads and Snow and Public Province/territory streets ice removal Parking transit Other Total millions of dollars Newfoundland and Labrador...... 88.1 26.1 0.1 6.6 .. 120.8 Prince Edward Island . . . 15.3 2.0 0.1 0.7 1.6 19.7 Nova Scotia...... 187.1 21.5 1.8 31.7 6.8 248.9 New Brunswick ...... 144.5 27.3 4.8 9.8 8.2 194.6 Quebec...... 2,556.1 758.8 73.6 798.1 84.5 4,271.1 Ontario...... 3,415.8 573.6 138.5 1,156.2 210.6 5,494.8 Manitoba...... 443.8 38.9 6.2 38.5 13.1 540.5 Saskatchewan ...... 587.0 16.4 3.8 28.6 9.8 645.6 Alberta...... 2,429.9 33.4 28.8 204.9 53.7 2,750.7 British Columbia ...... 1,121.1 30.8 37.7 221.0 69.2 1,479.8 Northwest Territories . . . 28.5 0.5 .. 1.0 0.9 30.9 Nunavut...... 22.3 0.1 — — 10.0 32.4 Yukon ...... 10.7 1.8 0.2 0.8 .. 13.6 ...... Total...... 11,049.8 1,531.3 295.7 2,498.0 468.5 15,843.3 Source: Same as table 11.1.

The Department of Transportation and Works operates a fleet of ferries to service outlying islands and reduce the isolation of numerous outport communities. The 16 ferry services, varying from small daily passenger/ freight to seasonal auto/passenger/freight services, provide the vital marine link throughout Newfoundland and Labrador, as well as between Newfound- land and Labrador and Quebec on the Labrador straits. There are 19 vessels in the system: 11 are owned by the province and 8 are privately owned. Newfoundland and Labrador’s 2009 budget included $800 million for expenditures on the province’s infrastructure. Of that total, about $277 million was earmarked for spending on transportation infrastructure. The budget announced that the province will spend $235.5 million on roads in 2009-10. Projects include the completion of phase 3 of the Trans-Labrador Highway and $32.5 million for the completion of the highway from Cart- wright to Happy Valley-Goose Bay. The budget noted that, upon completion, there will be an unbroken road and marine route from Labrador City to St. John’s for the first time in the province’s history.

Prince Edward Island The provincial Department of Transportation and Public Works is responsible for the construction and maintenance of over 5,475 kilometres of the provincial highway network and for all bridges within this network, including 127 kilometres of the TransCanada Highway. Construction and major highway upgrades on the national highway system are cost-shared between the federal and provincial governments. The province is not responsible for the collector, local, and minor roads and bridges located along roadways within the municipal boundaries of Charlottetown and Summerside. The province is, however, responsible for the portion of the national highway system that is located within the municipal boundaries of Charlottetown. In 11:4 FINANCES OF THE NATION 2009

1990, all rail lines in the province were abandoned by the Canadian National Railway Company (CN Rail), resulting in the transfer of approximately 740,000 tonnes of goods and produce from the rail system to the provincial road network. Prince Edward Island has developed about 450 kilometres of the former rail lines into the Confederation Trail, part of the TransCanada trail system. Neither the provincial government nor the municipalities have any jurisdiction over air or marine transportation, including ferry services and Confederation Bridge.

Nova Scotia The provincial Department of Transportation and Public Works administers all primary highways within the province. Secondary roads and local streets within towns and the urban centre of regional municipalities are the responsibility of the municipality. Those secondary roads and local roads outside the urban centre of regional municipalities and in all other municipalities are administered by the province. The department is responsible for more than 23,000 kilometres of roads and 4,100 bridges. The department fleet includes seven ferries. Passenger ferry service across Halifax harbour is, however, under the jurisdiction of the Halifax regional municipality. Certain roads within incorporated towns/regional municipalities are designated as forming part of the provincial highway system. On such roads, the province shares the cost of maintaining bridges. The Department of Transportation and Public Works maintains both the superstructure and the substructure and shares equally with the municipality the cost of maintaining the riding surface and the guide rail. Effective April 2009, Nova Scotia requires all vehicles on provincial roads to use daytime running lights.

New Brunswick The province is responsible for the maintenance and construction of all highways outside the limits of cities, towns, and villages. It also enters into agreements with municipalities to share the cost of constructing, upgrading, and maintaining provincial highways within their boundaries. Transportation policy is carried out through consultation with transportation stakeholders and the federal and other provincial governments and through national and regional meetings of transportation ministers. Municipalities have jurisdiction over municipal roads, streets, and urban transit. The province is responsible for all other roads and highways and also administers the operations of all provincial ferry services. Expenditure reductions for the provincial Department of Transportation in New Brunswick’s 2009 budget will result in the discontinuation of river ferry services in certain towns, the closure of some maintenance divisions, and the reduction of maintenance services on non-designated roads. TRANSPORTATION AND COMMUNICATIONS 11:5

Quebec The province has jurisdiction over the construction and maintenance of 29,484 kilometres of road, which includes 5,664 kilometres of freeways, 8,889 kilometres of national roads, 5,455 kilometres of regional roads, 7,781 kilometres of collector roads, and 1,695 kilometres of resource access roads. The province also has jurisdiction over 9,305 bridges, including 4,281 bridges (since January 2008) that are part of the municipal road network. The province assists transit commissions in large urban centres with capital grants. Municipal organizations that serve smaller municipalities receive grants that partially cover operating costs. Municipalities and transit commissions may also receive grants covering up to 75 percent of the costs of transportation for the disabled. The provincial Ministry of Education covers most costs of school bus systems. Responsibility for 67,000 kilometres of local roads and 38,000 kilometres of streets rests with municipalities. Winter maintenance is also a municipal responsibility. The province transferred responsibility for most local roads to municipalities in 1993 but provides an annual grant to partly cover maintenance costs. The grant amount is based on the length and condition of such roads and municipal financial resources. Road improvements in this network are also partly subsidized. The province provides funding assistance to short-line railways for rehabilitation of secondary lines, construction of industrial branch lines, and installation of a reload centre. A special road conservation and improvement fund capitalizes and amortizes road investments over the useful life of the roads. The province provides the fund with financial resources to cover the annual amortization, interest costs of borrowing, and related costs. The ministère des Transports subsidizes eight ferries through the Crown corporation Société des traversiers du Québec. Other Crown corporations and agencies that report to the ministry include the Société de l’assurance automobile du Québec, which deals with road users’ insurance and driving licence fees; the Commission des transports du Québec, which enforces the transport laws; and the Agence métropolitaine de transport, which is responsible for planning public transit in Montreal and its suburbs. Quebec’s 2009 budget announced an expenditure of $698 million for the extension of Highway 167 and improvements to Highway 389. The budget also provided $106 million to improve northern airports.

Ontario Ontario has authority over approximately 16,525 kilometres of provincial highways. Local governments administer the roads and highways within their own areas. A private consortium operates a toll facility in the greater Toronto area (GTA). 11:6 FINANCES OF THE NATION 2009

The province transferred responsibility for GO transit to municipalities on January 1, 1998 but resumed responsibility, effective January 1, 2002. GO Transit provides interregional rail and bus services across the greater Toronto area and Hamilton. Ontario funds GO Transit’s operating and base capital requirements, as well as up to one-third of its expansion capital requirements. Base capital funding is directed at maintaining existing assets in good repair. In May 2004, the three levels of government agreed to spend a total of $1 billion to improve the GO Transit rail and bus system in the GTA. The GO Transit expansion program will be implemented over seven years, until 2011. The federal and Ontario governments will each provide $385 million, and municipal governments, $235 million. In June 2007, Ontario announced plans for a multi-year $17.5 billion rapid transit system for the GTA and Hamilton. Beginning in 2008, Ontario is building 902 kilometres of new or improved rapid transit. Projects include the extension of the Yonge Street subway line to Highway 7 in the north, electrification of the GO Lakeshore line to increase speed and reduce emissions, expansion of bus service across Highway 407, and construction of two rapid transit lines across Hamilton and light rail across Toronto. The projects are to be built over 12 years and financed over 50 years. The Greater Toronto Transportation Authority was created by the province in 2006 to develop a seamless and sustainable regional transportation system for the GTA and Hamilton. Now known as Metrolinx, the agency is creating an implementation plan for the province’s $17.5 billion investment in public transit. The 12-year plan will replace 300 million car trips annually. The agency is responsible for coordinating the purchase of transit vehicles on behalf of municipalities and will ultimately assume responsibility for GO Transit. Implementation of the province’s GTA fare-card system, which will allow commuters to travel from Oshawa in the east to Hamilton in the west using a single card, began in 2008 and will be in use across the GTA and Hamilton by 2010-11. Effective October 1, 2006, the province dedicates 2 cents of the existing provincial gas tax to public transit. Municipalities may use the gas tax funding for transit operations, as well as for capital expenditures.

Manitoba The provincial Department of Infrastructure and Transportation is responsible for the construction and maintenance of all provincial trunk highways and provincial roads, including 19,000 kilometres of highways, 2,400 bridges and large culverts, 2,200 kilometres of winter roads, drainage and water control infrastructure, 24 northern airports, 16 aircraft, and eight marine vessels. The department pays 100 percent of the construction and maintenance costs, excluding municipal services, for provincial roads and provincial trunk highways through towns, villages, and cities other than Winnipeg. The province, through the Department of Intergovernmental Affairs, provides Winnipeg with capital grants to cost share specific transportation projects, including regional and residential streets, bridges, and bus purchases. TRANSPORTATION AND COMMUNICATIONS 11:7

Manitoba also provides funding on a 50:50 cost-shared basis to cities (except Winnipeg), towns, and villages to facilitate the construction and upgrading of eligible main collector or arterial streets within community boundaries. The Department of Intergovernmental Affairs, through a transit funding partnership, provides grants for 50 percent of the net operating costs of public transit services including Winnipeg’s rapid transit and public transit services in Brandon, Thompson, and Flin Flon. Winnipeg and Brandon maintain their own fleet of transit vehicles and receive capital funding for vehicle replacement or refurbishment. Under the mobility disadvantaged program, grants are available to municipalities that provide transportation services to mobility disadvantaged persons in rural areas of the province. The program provides a one-time startup grant of $6,000 for administration costs and a capital grant of 50 percent (maximum $10,000) of the net cost of a handivan. Annual operating grants of 37.5 percent of gross operating expenditure are paid to municipalities (maximum $20,000) for communities with one vehicle and $30,000 for those with more than one vehicle. Through the Building Manitoba fund, municipalities receive a portion (2 cents per litre of gasoline and 1 cent per litre of diesel) of provincial fuel taxes and 4.15 percent of provincial income taxes estimated for the fiscal year. In 2008, Manitoba municipalities received $143 million through the fund for roads, transit, and other municipal infrastructure and services. Manitoba’s 2009 budget announced that the province will continue the rehabilitation or rebuilding of 50 bridges and structures, improvements to 100 kilometres of the TransCanada Highway, reconstruction of provincial trunk Highway 75 between Winnipeg and the US border, and commence work on CentrePort Canada, Manitoba’s inland port.

Saskatchewan Of the province’s public roads, approximately 26,000 kilometres are designated as provincial highways and are the responsibility of Saskatchewan Highways and Infrastructure. About 55 percent of these highways are paved and carry about 90 percent of total provincial vehicle travel. Saskatchewan has 13 cities and 475 urban municipalities that operate and maintain approximately 8,500 kilometres of urban roads and streets. Through the Ministry of Municipal Affairs, the province provides urban and rural municipalities with revenue-sharing grants. The rural areas in the south have been incorporated into 296 rural municipalities, which are responsible for all public rural municipal roads (approximately 163,000 kilometres) that are not designated as provincial highways. The province, through the Ministry of Municipal Affairs, provides revenue-sharing grants to construct and maintain an integrated system of 53,000 kilometres of higher standard designated municipal roads and 110,000 kilometres of local and land access roads. The province’s north is sparsely populated and is organized into northern municipalities, which include two towns, 13 villages, nine hamlets, and 11 northern settlements. All public rural 11:8 FINANCES OF THE NATION 2009 roads in northern Saskatchewan, other than those within the northern municipalities, are designated provincial highways under the jurisdiction of Sas- katchewan Highways and Infrastructure. The province, through the Ministry of Municipal Affairs, administers the federal funds targeted for public transit, specifically the public transit capital trust. Saskatchewan’s priorities for the allocation of funds include capital investments in public transit rolling stock, public-transit-related infrastructure, and intelligent transport systems. Provincial assistance is available through the Ministry of Municipal Affairs to cities and towns for transit for the disabled. The Saskatchewan Transportation Company, a provincial Crown corporation, is the major intercity bus operator in the province. Saskatchewan Highways and Infrastructure operates and maintains 17 airports in northern Saskatchewan. The ministry provides financial assistance to communities for the operation and maintenance of community airports. The ministry also operates and maintains 12 cable ferries and one self- propelled barge. Saskatchewan’s 2007 budget noted that the province’s Fuel Tax Account- ability Act, introduced in 2006, ensures that revenue raised from the gas tax is spent on transportation and highway infrastructure. In 2007-8, over $300 million was allocated to highway infrastructure. Saskatchewan’s 2009-10 budget announced that the province will spend over $40 million to rehabilitate municipal roads. The budget also announced increased transit support for the disabled.

Alberta In Alberta, the provincial government is responsible for the construction and maintenance of all 28,600 kilometres of primary highways within towns, villages, summer villages, and hamlets, and in rural areas. Local roads are under the direction, management, and control of the local authorities. The Ministry of Transportation also operates seven ferries as part of Alberta’s highway network. The province provides annual rural transportation grants to all rural municipalities, including municipal districts, regional municipalities, Metis settlements, and special areas. Variables that the formula-based funding takes into account include the number of kilometres of open road, population, equalized assessment, and terrain. Funding is provided for approved road projects, up to a municipality’s annual allocation. Within cities, the roads and highway routes are a municipal responsibility, with some exceptions. The province is responsible for the construction and maintenance of some key highway routes through selected cities, generally those highways that are in the national highway system and major provincial corridors. All cities, except Edmonton and Calgary, are eligible for grant funding of $60 per capita. This funding is available to cover 75 percent of the costs of capital work on city roads and/or public transit. The cities also receive annual TRANSPORTATION AND COMMUNICATIONS 11:9 maintenance grant funding of $1,959 per lane kilometre for all eligible primary highway connector routes within each city. Grant funding for Edmonton and Calgary is based on fuel consumption, not population. These two cities receive annual grant funding equivalent to 5 cents per litre for every litre of road fuel sold within each city. This funding must be used for capital work on major arterial roads or for transit capital costs. Alberta provides funding assistance to community-owned, public-use airports for rehabilitation and construction requirements. There are 72 paved community airports across the province. Municipalities that own and operate a public transit system are eligible for financial assistance from the province under a federal funding program initiated in 2006. Eligible projects include vehicle purchase, light rapid transit and busway construction, and accessibility improvements for seniors and persons with disabilities. The province distributes the funds to eligible municipalities in increments over four years. After a review of program accomplishments in the third year, the federal government may extend, modify, or cancel the program. Commencing in 2005, all municipalities are eligible to receive funding under a one-time, 10-year capital municipal infrastructure program. Under this program, a total of $3 billion is allocated to municipalities based on population and can be used for roads, transit, water, wastewater, solid waste, emergency vehicles, and other capital municipal infrastructure projects. Municipalities have until 2015 to use the available funding. Municipal infrastructure that contributes to cleaner water and air and reduced greenhouse gas emissions may also be funded under a similar per capita grant program managed by the province. Funding under this program is dependent on the level of federal government funding. Alberta’s 2008 budget announced that the province will pave more than 2,800 kilometres of road in 2008-9.

British Columbia The Ministry of Transportation and Infrastructure administers all direct roadway construction and maintenance on classified arterial highways. It shares responsibility and costs with municipalities for related works such as curbs and gutters, sidewalks, intersection lighting, storm sewers, and traffic signals. Depending on the area, British Columbia has a series of motor vehicle fuel taxes, as shown in table 11.4. The provincially run BC Transportation Financing Authority receives 6.75 cents per litre for major transportation projects, in cooperation with relevant local governments. The province transferred control of transportation in greater Vancouver to a regional authority in 1999. Proceeds from the 12.0 cent per litre tax collected within the Vancouver area are used by TransLink to finance the operating and capital costs of transit services and major roads in area munici- 11:10 FINANCES OF THE NATION 2009

Table 11.4 British Columbia Motor Vehicle Gasoline Taxes,a 2009 cents per litre Greater Vancouver Region Province...... 1.75 TransLink ...... 12.0 BC Transportation Financing Authority...... 6.75 Total tax ...... 20.5 Victoria Transit Area Province...... 7.75 BC Transit...... 3.5 BC Transportation Financing Authority...... 6.75 Total tax ...... 18.0 Elsewhere in province Province...... 7.75 BC Transportation Financing Authority...... 6.75 Total tax ...... 14.5 a Motive fuel (diesel and diesel blends) taxes are one-half cent higher for the province in every location. palities. TransLink can levy a gasoline tax as well as other taxes and user charges, including an annual property tax. BC Transit was established to ensure a uniform provincial policy for urban transit in British Columbia that incorporates financial, planning, and technical assistance with direct local involvement in decision making and an equitable cost-sharing formula. The formula is based on the annual operating costs for the province, which pays a fixed percentage of the annual expenditures. The local government uses operating revenues and property taxes to cover its share of the annual operating costs. The BC transit tax of 3.5 cents per litre of fuel that is collected in the Victoria regional transit service area is allocated to the local government to finance operating and capital expenses. Because both the greater Vancouver and greater Victoria areas include a number of municipalities, the province continues to have a significant role in policy formulation. The province may build, rebuild, repair, or protect a bridge on a highway where the cost of the work is provided for by a specific vote of the legislature. In case of damage by flood or other accident, or where otherwise necessary in the public interest, the Ministry of Transportation and Infrastructure may, with the approval of the lieutenant governor in council, repair, rebuild, or protect a highway bridge on a classified or unclassified highway and pay the entire cost or reimburse a municipality for any costs it might incur. The province negotiates 10-year agreements with private contractors for road and bridge maintenance in 28 contract areas throughout the province. British Columbia builds and maintains all highways in the unorganized areas of the province. The definition of “highway” includes public streets, roads, ways, trails, lanes, bridges, trestles, ferry lands and approaches, and any other public way. TRANSPORTATION AND COMMUNICATIONS 11:11

The Ministry of Community Development provides grants for 50 percent of the cost of right-of-way acquisition and construction on major municipal highways where the Ministry of Transportation approves the location, relationship to land use, classification, and function. This cost-sharing program does not include the maintenance, reconstruction, or resurfacing of existing roads unless traffic lanes are added or the alignment is upgraded to significantly improve capacity and/or safety. Subject to a budget appropriation, the Ministry of Community Develop- ment has authority under the Local Government Grants Act Regulation to provide grants for 50 percent of the cost of right-of-way acquisition and construction on major municipal highways where the Ministry of Transporta- tion and Infrastructure approves the location, relationship to land use, classification, and function. This cost-sharing program does not include the maintenance, reconstruction, or resurfacing of existing roads unless traffic lanes are added or the alignment is upgraded to significantly improve capacity and/or safety. British Columbia operates ferries on 25 coastal and 14 inland routes throughout the province. The former provincial Crown corporation, British Columbia Ferry Corporation, was transformed into an independent firm in 2003. The company operates ferries between Vancouver Island, the small islands in the Strait of Georgia, the Queen Charlotte Islands, and ports on the mainland. In late 2003, British Columbia reached agreement with CN Rail to restructure the British Columbia Railway Company (BCRC) through investment in the freight railway. Under the BC rail investment partnership, CN paid the province $1 billion for the opportunity to operate the freight railway. CN acquired the outstanding shares of BC Rail Ltd. BCRC remains a Crown corporation and retains ownership of the right of way, railbed, and track, which is leased on a long-term basis to CN. Provincial proceeds from the partnership agreement will be invested in northern communities through a $135 million northern development initiative, and a $15 million First Nations benefits trust. The trust supports economic development, educational advancement, and cultural renewal for the 25 First Nations along the freight railway corridor. Under the partnership, BCRC’s outstanding debt was retired. British Columbia’s 2008 budget announced that the province will expand the scrap-it program, which offers cash and incentives to get older vehicles off the road. The budget also noted that the province will fund the initial phase of its $14 billion transit plan, which is designed to double transit ridership by 2020.

Northwest Territories The primary highway system in the Northwest Territories consists of about 2,200 kilometres of two-lane roads. About 40 percent of the system is paved, 27 percent is dust-controlled gravel, and the balance is untreated gravel. The 11:12 FINANCES OF THE NATION 2009 territorial Department of Transportation is responsible for the maintenance and reconstruction needs of this system. The Department of Transportation also builds and maintains 1,450 kilometres of winter roads constructed over ice and frozen ground each year in order to provide winter access to isolated communities. These routes are usually open to traffic from January to March or April. The territorial government contributes up to 100 percent of the cost of building and maintaining roads within municipal boundaries. The Depart- ment of Public Works and Services builds and maintains numerous community roads for the Department of Municipal and Community Affairs. A local community access roads program was established by the Depart- ment of Transportation for the construction of local access roads and trails to nearby community attractions such as hunting and fishing areas and recreation sites. The program operates primarily in off-highway communities. The department is also responsible for the community marine program, which provides marine facilities such as wharves, breakwaters, docks, barge landing areas, and boat launches to facilitate both local boating and marine resupply activities. The Department of Transportation provides free ferry services for vehicles at five locations where primary highways cross major rivers. The ferries are replaced by ice bridges in the winter. Ownership and responsibility for airports devolved to the territory from Transport Canada. The NWT Department of Transportation now owns, operates, and maintains airports in 27 communities.

Nunavut Nunavut’s 25 isolated communities are spread across 1,800 kilometres, and all but one community is non-tax-based. These communities are therefore unable to generate sufficient revenue for public infrastructure investment. Most community roads serve simply to access lots. The community is responsible for the cost of road construction and recovers that cost through equity leases on the lots accessed by such roads. Where there are roads accessing areas outside communities (for example, traditional hunting and camping grounds), the communities and the territorial government may share in the capital costs of construction. Road maintenance in non-tax-based communities is directly subsidized by the territorial government. Nunavut’s single tax-based community collects tax revenue from a limited number of residents, but this revenue is insufficient for road construction beyond the community boundary. As is the case in non-tax-based communities, road construction is simply for access to lots, and costs are recovered through equity leases. The road transportation system in Nunavut is very rudimentary, and there are no intercommunity roads. The territorial government is working with the federal government and Manitoba on a road link between Churchill and the communities along the western coast of Hudson’s Bay. A road project linking TRANSPORTATION AND COMMUNICATIONS 11:13

Bathurst Inlet to the mineral rich areas of the north Slave region is currently under review.

Yukon The Yukon government maintains and regulates all Yukon highways. Responsibility for the five interterritorial highways, the Alaska Highway, and Haines Road has devolved to the Yukon government from the federal government. The transportation division of the Department of Highways and Public Works maintains about 3,723 kilometres of trunk highways: 247 kilometres are paved, 1,916 kilometres are bituminous surface treated, and 1,560 kilometres are gravel. The Yukon government also maintains about 1,126 kilometres of recreational and multipurpose industrial roads, the majority of which are gravel. The transportation division pays 100 percent of the construction and maintenance costs of highways within municipalities, for which it retains responsibility. The organized municipalities are responsible for all other roads within their jurisdiction. Each year, the municipalities are given comprehensive municipal grants from the territorial government, part of which can be used for roads within their jurisdictions. All roads in unincorporated communities are under the jurisdiction of the Department of Highways and Public Works and the Department of Community Services. The transportation maintenance branch is also responsible for ferry traffic in Dawson City and Ross River, as well as for 23 highway maintenance camps located throughout Yukon. The aviation branch of the Highways and Public Works department maintains and operates 29 aerodromes, including the Whitehorse international airport. Community aerodrome radio station services, which include the provision of weather observations and air traffic advisory services, are provided at eight aerodromes under a contractual agreement with NAV Can- ada. The aviation branch also administers 17 emergency airstrips throughout Yukon that are maintained by the transportation maintenance branch. Yukon’s 2009 budget announced that the territory will invest up to $500,000 per year for the next four years to upgrade and improve access roads. Transportation infrastructure spending on $56.7 million in 2009-10 includes $23.6 million for the Shakwak project, $10.6 million on further construction to the Robert Campbell Highway, and $15.7 million for expansion of the Erik Nielsen Whitehorse international airport building terminal.

FEDERAL TRANSPORTATION SYSTEMS Since 1995, the organization and responsibilities of the federal Department of Transport have undergone a sea change. Sharp decreases in federal business subsidies resulted in a department spending decrease of over 70 percent between 1995-96 and 1999-2000. Federal spending on transportation has, however, stabilized, as shown in table 11.5. Total federal spending on transportation in 2008-9 is estimated at $3.1 billion. Under the federal government’s national airports policy, airport operations were transferred or 11:14 FINANCES OF THE NATION 2009 xxxxx Table 11.5 Federal General Government Expenditures on Transportation, Fiscal Years 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Air transport ...... 487 370 372 368 384 Road transport...... 418 434 322 269 328 Rail transport ...... 248 248 217 289 383 Water transport...... 411 607 620 612 763 Public transit...... — 552 1,179 136 500 Other transport ...... 508 492 484 510 740 Total transportation ..... 2,072 2,703 3,194 2,184 3,098 Source: Same as table 11.1. sold, and the air navigation system was transferred to a private non-profit corporation. Most federal expenditures on transportation are shown in the Estimates of the Department of Transport. Some transportation-related expenses are incurred by the Department of Indian Affairs and Northern Development and the Department of Public Works and Government Services. The Esti- mates of these departments do not, however, contain sufficient detail to determine these relatively minor amounts. Transport Canada coordinates and regulates all modes of interprovincial and international transportation. The Transportation Appeal Tribunal of Canada and the Canadian Transportation Agency are separate from the department but report to the minister of transport. The Transportation Appeal Tribunal of Canada (TATC) is independent of Transport Canada but reports to Parliament through the minister of transport. The TATC holds review and appeal hearings at the request of individuals, companies, and municipalities directly affected by various pieces of federal air, rail, and marine transportation legislation.

Air The Canadian Air Transport Security Authority, a federal Crown corporation, was created in 2001 as a federal response to the terrorist attacks in the United States. The authority is responsible for providing key air security services. The federal government provided funding for pre-board screening and advanced explosives detection systems at Canadian airports and armed police on board-selected domestic and international flights. The 2009-10 Main Estimates provide $262.5 million for the work of the authority.

National Airports System The 26 airports that make up the federal government’s national airports system (NAS) are defined as those located in provincial or territorial capitals and any airport that handles 200,000 or more passengers annually. Airports in the national airports system handle 94 percent of all air travel in Canada. The Canada Airports Act is the framework for governance, transparency, and accountability at the airports within the national airport system. TRANSPORTATION AND COMMUNICATIONS 11:15

Under the federal national airports policy, ownership of these airports is retained by the Department of Transport, but operations are handled by the Canadian Airport Authorities. All of the 11 Arctic airports have been transferred to the territorial governments of the Northwest Territories, Nunavut, and Yukon. Ownership of the 71 local and regional airports that handle less than 200,000 passengers annually was offered to provincial and local governments, airport commissions, and private businesses. As of April 2008, ownership of 64 local and regional and 30 small airports has been transferred. The airport transfer program ended on March 31, 2007. The federal government is now reviewing its role in the future management of the 7 remaining local and regional airports. The 2009-10 federal Main Estimates provide a $36.2 million contribution for the airports capital assistance program. Transport Canada continues to provide financial support to remote airports that provide exclusive, year-round access to isolated communities. Transport Canada sets safety and security standards for all Canadian airports. The federal government introduced the air travellers’ security charge in 2001 to finance enhanced security measures at Canadian airports. For travel in Canada, the charge was initially set at $12 each way. Currently, the charge is $4.90 for one-way travel and $9.80 for round-trip travel within Canada.

Water National Ports System The national ports system includes those ports deemed vital to domestic and international trade: St. John’s, Halifax, Saint John, Belledune, Quebec City, Montreal, Vancouver, Fraser, Sept Îles, Trois Rivières, Saguenay, Thunder Bay, Toronto, Hamilton, Windsor, Nanaimo, Port Alberni, and Prince Rupert. These ports comprise Canada Port Authorities (CPAs). Effective January 1, 2008, the port authorities of Fraser River, North Fraser, and Vancouver were amalgamated into the Vancouver Fraser Port Authority. The amalgamation is part of the federal government’s Asia-Pacific gateway and corridor initiative, which aims to boost Canada’s commerce with the Asia Pacific region. The Canada Marine Act provides the legislative framework for restructuring the federal marine transportation infrastructure. The CPAs, composed of user- group representatives and various levels of government, do not receive government funding: they are expected to be financially self-sufficient. They have the right to make contracts or leases, set tariffs and fees, and borrow money on commercial markets and are responsible for port security and policing. A $125 million port divestiture fund was set up to assist those parties interested in the operation of regional/local ports. The Main Estimates provide $35.1 million for the fund in 2009-10. In May 2009, the federal minister of transport announced the federal government’s intention to create a Canada Port Authority to operate the port of Oshawa, Ontario. The port is currently managed by the Oshawa Harbour Commission, the only remaining harbour commission in Canada. 11:16 FINANCES OF THE NATION 2009

Of the 549 local and regional ports, 469 were transferred (to provincial and local governments, community organizations, and private interests), or demolished, or had their public harbour status terminated. The 26 remote ports serve isolated communities that rely on marine transportation. These ports continue to be maintained by Transport Canada unless local groups express interest in divestiture. The port divestiture program was terminated on March 31, 2007. Since 2001, enhanced security procedures for ports and other critical infrastructure include pre-screening and onboard inspections of foreign ships prior to proceeding to port. The marine security contribution program is a five-year, $115 million commitment to assist ports and port facilities with security enhancements. The program is cost-shared 75 percent federal and 25 percent recipient for eligible expenses during the period April 2004 to November 2009. Ports or marine facilities must apply for funding under the program. The program is part of the $308 million national security policy announced in April 2004. In 2006, the program was expanded to include domestic ferry operators, including those that are part of public transit systems. The 2009-10 Main Estimates of the Department of Transport provide $12.5 million for the program. The federal government introduced a $300 million, five-year package of marine security initiatives in 2005. The initiatives focus on the Great Lakes- St. Lawrence Seaway system and other ports and marine facilities. The security initiatives are carried out by six federal government departments and agencies. As shown in table 11.5, federal spending on water transportation grew from $411 million in 2004-5 to $763 million in 2008-9.

Ferry Services The Department of Transport provides financial assistance to Marine Atlantic Inc., a federal Crown corporation, for certain coastal and ferry services. The 2009-10 Main Estimates of the department provide contributions of $16.7 million for ferry and coastal passenger and freight services and a grant of $27.3 million to British Columbia for ferry and coastal freight and passenger services.

Pilotage Authorities Four regional pilotage authorities (the Atlantic Pilotage Authority, the Great Lakes Pilotage Authority, the Laurentian Pilotage Authority, and the Pacific Pilotage Authority) operate on a cost-recovery basis and have a great deal of autonomy in both regulatory and financial matters. They are expected to achieve full financial self-sufficiency. The authorities experienced a combined net income of $5.3 million in 2008.

Rail Rail transportation has been a federal responsibility since Confederation. Most federal expenditures on rail transportation are for the transportation of TRANSPORTATION AND COMMUNICATIONS 11:17 grain. The Canadian Transportation Agency determines the railway companies’ annual revenue entitlement for the movement of western grain. Federal spending on rail transport increased by 54 percent between 2004-5 and 2008-9. As shown in table 11.5, federal spending on rail transportation peaked at $383 million in 2008-9. The federal government implemented measures to increase efficiency and cut costs in the grain-handling and transportation system in 2000. Reforms included the establishment of a revenue cap on railway revenues (resulting in an 18 percent reduction in grain freight rates from 2000-1 levels), federal funding for prairie grain roads, and amendments to the Canada Transporta- tion Act to facilitate the transfer of branch lines to community-based short- lines. In November 2005, the federal government reached an agreement in principle with the farmer rail car coalition on the transfer of federal railway hopper cars to the coalition. In May 2006, the new federal government decided not to proceed with the transfer and to retain ownership of the cars. There are approximately 13,000 railway hopper cars in the federal fleet. The cars are provided at no cost to the railways for the transportation of grain. The federal government collects between $10-$15 million revenue annually from the railways for the use of hopper cars in non-regulated shipments of grain and other products.

Roads Roads are primarily a provincial responsibility, but the federal government provides some financial support for highway construction and other programs. The federal government makes payments to provinces to improve the TransCanada and provincial highways, promote safety, and encourage economic and regional development. The Department of Public Works and Government Services is responsible for the old Welland Canal, 12 bridges, one causeway, 875 kilometres of the Alaska Highway, and capital improvements to the sections of the TransCan- ada Highway in national parks. The Indian and Inuit affairs program of the Department of Indian Affairs and Northern Development undertakes major road and bridge-building projects on Indian reservations and finances road improvements administered by Indian bands.

Federal Infrastructure Programs The federal government introduced a program in 2008 to help the transportation sector limit the emission of greenhouse gases and other contaminants.

Building Canada Program The 2007 federal budget introduced the seven-year, $33 billion building Canada plan with spending allocated among provinces and territories on investments in the core national highway system and large-scale projects such as public transit and sewage treatment infrastructure. The plan consists of several programs, as outlined below. 11:18 FINANCES OF THE NATION 2009

1) The gas tax fund, whereby municipalities receive a portion of federal excise tax revenue on gasoline, initially 1 cent per litre, but increased to 5 cents per litre in 2009-10. The 2008 federal budget extended payments from the gas tax fund to $2 billion annually beyond 2013-14 and announced it will become a permanent measure, thereby ensuring predictable funding for infrastructure in cities and communities. 2) Provincial/territorial base funding of $25 million annually. The 2009 federal budget accelerated payments under this initiative. For the next two years, up to $1 billion in additional funding will be made available for infrastructure projects. 3) The building Canada fund supports infrastructure projects across Canada. 4) The gateways and border crossings fund and the Asia-Pacific gateway and corridor fund strengthen trade-related infrastructure. In 2005, the federal government also increased the goods and services tax rebate to municipalities to 100 percent from 57.1 percent.

Infrastructure Stimulus Fund The 2009 federal budget established a new $4 billion infrastructure stimulus fund to provide funding for provincial, territorial, and municipal infrastructure rehabilitation projects. Funding is available for two years for projects that begin construction during 2009 and 2010. The federal government will approve project plans and will cover up to 50 percent of eligible project costs. Subject to project readiness and merit, funding is allocated on the basis of provincial/territorial population. The Canada strategic infrastructure fund (CSIF) is aimed at funding major infrastructure projects such as the renewal of the Toronto Transit Commis- sion (TTC) system. The federal government is providing $350 million to help renew the TTC and Ontario and the city of Toronto are matching this contribution. About 43 percent of CSIF funding is devoted to public transit. The 2009-10 Main Estimates of Infrastructure Canada provide $484.2 million for the CSIF. Under the border infrastructure fund, the federal government is contributing $90 million toward road investments in the British Columbia lower mainland. The federal government is investing $65 million under the corridors for Canada program, which consists of transportation infrastructure improvements in the Northwest Territories. The 2009 federal budget provided up to $14.5 million for bridges at two of the busiest Canada-US border crossings: the Blue Water bridge in Sarnia, Ontario and the Peace bridge in Fort Erie, Ontario. The 2009-10 Main Estimates provide $66.7 million in payments under the fund. The federal government will spend an estimated $483.8 million in 2009-10 under the municipal rural infrastructure fund, which supports smaller scale municipal infrastructure projects. The 2008 federal budget provided $500 million for expenditures on public transit capital infrastructure. Projects include a light rapid transit system in Vancouver, the re-establishment of a rail link between Peterborough and TRANSPORTATION AND COMMUNICATIONS 11:19

Toronto, and new equipment and upgrades to dedicated rapid transit routes in Montreal airports.

COMMUNICATIONS Expenditures on communications are not available by province, but are included with the consolidated provincial, territorial, and local expenditures on transportation in table 11.1, the provincial-territorial expenditures in table 11.2, and the local expenditures on transportation in table 11.3. Federal expenditures on communications are carried out through the Department of Industry and the Department of Canadian Heritage. The De- partment of Industry manages the radio spectrum to ensure the high quality and efficiency of radio communications in Canada. International agreements are in place to guarantee that Canada has sufficient access to the international radio frequency spectrum. The department develops legislation, standards, and engineering rules that affect both broadcast and non-broadcast radio stations. The department is committed to making the information highway accessible to all Canadians. Canada was the first country in the world to connect all of its schools and public libraries to the Internet. The Department of Canadian Heritage provides funding and assistance for the production and distribution of aboriginal radio and television programming in aboriginal languages. Native communications societies serve approximately 400 communities in the three territories and northern regions of seven provinces. The Canadian Radio-Television and Telecommunications Commission (CRTC) regulates federally incorporated telecommunication common carriers and all broadcasting undertakings in Canada. Under the Broadcasting Act, the CRTC may issue, renew, amend, suspend, and revoke the licences of broadcast transmitting companies (for example, radio and television stations) in Canada and broadcasting receiving undertakings (such as cable television systems and networks). The CRTC regulates over 2,000 broadcasters, including radio, television, cable, and satellite systems, as well as over 80 telecommunication carriers. The CRTC licenses federal, provincial, and community- based broadcasting organizations as well as private enterprises. The CRTC’s authority over telecommunication carriers is limited to those carriers that fall under federal jurisdiction, such as Bell Canada, Maritime Telephone and Telegraph Company, and Telesat Canada. Telephone companies providing local or intraprovincial services with interconnection to interprovincial services (such as Quebec Tel, Thunder Bay Telephone, ED Tel) were formerly subject to provincial legislative and regulatory authority. Since 1994, however, such companies fall under federal and, therefore, CRTC jurisdiction. The CRTC’s objectives are to ensure that rates charged to the public are reasonable, customers are treated fairly, basic telephone service is universally available at affordable prices, telecommunication carriers remain financially viable and, where possible, market forces are allowed to replace or supplement traditional regulatory approaches. Telecommunication carriers offering 11:20 FINANCES OF THE NATION 2009 services within one province and provincial Crown corporations are only subject to provincial legislative and regulatory control. The CRTC will spend an estimated $46.0 million in 2009-10 on broadcasting and telecommunications. The total is offset by revenues of $40.7 million, leaving a net expenditure of $5.4 million. 12 Protection and Defence

Canadian governments at all levels regard issues of protection and defence as the highest priority and have formulated policies and programs to protect their citizens. The federal government deals with national sovereignty and security. The provinces and territories provide law enforcement services, either through their own law enforcement bodies (Ontario and Quebec) or under contract with the Royal Canadian Mounted Police (RCMP). Most provinces are responsible for land titles and registry offices. Local governments generally provide fire protection, and most contribute to the cost of policing. All three levels contribute financially to the national search and rescue program (see the section on defence, below).

PROTECTION Initiatives on protection announced in the 2009 federal budget include proposals to strengthen the nation’s financial stability by increasing the Canada Deposit Insurance Corporation’s (CDIC) borrowing limit from $6 billion to $15 billion, which reflects the growth of insured deposits since the last borrowing increase in 1992. Other proposals include providing the corporation with a broader range of options when responding to risk concerns, providing the minister of finance with the authority to direct the CDIC to take specific action regarding financial stability, and allowing the CDIC to hold or own shares in its member institutions. The 2009 federal budget announced the government’s intention to move forward on the establishment of a national securities regulator and proposed to establish and fund an office to assist provinces and territories in the transition. Federal expenditures on protection of persons and property for fiscal years 2004-5 to 2008-9 are shown in table 12.1. In 2009-10, federal expenditure on protection, excluding defence, is estimated at $12.3 billion.

Table 12.1 Federal Government Expenditure on Protection of Persons and Property, Fiscal Years 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars National defence...... 14.5 15.1 16.1 17.9 17.3 Courts of law...... 0.5 0.5 0.6 0.7 0.6 Correction and rehabilitation services...... 2.0 2.1 2.4 2.4 2.2 Policing...... 3.3 3.5 3.8 4.1 4.8 Regulatory measures .... 1.2 1.3 1.3 1.4 1.2 Other ...... 2.6 3.0 3.2 3.2 2.8 Total...... 24.1 25.5 27.4 29.7 28.9 Source: Statistics Canada, June 2009.

13:a 12:2 FINANCES OF THE NATION 2009

Federal expenditures on protection involve many departments and the various agencies under their jurisdiction. The major expenditures are made by the Department of Public Safety and Emergency Preparedness ($8.9 billion in 2009-10) and the Department of Justice ($1.6 billion in 2009-10). The national crime prevention strategy is an interdepartmental program led by the federal Department of Justice and Public Safety and Emergency Preparedness Canada. The program assists communities in developing solutions to local crime problems. The 2008 federal budget provided the national crime prevention strategy with $60 million over two years, in addition to the existing annual funding of $33 million. The 2009-10 Main Estimates of the Department of Public Safety and Emergency Preparedness provide grants and contributions totalling $51.0 million for the safer communities initiative. Estimates of the expenditures of federal departments and agencies on protection in 2009-10 are as follows: $ million Public Safety and Emergency Preparedness...... 8,871.6 Justice...... 1,604.7 Industry Canada ...... 141.6 Transport...... 708.2 Agriculture ...... 572.0 Finance...... 157.5 Canadian Nuclear Safety Commission...... 142.7 Privy Council ...... 51.8 Other...... 72.7 Total ...... 12,322.8 Federal expenditures on protection are broken down in this chapter into the following categories: public safety and emergency preparedness, administration of justice and the court system, and market regulation and safety standards.

Federal Protection of Persons and Property Public Safety and Emergency Preparedness Canada Border Services Agency Part of the Public Safety and Emergency Preparedness department, the Canada Border Services Agency (CBSA) integrates the customs program of the former Canada Customs and Revenue Agency; the intelligence, interdic- tion, and enforcement program of Citizenship and Immigration Canada; and the import inspection role of the Canadian Food Inspection Agency. The CBSA processes commercial goods and travellers and identifies and intercepts those deemed high risk. The agency conducts inspections of food and agricultural products at airports, screens visitors and immigrants, works with law enforcement agencies, and engages in enforcement activities. The agency operates at about 1,200 service points across Canada and employs about 5,000 uniformed officers. The 2009-10 Main Estimates provide $1,483.0 million for the work of the CBSA. PROTECTION AND DEFENCE 12:3

Correctional Service of Canada Under the Criminal Code of Canada the federal government is responsible for offenders who are sentenced to custody for two years or more. The provinces have authority over persons given custodial sentences of less than two years in provincial jails and reformatories. Agreements may be made with the provinces to transfer prisoners from federal penitentiaries to provincial prisons, and certain facilities may be designated as penitentiaries to improve the effectiveness of the programs and services of the federal corrections system. The federal correctional service is divided into three levels: national, regional, and institutional/district parole offices. There are national headquarters in Ottawa and five regional headquarters. Correctional Service of Canada (CSC) currently manages 53 penitentiaries of differing security levels, 16 district offices that administer 71 parole offices, and 27 treatment centres. Of this total, 6 are regional women’s institutions and 1 is a women’s healing lodge. In British Columbia, women federal offenders are housed in a provincial women’s institution under an exchange of services agreement. The federal correctional system was reviewed in 2007, and recommendations included providing more employment and work-related skills to offenders, modernizing physical infrastructure, and increasing the emphasis on offender responsibility and accountability. The 2008 federal budget stabilized funding for CSC so it can begin to act on the recommendations and provided $122 million over two years toward this goal. Total expenditures for the correctional service in 2009-10 are estimated at $2,204.5 million. For the most part, income from prison industries (Corcan), estimated at $95.0 million for 2009-10, is expected to offset the related administrative and capital expenses.

National Parole Board The National Parole Board is an independent administrative agency responsible for granting, denying, and revoking parole (conditional release) for inmates incarcerated in federal institutions and for inmates in provincial and territorial institutions where the province does not maintain its own parole board. Provinces have the right to set up their own parole boards: Quebec, Ontario, and British Columbia have established parole boards for inmates in provincial institutions. There are different types of conditional release available: full parole, day parole, escorted and unescorted temporary absence (for humanitarian or medical reasons, work programs, or community service), and statutory release. Statutory release dictates that most federal inmates, by law, must be released with supervision after serving two-thirds of their sentence. Offend- ers serving life or indeterminate sentences are ineligible for statutory release. The National Parole Board has the right to deny early release on mandatory supervision of prisoners with perceived risks of recidivism. The National Parole Board also has the authority to issue or grant pardons and make recommendations to use the royal prerogative of mercy. 12:4 FINANCES OF THE NATION 2009

Royal Canadian Mounted Police The Royal Canadian Mounted Police (RCMP) will spend an estimated $4,210.0 million on protection in 2009-10. Serving as the federal police force, the RCMP is primarily responsible for the prevention and detection of offences committed against a wide range of federal statutes: it enforces laws, prevents crime, and maintains peace, order, and security. The force is divided into four regions and 15 operational divisions with headquarters located in Ottawa. RCMP detachments are located in all provinces and territories. Its major activities include providing investigative and protective services for federal departments and agencies; safeguarding internationally protected persons and Canadian dignitaries; suppressing economic and computer crime, smuggling, and traffic in narcotic drugs; enforcing immigration law; and protecting government property and foreign diplomatic missions. Services to police forces across Canada include the Canadian Police Information Centre, eight forensic laboratories, the Canadian Police College with its managerial and specialist courses, and the criminal intelligence service, which focuses on organized crime. The RCMP enhanced Canada-US collaboration through an agreement signed with the American Federal Bureau of Investigation to improve the sharing of data, equipment, and information. The RCMP also provides provincial and municipal policing services under contract to the three territories, all provinces except Quebec and Ontario, approximately 190 municipalities, and 184 First Nations communities. Municipalities with populations below 15,000, provinces, and territories pay 70 percent of the cost of RCMP services. For larger municipalities, the share is 90 percent. Revenue from policing contracts is estimated at $1.6 billion for 2009-10. First Nations’ policing is carried out under agreements signed by the federal, provincial, and individual band governments. Agreements are cost-shared 52 percent by the federal government and 48 percent by provincial and territorial governments. The 2008 federal budget provided $400 million to assist provinces and territories in recruiting 2,500 new front-line police officers. Funding was deposited in a third-party trust and will be released to provinces and territories as required over five years.

1) RCMP External Review Committee The RCMP External Review Committee was created to guarantee the rights of the members of the RCMP. It acts as a neutral third party to provide an independent review of cases referred to it from the RCMP. Such cases involve grievances and formal disciplinary and demotion appeals.

2) RCMP Public Complaints Commission The RCMP Public Complaints Commission was created to provide the public with an opportunity to make complaints regarding the conduct of members of the RCMP and to have the complaints examined by an external body in an independent and impartial manner. The commission receives and investigates PROTECTION AND DEFENCE 12:5 complaints brought before it, conducts investigations, holds public hearings, and summons witnesses.

Canadian Security Intelligence Service The Canadian Security Intelligence Service carries out the surveillance of groups and individuals suspected of espionage, sabotage, terrorism, foreign- influenced activities, and domestic subversion. Expenditures for 2009-10 are estimated at $496.4 million.

Administration of Justice and the Court System The Canadian judicial system is hierarchical. The federal level of courts is made up of the Supreme Court of Canada, the Federal Court of Canada (which consists of the Federal Court of Appeal and the Federal Court), and the Tax Court of Canada. Provincial court levels include municipal-county courts and provincial courts; superior courts (the Supreme Court in some provinces; Superior Court of Quebec; and the Court of the Queen’s Bench in New Brunswick, Manitoba, Saskatchewan, and Alberta); and the provincial courts of appeal, which are the highest provincial courts. Cases that originate in the lower provincial courts may be appealed to a provincial court of appeal and from there to the Supreme Court of Canada. As attorney general, the federal minister of justice applies existing law (for example, gives legal advice to the heads of all departments and some agencies of the federal government), drafts legislation, and conducts litigation. The minister of justice examines the policy underlying such laws as the Criminal Code, divorce laws, and other legislation; considers the substantive and procedural content of government bills and regulations that may affect fundamental human rights and principles; and ensures that the administration of public affairs is in accordance with the law. Bill C-31, which amended The Judges Act, received royal assent on June 18, 2008. It increased the number of judges in provincial superior courts across Canada. The legislation authorized the appointment of 20 new judges. The Specific Claims Tribunal Act, which also received royal assent on June 18, established an independent tribunal made up of the equivalent of six full- time sitting superior court judges to resolve First Nations’ specific claims. The aboriginal justice strategy, a cost-shared initiative with the federal, provincial, and territorial governments, received an additional $40 million from the federal government in August 2008. The 2009-10 Main Estimates provide $12.5 million for grants and contributions under the strategy. Legislation introduced in 2009 restricts the use of conditional sentencing for serious property and violent crime and ends the “faint hope” clause whereby those convicted of first or second-degree murder may apply for early parole. Bill C-14, which received royal assent on June 23, 2009, amended Can- ada’s criminal code by making murders connected to organized crime automatically first-degree offences, subject to a mandatory sentence of life imprisonment without parole for 25 years. 12:6 FINANCES OF THE NATION 2009

Canada’s Criminal Code was strengthened in 2008 by providing tougher jail time for serious gun crimes, strengthening sentencing and bail provisions for those accused of serious gun crimes, and providing youth more protection from sexual predators by increasing the age of consent from 14 to 16 years. The Anti-Terrorism Act defines terrorist activity as that which is an offence under one of the United Nations’ (UN) anti-terrorism conventions or is undertaken for political, religious, or ideological purposes and which intimidates the public or compels a government to do something and intentionally causes death or serious harm to people. Under the legislation, it is a crime to provide funds to terrorist groups and, if convicted, a maximum sentence of 10 years can be imposed. Facilitating the activities of a terrorist group carries a maximum sentence of 14 years. A “leadership” offence carries a maximum life sentence. Additionally, any indictable act committed for or by a terrorist group also carries a maximum sentence of life imprisonment. The federal government is harmonizing 49 federal laws with Quebec civil law. Harmonization will ensure that every linguistic version of federal statutes equally reflects both the civil law and common law systems. Justice will spend an estimated $867.1 million on administration in 2009-10.

Supreme Court of Canada Under section 101 of the Constitution Act, 1867, the Supreme Court of Canada was established as the final general court of appeal with a national jurisdiction that encompasses the civil law of Quebec as well as the common law of the other nine provinces and three territories. The Supreme Court also hears cases on constitutional questions referred to it by the governor in council and advises the Senate and House of Commons on questions concerning interpretation of the Constitution Act, 1982, the constitutionality or interpretation of any federal or provincial law, and the powers of Parliament and provincial legislatures. Appeals may be brought to the Supreme Court from final judgments of the highest provincial courts. The judgment of the Supreme Court of Canada is final and conclusive in all cases.

Federal Court of Canada Under the Courts Administration Service Act, the federal court has two divisions: the Federal Court of Appeal and the Federal Court. The Federal Court of Appeal has exclusive jurisdiction to review all judicial or quasi- judicial decisions made by federal boards, commissions, and tribunals, but only when it can be shown that a fundamental principle of justice has been breached in reaching a decision. The Federal Court has jurisdiction over bills of exchange, promissory notes, aeronautics, and works and undertakings that connect one province with another or that extend beyond the boundaries of a province.

Tax Court of Canada The Tax Court of Canada has jurisdiction to hear and determine appeals on matters that arise under the Income Tax Act, the Canada Pension Plan, the PROTECTION AND DEFENCE 12:7

Old Age Security Act, the Petroleum and Gas Revenue Tax Act, the goods and services tax legislation, and part III of the Employment Insurance Act.

Canadian Human Rights Commission The Canadian Human Rights Commission administers the Canadian Human Rights Act, which prohibits discrimination in employment and service access on 10 grounds: race, colour, national or ethnic origin, religion, age, sex, marital status, family status, disability, and conviction for an offence for which a pardon has been granted. The commission also investigates complaints alleging pay inequities. The commission cooperates closely with its provincial counterparts.

Commissioner for Federal Judicial Affairs The commissioner administers federal judicial affairs and provides for salaries, allowances, and annuities to all federally appointed judges, the Federal Court of Canada, the Tax Court of Canada, and the Canadian Judicial Council. The federal government appoints and pays the salaries of judges in provincial and territorial superior courts, although the provinces administer justice. Advisory councils assist with the selection of judges in the provinces and territories. The 2009-10 Estimates provide $424.7 million for expenditures of the commissioner.

Offices of the Information and Privacy Commissioners of Canada The information commissioner investigates and reports on complaints from persons who are denied access to records and any other matters that relate to requesting and obtaining access to records under the Access to Information Act. The privacy commissioner investigates complaints relating to the misuse of personal information by government institutions.

Market Regulation and Safety Standards Canadian Food Inspection Agency The Canadian Food Inspection Agency ensures that food products for domestic and foreign consumption meet standards for quality and safety and carries out programs to protect animal health and prevent the transmission of disease to humans. The agency also controls the importation and domestic movement of plants and plant products. The 2009-10 Estimates of the Department of Agriculture and Agri-food provide $572.0 million for the agency’s activities.

Industry Canada The marketplace policy and operations sectors of Industry Canada administer and enforce legislation, regulations, and standards pertaining to the marketplace; protect consumers; and promote an efficient and stable marketplace. The department expects to spend $129.8 million on this activity in 2009-10. 12:8 FINANCES OF THE NATION 2009

The Competition Tribunal, Copyright Board, and Standards Council of Canada, all under the umbrella of Industry Canada, are expected to spend $11.8 million on protection in 2009-10.

Office of the Superintendent of Financial Institutions The Office of the Superintendent of Financial Institutions supervises about 500 federally regulated financial institutions and 1,100 pension plans to ensure that they meet their obligations. It also reviews 24 provincially chartered institutions. Estimated expenditure on this activity is $100.0 million in 2009-10.

Canadian Nuclear Safety Commission The Canadian Nuclear Safety Commission regulates nuclear energy by means of a comprehensive licensing system. The commission regulates nuclear operations and facilities such as accelerators, research and test establishments, power reactors, uranium mining and processing, and waste management. The Main Estimates provide $142.7 million to the commission in 2009-10.

Privy Council Expenditures of the Privy Council on protection activities include $28.9 million for the Canadian Transportation Accident and Investigation Safety Board, $19.9 million for the Commissioner of Official Languages, and $2.9 million for the Security Intelligence Review Committee.

Department of Transport The Department of Transport will spend an estimated $55.6 million in 2009- 10 on the protection of persons and property for the transportation of danger- ous goods; aviation, marine, railway, and road safety; and other activities.

1) Canadian Air Transport Security Authority The federal government created the Canadian Air Transport Security Authority (CATSA) in response to the terrorist attacks of September 11, 2001. A Crown corporation, CATSA began screening passengers and their belongings at 89 designated airports in December 2002. CATSA is responsible for pre-board screening of passengers and baggage, the explosives detection system, and enhanced policing at Canadian airports, as well as working with the RCMP to provide on-board officers for domestic and international flights. The Main Estimates provide $262.5 million for activities of CATSA in 2009-10.

Provincial/Territorial-Local Protection Systems Table 12.2 shows provincial and territorial expenditures on protection of persons and property for fiscal years 2004-5 to 2008-9. Consolidated provincial, territorial, and local expenditures are shown in table 12.3 for 2004-5 to 2008-9. Local government expenditures on courts of law, policing, firefighting, and regulatory measures for 2008 are shown in table 12.4. The following provides an overview of the provincial-local protection systems. PROTECTION AND DEFENCE 12:9

Table 12.2 Provincial and Territorial Government Expenditure on Protection of Persons and Property, 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 226 242 308 330 372 Prince Edward Island . . . 40 39 40 42 47 Nova Scotia...... 272 293 314 349 380 New Brunswick ...... 193 211 218 205 253 Quebec...... 2,299 2,279 2,556 2,584 2,639 Ontario...... 3,493 3,563 3,884 4,303 4,513 Manitoba...... 357 405 413 486 484 Saskatchewan ...... 393 434 478 536 562 Alberta...... 826 990 992 1,112 1,270 British Columbia ...... 1,036 1,150 1,174 1,291 1,301 Northwest Territories . . . 87 91 96 102 110 Nunavut...... 69 75 72 83 86 Yukon ...... 80 65 63 74 79 Totala ...... 9,371 9,837 10,608 11,497 12,096 a Totals may not add due to rounding. Source: Same as table 12.1.

Table 12.3 Consolidated Provincial, Territorial, and Local Government Expenditure on Protection of Persons and Property, 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 250 260 310 367 409 Prince Edward Island . . . 54 53 55 55 60 Nova Scotia...... 488 528 574 631 682 New Brunswick ...... 350 369 397 392 445 Quebec...... 4,250 4,466 4,707 4,975 5,121 Ontario...... 7,537 7,623 8,167 8,978 9,616 Manitoba...... 625 659 714 811 811 Saskatchewan ...... 614 651 714 775 845 Alberta...... 1,650 1,882 1,988 2,268 2,520 British Columbia ...... 2,225 2,420 2,530 2,751 2,870 Northwest Territories . . . 96 95 103 113 122 Nunavut...... 72 73 74 86 88 Yukon ...... 86 71 68 80 85 Total...... 18,297 19,150 20,401 22,282 23,674 Source: Same as table 12.1.

Newfoundland and Labrador Newfoundland and Labrador maintains the Royal Newfoundland Constabu- lary (RNC), which polices the cities of St. John’s, Corner Brook, Mount Pearl and surrounding communities in the northeast Avalon region, and Labrador West. The RCMP polices the remaining areas of the province. The Supreme Court of Newfoundland and Labrador (Court of Appeal and Trial Division) sits permanently in St. John’s. The Trial Division also sits permanently in Corner Brook, Gander, Grand Bank, Grand Falls-Windsor, 12:10 FINANCES OF THE NATION 2009 xxxxx Table 12.4 Local Government Expenditure on Protection of Persons and Property, 2008 Regulatory Province/territory Courts of law Policing Firefighting measures Other Total millions of dollars Newfoundland and Labrador...... 0.1 3.5 31.9 3.3 6.0 44.9 Prince Edward Island . . .. 10.9 4.3 — 0.4 15.7 Nova Scotia...... 12.8 171.0 96.9 6.2 30.0 316.9 New Brunswick ...... 0.2 104.1 82.9 3.0 5.3 195.7 Quebec...... 134.3 1,594.2 749.3 0.1 70.0 2,547.8 Ontario...... 120.9 3,308.5 1,583.3 353.2 77.5 5,443.4 Manitoba...... 208.6 115.6 9.3 17.2 350.7 Saskatchewan...... 4.7 175.0 107.1 6.7 11.0 304.4 Alberta...... — 700.8 486.3 68.1 44.2 1,299.4 British Columbia ..... 53.6 863.6 542.7 63.4 57.7 1,581.0 Northwest Territories . . 2.1 — 9.7 0.5 0.7 13.0 Nunavut...... 1.8 .. 3.0 .. 0.1 4.9 Yukon ...... 0.9 — 4.5 0.4 0.8 6.6 Total ...... 331.4 7,140.2 3,817.5 514.2 320.9 12,124.4 Source: Same as table 12.1. and Happy Valley-Goose Bay. The Unified Family Court serves the Avalon and Bonavista peninsulas. It sits permanently in St. John’s and on circuit in Clarenville. The Provincial Court has jurisdiction in criminal adult, youth, civil/small claims, family, and traffic matters. There are 10 provincial court locations with permanent registries throughout the province. A regular circuit serves 23 locations. Although the province has jurisdiction over justice, municipal councils may appoint municipal enforcement officers to administer local regulations and bylaws. In addition, municipal councils provide fire protection and prevention services. The provincial government provides cost-shared funding to municipal governments to assist with the purchase of firefighting equipment. The 2009 Newfoundland and Labrador budget provided over $20 million for justice infrastructure and $2 million to construct a new pre-trial detention centre for women and youth in Happy Valley-Goose Bay. The budget also provided $6 million to continue the process of revitalizing and reforming the province’s correctional system. The investment provides for an additional 15 correctional officer positions, a psychologist, and an addictions coordinator to work with male and female inmates, and a fetal alcohol spectrum disorder project coordinator for the Labrador Correctional Centre. In addition, $500,000 was allocated for ongoing training of corrections staff. The 2009 budget increased spending by about $2 million to augment violence prevention services for women. Of the total, $304,000 will support a specialized family court and $1.2 million is provided to open and operate a new transition house in Carbonear. Newfoundland and Labrador’s 2008 budget provided $1.6 million to strengthen the Royal Newfoundland Constabulary and the RCMP. The budget PROTECTION AND DEFENCE 12:11 also provided for the establishment of a child, youth, and family services project office in the province’s western region to improve legal aid services for children and parents in child protection cases.

Prince Edward Island Municipalities have no responsibility for the administration of justice in Prince Edward Island other than the enforcement of local bylaws. Police protection is provided by the RCMP except in Charlottetown, Summerside, and some towns and villages that operate their own police forces. The province provides jails and courts and appoints officials such as provincial court judges, justices of the peace, sheriffs, and coroners. The Supreme Court, appeal and trial divisions, sits permanently in Charlottetown. The trial division goes on circuit to Summerside and George- town as required. The Provincial Court may sit anywhere in the province. The criminal and youth branches sit in five locations. The provincial hazardous material team deals with emergencies related to hazardous materials. The team responds to emergency situations involving chemical, biological, or radiological elements resulting from natural disasters, terrorist activities, or man-made incidents.

Nova Scotia The provincial Department of Justice is responsible for the administration of the Court of Appeal, Supreme Court of Nova Scotia, Supreme Court (general and family divisions), Provincial Court, Family Court, Probate Court, Small Claims Court, and the Summary Proceedings Court. Through its court services division, the department is also responsible for court security and prisoner transportation, the justice of the peace program, the restorative justice program, the maintenance enforcement program, and programs designed to reduce conflict and litigation in the family division. The court services division operates from approximately 45 courthouses and other facilities. Court administration is managed through 18 justice centres. There are 8 centres located within the Halifax Regional Municipal- ity; the others are located at various locations throughout the province. The maintenance enforcement program operates from eight offices throughout the province, and the restorative justice program has nine sites. Policing is a municipal responsibility, with cities, towns, and rural municipalities responsible for police costs (whether provided by municipal police forces or the RCMP under contract). The province is responsible for the costs of highway patrol and central services provided by the RCMP. Nova Scotia’s 2008 budget announced the addition of 70 new police officers in 2008-9 at a cost of $8.2 million and noted that, by 2010-11, the province will have added a total of 250 new police officers. Noting that the province’s increased enforcement and crime prevention efforts had resulted in a growing inmate population, the budget provided an additional $1 million to the correctional facility in Yarmouth and $500,000 to the facility 12:12 FINANCES OF THE NATION 2009 in Burnside. An amount of $830,000 was provided to hire more youth court workers to help at-risk children less than 12 years of age. Fire protection is a local responsibility. The Fire Prevention Act provides for the appointment of a provincial fire marshall who is assisted by local fire chiefs or, in the absence of a fire department, by the head of the local council. Although most fire departments are made up entirely or partly by volunteers, many of the larger centres have full-time forces.

New Brunswick The Department of Justice is responsible for administering justice in New Brunswick. The minister of justice is mandated to administer court services; regulate trust companies and the insurance industry; administer and regulate the securities industry, cooperatives, and credit unions; examine financial institutions; and administer consumer affairs. The Department of Public Safety administers community and correctional services, policing services, and services and programs for victims of violence. The department is also responsible for commercial vehicle enforcement, emergency services, and the Office of the Fire Marshall. New Brunswick’s highest court is the Court of Appeal. The courts of civil jurisdiction are the Court of Appeal, the Court of Queen’s Bench (trial division), the Probate Court, and the Small Claims Court. Courts of family jurisdiction are the Court of Appeal and the Court of Queen’s Bench (family division). The courts of criminal jurisdiction are the Court of Appeal, the Court of Queen’s Bench (trial division), and the Provincial Court. The Small Claims Court, presided over by senior lawyers (adjudicators), holds sittings in each judicial district. The monetary limit of its jurisdiction is $6,000. The Probate Court sits in nine locations, eight of which correspond to the judicial districts. The Provincial Court is organized into 14 regions and travels to satellite court locations. Policing services are a municipal responsibility, financed through local property taxes. Many small municipalities do, however, use the services of the RCMP. There are 11 municipalities that have direct contracts with the federal government for RCMP services and pay 70 or 100 percent of the costs. The RCMP is also under contract with the province to provide police services to an additional 58 municipalities and most unincorporated areas. The RCMP is also contracted to provide policing services to four New Brunswick First Nations. New Brunswick pays 70 percent of incurred costs to the federal government and recovers either a per capita or per officer amount from each municipality, depending on the agreement. The commercial vehicle enforcement branch of the Department of Public Safety is responsible for maintaining public safety on provincial highways, reducing highway damage caused by overweight vehicles, and providing a unified approach to the regulation of the commercial vehicle industry. The branch conducts regular safety campaigns and routinely conducts driver fitness checks and vehicle inspections. PROTECTION AND DEFENCE 12:13

Fire protection, which is a local responsibility, is financed through property taxation in both the incorporated and unincorporated areas of the province. The Fire Protection Act provides the legislative framework for fire protection services and is administered by the Office of the Fire Marshall, Department of Public Safety. The security and emergencies initiative of the Department of Public Safety was established to coordinate the different levels of government and partner with the private sector. Specific initiatives include the development and update of community emergency plans; detection and prevention of organized crime and terrorist activity; a provincial security program to protect infrastructure, documents, and information technology; an improved nuclear emergency plan for Point Lepreau; and the integration of police, health, and fire responses to chemical, biological, radiological, and nuclear incidents.

Quebec Quebec has its own police force, the Sûreté du Québec, which maintains peace, order, and security throughout the province. Police officers are trained through the École nationale de police du Québec. Ethics in the Sûreté and municipal police forces are overseen by the Commissaire à la déontologie policière. In cases where an issue is not settled by the commissaire, the police officer can be cited before the Comité de déontologie policière. The level of police services is generally established according to population. In principle, every municipality that belongs to a metropolitan community or a metropolitan census region must be served by a municipal police force. Municipalities with a population of 50,000 or more must establish their own forces. All other municipalities, with some exceptions, are served by the Sûreté du Québec within the framework of service agreements signed with the respective county regional municipalities. The Ministry of Public Security also offers police science and forensic medicine to municipal police forces throughout Quebec. The Office of the Minister of Public Security publishes statistical reports on crime and ensures that research and/or investigations are carried out on suspicious fires or explosions. Provincial prisons are administered by the minister of public security. Additionally, the office supervises probation orders and ensures that probation services are available. The minister of public security is responsible to the National Assembly for the Commissaire à la déontologie policière and the Comité de déontologie policière, the École nationale de police du Québec, the École nationale des pompiers du Québec, and the Conseil de surveillance des activités de la Sûreté du Québec, the coroner’s office, the Commission québécoise des libérations conditionnelles, and the Régie des alcools des courses et des jeux. Quebec’s Court of Appeal is the general appeal tribunal for the province. Appeals from certain western judicial districts are heard in Montreal, while 12:14 FINANCES OF THE NATION 2009 all others are heard in Quebec City. The Superior Court sits in 56 permanent locations and goes on circuit in 4 locations. The court holds supervisory powers over all lower courts and has both civil and criminal jurisdiction. The Court of Quebec consists of 270 judges and is composed of three branches: civil, criminal and penal, and youth. There are 86 municipal courts in Quebec serving approximately 837 municipalities. The Human Rights Tribunal hears matters that relate to discrimination, harassment, and equal opportunity. Responsibility for fire and public safety is shared by local, regional, and provincial authorities and allows for the establishment of financial assistance programs, the implementation of protective measures, and fire compensation. Maximum annual income thresholds in 2009 for legal aid eligibility are $12,149 for an individual, $15,212 for an adult with one child, and $20,548 for a family of two adults and two or more children. For a contribution ranging between $100 and $800, a single person earning up to $17,313 and a family earning up to $29,283 may access legal aid assistance.

Ontario Policing responsibilities in Ontario are shared by the Ontario Provincial Police (OPP), 58 municipal services, and nine self-directed First Nations police services. The OPP also administers policing for 19 communities under the Ontario First Nation Policing Agreement and provides direct policing to 21 other First Nations communities. Together, they provide comprehensive coverage across the province. One of the largest police services in North America, the OPP maintains 163 detachments in five regions and one division, serving 313 municipalities and 12.7 million people. More than 130 municipalities have established formal contracts with the OPP to provide police services. Staffed by approximately 5,710 uniformed, 2,570 civilian, and 850 auxiliary members, the OPP’s area of responsibility encompasses approximately 993,000 square kilometres of land and 174,000 square kilometres of waterways. Additionally, the OPP is home to a number of specialized investigative units, including the provincial repeat offender parole enforcement unit, guns and gangs, missing persons and unidentified bodies/remains unit, the child pornography unit, the illegal weapons enforcement unit, and the illegal gaming enforcement unit. The Police Services Act assigns the following responsibilities to the OPP: providing police services on a contract or non-contract basis to municipalities in Ontario that choose not to provide their own municipal police services; providing police services for all Ontario waterways and trails, except those designated by the solicitor general; providing police services and traffic patrol on all Ontario roadways, except those designated by the solicitor general; and assisting municipal forces with investigative services on the solicitor general’s direction or at the Crown attorney’s request. The OPP heads a number of multijurisdictional policing initiatives aimed at coordinating law enforcement efforts. Two such province-wide initiatives PROTECTION AND DEFENCE 12:15 are the violent crimes linkages analysis system and the Ontario sex offender registry. The province is solely responsible for the accommodation and offices required to administer justice. Counties and municipalities receive fair compensation in the form of rent whenever courtrooms or judicial or land registry offices are situated in municipal buildings. The court services division of the Ministry of the Attorney General manages Ontario’s seven court regions. The division works closely with the judiciary to deliver civil, family, and criminal court services. The judiciary maintains a similar regional structure. A regional senior judge of the Superior Court of Justice and of the Ontario Court of Justice heads each judicial region. The province’s highest court, the Court of Appeal, sits regularly in Toronto and hears inmate appeals monthly in Kingston. The court is composed of 23 judges who hear over 1,700 civil and criminal appeals each year. These appeals relate to a wide variety of issues, including commercial, administrative, family, and criminal law matters, as well as the principles of sentencing, Charter litigation, and rules of evidence. The court also hears various young offender proceedings in addition to appeals argued by unrepre- sented inmates. In most cases, the Court of Appeal is the last avenue of appeal for litigants in the province. Ontario’s Superior Court of Justice consists of 301 judges, including 70 supernumerary judges, one full-time master, two per diem masters, and 16 case management masters, as well as one full-time and three per diem small claims court judges. There is also a large roster of deputy judges (417) who serve in the Small Claims Court. The monetary jurisdiction of the court is $10,000. The Ontario Court of Justice is composed of 286 full-time and 38 part- time judges and the equivalent of 345 full-time justices of the peace, as well as 28 per diem justices of the peace, operating in more than 200 courts across the province. The court conducts criminal matters and retains jurisdiction over family law matters (except the divorce and property division) in approximately 60 percent of the province. The province operates and administers jails, detention centres, correctional centres, and treatment facilities for adult offenders on remand or serving sentences of up to two years less a day. Under the federal Young Offenders Act, the province also maintains open and secure detention custody services for youths aged 12 to 17 years. A detention centre for young offenders aged 16 and 17 is privately run and operates in the style of a boot camp. Ontario municipalities are responsible for administering and prosecuting offences under parts I and II and the administration of part III of the Provin- cial Offences Act. Under the act, municipalities retain the revenue collected from fines. The province supplements municipal fire protection services through the fire marshal of Ontario, who is responsible for directing, coordinating, and advising on all aspects of fire prevention, fire fighting, and fire investigation within the province. 12:16 FINANCES OF THE NATION 2009

Manitoba Manitoba Justice monitors and coordinates the activities of the RCMP, municipal police forces, private investigators, security guards, and special constables under the authority of The Provincial Police Act and The Pri- vate Investigators and Security Guards Act. The department provides for provincial policing, as well as municipal policing for many rural communities under contract with the RCMP. The department also supports the development of First Nations policing in Manitoba in response to community needs and interests. The Municipal Act requires every urban municipality with a population of 750 or more to provide its own policing. Municipalities may discharge their obligations to provide policing by creating their own police services, such as Winnipeg or Brandon, or contract for RCMP policing services. Manitoba, in an agreement with the federal government and the Dakota Ojibway Tribal Council, underwrites the cost of a 27-officer force that delivers policing services to five First Nation communities. Correctional centres are built and maintained at provincial expense, but municipalities may provide temporary lockups pending court appearances. The province also provides probation and other community justice services that encompass the whole province and deals with both adult and young offenders. Manitoba’s judicial system is made up of the Court of Appeal in Winni- peg, the Court of Queen’s Bench (13 locations), and the Provincial Court (family and criminal divisions, 15 court locations, and 55 circuit points). The Provincial Court Act was amended in 2006 to redefine the roles of justices of the peace. Three types of justices, each with different powers and duties, were established to meet the needs of the court. Judicial justices of the peace conduct contested bail hearings, issue warrants, and make protection decisions. Staff justices of the peace are civil servants with mainly administrative duties. Community justices of the peace perform limited duties in 70 communities throughout the province. Manitoba’s 2009 budget noted that costs for police, prosecutions, courts, and corrections increased by $24 million over the previous year and, to offset these increased costs, the province increased court costs, small claims court filing fees, and fines for speeding by a total of $4.3 million. The 2008 Manitoba budget provided funding for 20 additional police officers and two additional Crown prosecutors. The budget provided $1.1 million for fire suppression and introduced disability insurance for volunteer firefighters in aboriginal and northern communities.

Saskatchewan Saskatchewan has a provincial police service agreement with the federal government for the use of the RCMP as the provincial police service. Under this agreement, the RCMP provides policing to all rural municipalities and urban municipalities with populations under 500. PROTECTION AND DEFENCE 12:17

Pursuant to the Police Act, 1990, all Saskatchewan communities with populations over 500 are required to provide policing to their own communities. The act does, however, provide communities with several options. Communities may form their own municipal police service, contract with the federal government for the use of the RCMP, or enter into a redistribution program. Communities with populations between 5,000 and 20,000 may use the RCMP as their municipal police force under an agreement with the federal government. Communities with a population over 20,000 must have their own municipal police forces. The RCMP municipal cost redistribution program is a cost-shared formula for all rural municipalities and urban municipalities with populations up to 5,000. Under the program, residents of rural municipalities and urban municipalities that do not have RCMP detachments pay a per capita rate of $32.45, while urban municipalities with a detachment pay a per capita cost of $52.45. The province operates four provincial correctional institutions for adults: three for men and one for women. There are no municipal or county jails apart from overnight lockups. The Court of Appeal sits in Regina on a regular basis and in Saskatoon six times per year on civil appeals only. The Court of Queen’s Bench, Saskatche- wan’s superior court of record, sits in 13 judicial centres and has broad civil and criminal jurisdiction. The Provincial Court of Saskatchewan has jurisdiction for small claims, traffic, youth, and criminal matters. Saskatchewan’s 2008 and 2009 budgets provided funds to hire 30 police officers in each year, as part of the province’s commitment to expand the police force by 120 new officers by 2012. The 2009 budget also provided $30 million to continue modernizing the province’s water bomber fleet and announced that volunteer fire departments will be equipped with new radios linking them to the new provincial emergency radio network.

Alberta There are three types of policing in Alberta: provincial, municipal/regional, and First Nation. The RCMP is the provincial police for Alberta, as established through the provincial police service agreement (PPSA) with the federal government. Under the PPSA, towns or villages with populations of 5,000 or less are policed by the RCMP at no cost to the municipality. The PPSA also provides for policing at no direct cost to all municipal districts and Metis settlements regardless of population, and to First Nation communities where other policing arrangements have not been made. The provincial police service has primary policing responsibility for approximately one quarter of Alberta’s population and has 105 detachments across the province. Cities, towns, or villages in Alberta with populations greater than 5,000 must provide their own police services, by establishing their own independent police service, entering into a regional police service, or entering into an 12:18 FINANCES OF THE NATION 2009 agreement with the federal or provincial government or with another municipality for policing services. Currently, 40 cities and towns contract directly with the federal government for the RCMP, and six municipalities operate their own police services. In addition, one regional service provides policing to two urban municipalities. Municipalities with populations of less than 5,000 do not pay for policing. The RCMP polices most First Nations. There are 16 First Nations communities that have, however, made other policing arrangements through agreements with the province and the federal government. Of these, 5 communities operate four First Nations police services that are staffed with their own officers, appointed by the provincial solicitor general. The remaining 11 communities are policed under special agreements with the RCMP. Alberta currently cost-shares with the federal government the aboriginal community constable program. This policing program provides funding (56 percent from Alberta and 44 percent from the federal government) for 37 RCMP officers at 28 First Nations. The Solicitor General and Public Security department provides an annual policing grant to all municipalities that provide their own policing. The grant, in some cases, is a combination of base payment and added per capita amount. For municipalities with a population over 50,000, the grant is a straight per capita amount. The correctional services division of the Solicitor General and Public Security department administers pre-trial supervision and community and custody sentences through a variety of community and custodial supervision programs for adult and young offenders. Custodial supervision includes inmates who have been remanded to pre- trial custody, young offenders who have been sentenced to varying periods of custody, and adult offenders who have been sentenced to incarceration for a period of less than two years. Alberta operates eight correctional and remand facilities, two correctional camps, two young offender centres, two attendance centres, and more than 40 community corrections offices. Additionally, Alberta maintains contracts with First Nations’ organizations for the delivery of culturally responsive community corrections programs in four areas of the province, as well as a work camp and a minimum security correctional centre for aboriginal offenders. A limited number of federal offenders detained by the federal Correctional Service and Canada Border Services Agency are also held pursuant to agreements between Alberta and the federal government. All courtrooms and judicial offices are supplied by the provincial government. Provincial judges, justices of the peace, medical examiners, registrars of land titles, the sheriff, and other judicial officers, as well as adult probation officers, are paid by the province. The Alberta Court of Appeal is the province’s highest court and normally sits on a regular basis in Edmonton and Calgary. The Court of Queen’s Bench, the province’s superior court of civil and criminal jurisdiction, sits on a regular basis in 11 locations and on circuit in 2 locations. There are 21 permanent and 53 circuit locations of the Provincial Court. PROTECTION AND DEFENCE 12:19

The Calgary Court Centre, which opened in 2007, houses the Court of Queen’s Bench and the four divisions of the Provincial Court. The 2009 Alberta budget provided for 200 more law enforcement officers over the next two years, as well as additional Crown prosecutors.

British Columbia British Columbia is responsible for the provision and operation of the courts and all provincial correctional centres except for municipal lockups, the retention of provincial prisoners after court appearance and sentencing, and all prisoners on remand, all without chargeback to the municipalities. The highest provincial court, the British Columbia Court of Appeal, sits regularly in Vancouver and from time to time in Victoria, Kamloops, and Kelowna. Three to five judges hear appeals from the two lower courts in both criminal and civil cases. The Supreme Court of British Columbia hears civil and serious criminal cases and may also hear appeals from Provincial Court. There are 100 Supreme Court judges and 12 masters who deal with pre-trial matters. Judges are required to reside in the judicial district assigned to them, but they may sit or act at any time in any judicial district. There are eight judicial districts and 27 court registries. The Provincial Court has 88 locations, 44 of which are permanently staffed. There are 150 provincial court judges, including part-time judges. The court has jurisdiction over small claims, family matters, and child protection; adult criminal matters and the criminal trials of youths aged 12 to 17; and traffic and bylaw cases. British Columbia municipalities with populations over 5,000 are required to provide police services within their boundaries. Municipalities may establish their own police force or contract with the RCMP to provide municipal policing. Currently, 11 municipalities are policed by independent municipal police departments. All other municipalities have contracts with the RCMP. Municipalities contracting with the RCMP are bound by a 20-year federal-provincial-municipal agreement that ends in 2012. Municipalities with populations over 15,000 pay 90 percent of the RCMP costs of providing police services, and municipalities with populations between 5,000 and 15,000 pay 70 percent of such costs. The remaining 10 and 30 percent, respectively, are paid by the federal government. Municipalities with populations below 5,000, as well as unincorporated (usually rural) areas, are policed by the RCMP provincial force. A new police financing model was introduced in 2007 that requires those municipalities to pay a more equitable share of their policing costs. Under the new model, less than 50 percent of the total cost for the provincial force will be collected from property taxpayers in these communities. The RCMP, through 44 community tripartite policing agreements between First Nations, Canada, and the province, delivers enhanced policing services to 141 First Nation communities in British Columbia. Two self-administered First Nation policing services in British Columbia serve 12 communities with 12:20 FINANCES OF THE NATION 2009 a total complement of 12 police officers. As well, a policing agreement with the Delta municipal police department provides policing to the Tsawwassen First Nation. Fire suppression is a local responsibility. Under the Fire Services Act, a municipality is required to provide a regular system of inspection for all public buildings in its jurisdiction.

Northwest Territories Responsibility for law enforcement and the administration of justice in the Northwest Territories is shared by the territorial and federal governments. The Northwest Territories Court of Appeal may sit in the territory or in Alberta. Regular sittings are scheduled for Yellowknife. The chief justice of Alberta is the chief justice of the Court of Appeal of the Northwest Territo- ries. Justices of the court include those of the Northwest Territories Supreme Court and the courts of appeal in Alberta and Saskatchewan. The Supreme Court is based in Yellowknife and goes on circuit throughout the territory. The Territorial Court has jurisdiction over civil, family and youth, and adult criminal matters. There are approximately 180 justices of the peace in the Northwest Territories. Policing is carried out under contract by the RCMP. The Northwest Territories has an agreement with the federal Department of Indian Affairs and Northern Development for a special native constables program to carry out certain policing functions within communities. The NWT Department of Justice provides administrative and financial support to the Supreme Court and the territorial courts, both of which travel on circuit to all communities, as required. The department also administers the justices of the peace and coroners programs. The 2008 Northwest Territories budget provided $1.5 million to open additional police detachments and $350,000 to support communities providing ground ambulance and highway rescue services.

Nunavut Nunavut’s Department of Justice administers corrections, community justice, and legal registries. The department is translating all legislation into Inukti- tut. Policing services are provided under contract with the RCMP. The Nunavut Court of Justice is Canada’s only single-level trial court and has jurisdiction to hear any type of case in the territory. The court is based in Iqaluit and travels to Nunavut communities every six weeks to two years, depending on the number of charges in the community. There are, on average, two to three sittings of the Nunavut Court of Justice each week, with at least one travelling court circuit and one court sitting in Iqaluit. Members of the circuit court include a judge, a clerk, a court reporter, an interpreter, a prosecutor, and at least one defence attorney. PROTECTION AND DEFENCE 12:21

Yukon Policing in Yukon is carried out under contract by the RCMP. The Yukon Department of Justice administers justice in the territory, although the federal government retains responsibility for prosecuting criminal offences. The Court of Appeal sits in Whitehorse once a year for one week, but most cases are heard when the court sits in Vancouver. The Court of Appeal consists of judges of the Supreme Court of Yukon, the judges of the Supreme Court of the Northwest Territories, and the judges of the Court of Appeal of British Columbia. The Supreme Court of Yukon sits on a regular basis in Whitehorse and, as required, in some smaller communities. The Territorial Court sits in Whitehorse and is responsible for family matters and youth and adult criminal matters. The Small Claims Court sits in the same locations as the Territorial Court and accompanies it on circuit, as required. The court services branch provides an administrative support system to the courts and court-related agencies. It also provides service and assistance to the general public, special interest groups, and other government agencies in their dealings with the justice system. Specific duties include the operation of registries for the Supreme Court, Territorial Court, and Court of Appeal; Sheriff’s Office; law library; court reporting services; native courtworkers; victim/witness administration; and the maintenance enforcement program. The legal and regulatory services branch develops territorial legislation in both official languages, advises on First Nation land claims, prosecutes territorial offences, provides legal advice to government, and funds programs under the federal/territorial access to justice agreement. The community and correctional services branch provides probation services, operates the Whitehorse correctional centre, funds an adult residential centre in Whitehorse, and provides family violence prevention and victim services programming throughout Yukon. The 2009 Yukon budget provided $21.6 million to continue work on a new corrections facility and treatment centre to replace the Whitehorse Correctional Centre. The budget also provided $719,000 toward the construction of a women’s transition living unit. In addition, $300,000 was provided for a new court registry information system, funding was doubled—to $200,000—for the prevention of violence against aboriginal women fund, and $1.5 million was provided to the Fire- smart program, which is directed at minimizing flammable materials in high- risk areas.

DEFENCE The major military roles of the armed forces are to contribute to (1) sovereignty and defence in Canada; (2) collective defence through the North Atlantic Treaty Organization (NATO), including our continental defence relationship with the United States; and (3) international peace and security through stability and peacekeeping operations, arms control verification, and humanitarian assistance. In addition to its military roles, the Department 12:22 FINANCES OF THE NATION 2009 of National Defence also provides aid to civil authorities and search and rescue services in cooperation with other federal departments and other governments. Defence spending, which by 1998-99 had declined to its lowest level since before World War II, began increasing with the 1999 and 2000 federal budgets. This momentum was accelerated with the 2003 federal budget, which provided the Department of National Defence and the Canadian Forces with the largest budget increase in a decade. Estimated defence spending in 2009-10 is $19.2 billion. The 2008 federal budget increased the automatic annual increase on defence spending to 2 percent from 1.5 percent, beginning in 2011-12. The budget noted that, over the next 20 years, this will provide the Canadian forces with an additional $20 billion. The 2008 budget provided $43 million over two years to the Communications Security Establishment, the national cryptologic agency. In addition, the 2008 federal budget provided an additional $100 million for the reconstruction and development of Afghani- stan, bringing the total assistance budget for that country to an estimated $280 million. The number of aircraft assigned to the North American air defence agreement (NORAD) was increased following the September 11, 2001 terrorist attacks in the United States. Approximately 4,500 Canadian personnel are involved in the international anti-terrorism campaign, including a naval task group, airlift detachments, a battle force working with US forces in Afghanistan, and Joint Task Force Two, a special counter-terrorist force.

International Policy Statement In April 2005, the federal government announced a major defence policy change following the first review of Canada’s defence policy in more than 10 years. The new policy is grounded in the realities of a post-September 11 world and makes Canadian security the first priority for Canadian forces, which will be reorganized to more quickly and effectively respond to domestic crises. The policy paper noted that, since 1990, the number of operations in which Canada’s military has participated has tripled, compared with the period between 1945 and 1989. The number of personnel deployed on foreign operations has frequently exceeded the ceiling of 4,000 set in the 1994 white paper. These challenges have severely strained not only the military’s ability to sustain operations but also the quality of life for the men and women in uniform. Combat missions have also become more common. Canadian armed forces personnel requirements are estimated at 55,618 regular forces and 26,030 civilians in 2009-10. Canadian maritime, air, land, and special operations forces are now integrated under Canada command. National headquarters for the command are in the national capital region. The Canada command consists of six regional headquarters: northern, Pacific, western, central, eastern, and Atlantic. PROTECTION AND DEFENCE 12:23

Under Canada command, the Canadian forces have the ability to deploy three kinds of joint formations: a special operations group to respond to terrorism and threats to Canada around the world, a standing contingency task force to respond rapidly to emerging crises, and mission specific task forces to be deployed as required.

Protection of Canadian Sovereignty The Canadian forces are organized to provide land forces that are trained and equipped to protect Canadian territory, maritime forces for the surveillance and control of the ocean approaches bordering Canada, and air forces to protect Canadian airspace. In order to bolster Canada’s northern presence, operation Nanook, a Canada command sovereignty operation, covers a vast area from Iqualuit to Baffin Island and includes army, navy, and air force units.

Collective Defence Canada was one of the 12 original members of NATO, which began in 1949. Canada remains committed to the principle of collective defence and the collective security framework provided by NATO. Canada’s financial contribution to NATO for 2009-10 is estimated at $188.3 million. Through a series of bilateral agreements with the United States, such as NORAD, Canada participates in the protection of the North American landmass, offshore waters, and airspace approaches. The objectives of NORAD (in effect since 1959) are (1) to safeguard the sovereignty of airspace in Canada and the United States, (2) to deter attacks on North America by providing airspace surveillance and early warning, and (3) to respond to an attack with the forces of both countries should deterrence fail. Since 1985, Canada and the United States have had an agreement to share the costs of modernizing North American air defence. The modernization program consists of the installation of a north warning system (NWS) to replace the distant early warning (DEW) line.

Peacekeeping Peacekeeping has long been a part of Canada’s defence policy. Canada has participated in almost every United Nations (UN) peacekeeping operation to date, as well as a number of operations outside UN auspices. Traditional peacekeeping is no longer the norm. Today, peacekeeping typically involves peace enforcement and combat. Currently, Canada is participating in the rebuilding of Afghanistan and has committed $1 billion over 10 years.

Assistance to Civil Authorities Canadian forces also assist civil authorities with non-military threats. For example, the armed forces help civil authorities deal with the drug trade, oil spills, the illicit use of Canada’s natural resources, political crises where weapons appear, and emergencies that are beyond the capabilities of local 12:24 FINANCES OF THE NATION 2009 police forces. Since 1993-94, the forces have assumed responsibility for the special emergency response team from the Royal Canadian Mounted Police.

National Search and Rescue Program The national search and rescue program is structured to encompass all of Canada’s search and rescue activities within national borders and other areas as defined in various international agreements. The program is funded by contributions from federal, provincial, and local governments. The federal contribution is provided by several departments, including National Defence, Environment Canada, Department of Fisheries and Oceans, Parks Canada, Transport Canada, and the Ministry of the Solicitor General through the RCMP. The Department of National Defence has primary responsibility for air search and rescue and provides secondary support for other types of search and rescue.

Department of National Defence The reserve system consists of primary and supplementary reservists, as well as personnel on the cadet instructor list and the Canadian rangers. With the reduction in the size of the regular force, the army reserve has an even greater role. The Canadian rangers provide a military presence in remote communities and enhance Canadian sovereignty, especially in coastal areas. In Arctic communities, ranger patrols are almost exclusively Inuit.

Capital Expenditures Capital expenditures for 2009-10 by the Department of Defence total an estimated $4,272.9 million. 13 Resource Conservation and Industrial Assistance

Expenditures on natural resources and the environment are primarily directed at encouraging policies for long-term preservation and sustainable development. Assistance to business is intended to promote the growth, stability, and competitiveness of industries; to support entrepreneurs who are establishing or expanding their businesses; and to promote economic development in various regions of Canada.

RESOURCE CONSERVATION All provinces provide assistance to agriculture, fisheries, forestry, and mine and mineral resource activities to the extent that each is significant in the provincial economy. Municipalities generally have no responsibility for natural resources but make significant expenditures on environmental matters such as water purification and supply, sewage collection and disposal, and garbage and waste collection and disposal. The natural resource classification covers agriculture, energy and mineral resources, fisheries and oceans, forestry, and the environment. Federal expenditures on resource conservation and industrial development and the environment are shown in table 13.1 for 2004-5 to 2008-9. Consolidated provincial, territorial, and local government expenditures on resource conservation and industrial development for 2004-5 to 2008-9 are shown in table 13.2. Local government expenditures on this category for 2005 to 2008 are shown in table 13.3.

Agriculture Growing Forward Policy The growing forward policy framework is a national action plan that replaced the former agricultural policy framework (APF) in 2008. It sets out an integrated and comprehensive policy for Canadian agriculture and agri-food. The federal and provincial governments have invested $1.3 billion over five years on a cost-shared 60:40 basis. Programs under the APF were continued to April 2009. Spending on agriculture is shared by the federal and provincial governments. In table 13.4, total federal and provincial expenditure on agriculture is broken down by province and payer government for fiscal years 2004-5 to 2008-9. Spending by the federal government on agricultural programs is estimated at $4.3 billion in 2008-9. Total provincial spending on agriculture is estimated at $3.6 billion for the same year. 13:2 FINANCES OF THE NATION 2009

Table 13.1 Federal Expenditure on Resource Conservation and Industrial Development and the Environment, 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Resource conservation and industrial development Agriculture ...... 3,768 3,744 3,967 3,909 2,015 Fish and game...... 559 471 565 511 570 Oil and gas ...... 359 758 704 2,312 2,865 Forestry...... 112 271 671 829 506 Mining...... — 70 68 66 — Water power ...... — 1 46 2 2 Tourism promotion...... 95 100 93 85 85 Trade and industry ...... 3,018 3,160 2,736 2,764 2,852 Other ...... 1,175 1,306 951 1,073 961 Total...... 9,086 9,881 9,801 11,550 9,856 Environment Water purification and supply ...... 620 627 713 689 784 Pollution control...... 506 624 537 2,127 1,300 Other ...... 697 487 916 827 617 Total...... 1,823 1,738 2,166 3,643 2,700 Source: Statistics Canada, June 2009.

Table 13.2 Consolidated Provincial, Territorial, and Local Government Expenditure on Resource Conservation and Industrial Development, 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador . . . 164 181 233 263 271 Prince Edward Island...... 118 110 150 119 126 Nova Scotia...... 267 254 313 319 326 New Brunswick ...... 249 241 310 288 293 Quebec...... 3,128 3,473 3,744 3,732 3,647 Ontario...... 2,211 2,777 3,001 3,719 3,164 Manitoba...... 502 497 314 525 554 Saskatchewan ...... 1,023 761 779 754 902 Alberta...... 2,071 2,074 2,144 1,913 2,616 British Columbia ...... 1,371 1,318 1,595 1,756 1,702 Northwest Territories...... 107 110 121 126 135 Nunavut...... 51 55 51 56 55 Yukon ...... 75 82 83 81 87 Total...... 11,337 11,933 12,838 13,651 13,878 Source: Same as table 13.1.

Agri Stability, Agri Invest, Agri Recovery, and Agri Insurance The agri stability program is based on margins. A producer receives a payment when the current-year program margin falls below 85 percent of the reference margin. The program margin is the allowable income minus allowable expenses in a given year, with adjustments for receivable, payable, and inven- tory adjustments. The reference margin is a participant’s average program RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:3 xxxx Table 13.3 Local Government Expenditure on Resource Conservation and Industrial Development, 2005 to 2008 Province/territory 2005 2006 2007 2008 thousands of dollars Newfoundland and Labrador ...... 5,196 3,834 6,747 4,137 Prince Edward Island...... 968 2,730 1,497 987 Nova Scotia...... 15,912 23,066 19,123 29,189 New Brunswick ...... 19,390 25,198 24,524 22,868 Quebec...... 415,510 398,136 382,852 376,523 Ontario...... 539,187 581,611 612,424 627,431 Manitoba...... 36,695 36,550 39,597 39,115 Saskatchewan ...... 30,230 30,473 33,745 48,988 Alberta...... 149,901 164,516 176,299 202,290 British Columbia ...... 71,850 117,068 140,887 167,640 Northwest Territories...... 2,436 2,047 3,033 3,639 Nunavut...... 1,316 1,516 2,081 2,179 Yukon ...... 618 835 676 1,210 Total...... 1,289,209 1,387,580 1,443,485 1,526,196 Source: Same as table 13.1. margin for three of the past five years (lowest and highest margins are not included in the calculations). The 2009-10 Main Estimates provide $594.3 million for the agri stability program. The agri invest program helps producers protect their margin from small declines. Agri invest replaces the coverage for margin declines of less than 15 percent. Each year, producers make a deposit into their agri invest account and receive a matching contribution from the federal and provincial governments. The federal government provided an initial $600 million to the agri invest account and the 2009-10 Main Estimates provide contributions that total $159.5 million. Producers are encouraged to participate in both the agri insurance and agri stability programs. Agri insurance protects against production losses, and agri stability covers margin declines. Under the agri stability program, coverage is provided for production and asset losses caused by natural perils. The agri recovery program allows federal and provincial governments to jointly respond to natural disasters such as disease or weather events. When assistance is warranted, it is in a form unique to the specific situation. The 2009-10 Main Estimates provide $54.2 million for grant payments under the program. In August 2009, the federal government announced new initiatives to assist Canada’s hog producers struggling with record low prices for pork and concerns regarding the H1N1 virus. Among the new initiatives was an international pork-marketing fund of $17 million to find new customers for Canadian pork and for market research and promotion. As well, the federal government will provide long-term credit for operating costs such as feed and payroll, and $75 million to help producers transition out of the hog industry and gradually reduce production and oversupply issues. The Main Estimates for the Agriculture and Agri-food department provide $440.6 million for agri insurance in 2009-10. 13:4 FINANCES OF THE NATION 2009

Table 13.4 Federal and Provincial Government Expenditure on Agriculture, 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador Federal...... 11.6 14.0 9.1 13.2 13.1 Provincial ...... 10.7 14.9 15.5 18.1 35.3 Prince Edward Island Federal...... 46.3 31.1 40.5 36.2 38.1 Provincial ...... 38.8 31.6 28.3 44.0 31.9 Nova Scotia Federal...... 34.9 35.6 44.0 41.4 47.5 Provincial ...... 49.0 47.3 45.6 66.1 51.8 New Brunswick Federal...... 45.9 33.1 47.9 52.9 48.5 Provincial ...... 32.0 26.7 25.0 30.3 31.8 Quebec Federal...... 523.6 537.4 529.3 650.7 534.0 Provincial ...... 708.7 842.4 958.3 1,026.5 1,090.6 Ontario Federal...... 668.7 796.4 753.6 903.1 1,062.3 Provincial ...... 579.5 540.9 513.2 719.4 560.9 Manitoba Federal...... 469.3 604.3 518.4 559.2 476.7 Provincial ...... 204.8 300.3 248.1 289.8 265.7 Saskatchewan Federal...... 986.9 1,147.7 1,073.7 854.1 640.7 Provincial ...... 458.9 490.0 421.2 331.3 403.9 Alberta Federal...... 891.7 1,054.9 924.6 752.5 704.2 Provincial ...... 826.1 868.6 967.9 640.9 1,056.7 British Columbia Federal...... 238.1 160.7 201.7 215.3 193.3 Provincial ...... 80.4 62.0 73.9 100.9 87.9 Other Federal...... 422.0 437.1 473.9 434.8 493.7 Provincial ...... — — — — — Total Federal...... 4,339.0 4,852.2 4,616.5 4,513.5 4,252.1 Provincial ...... 2,988.9 3,224.6 3,297.0 3,267.3 3,616.3 Source: Agriculture and Agri-Food Canada, Strategic Policy Branch, Data Book, April 2009.

Food Safety and Quality 1) Canadian Food Inspection Agency Federal food inspection and quarantine-related services are carried out by the Canadian Food Inspection Agency (CFIA). Created in 1997, the agency amalgamated the inspection and related services previously provided by four federal departments. CFIA delivers 14 inspection programs related to foods, plants, and animals in 18 regions across the country. Expenditures of CFIA are considered spending on protection and are included in chapter 12.

Other Agriculture Programs The federal government carries out research and development to improve the long-term marketability of Canadian agricultural products and inspects and RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:5 regulates agricultural products. The National Farm Products Council supervises the activities of the agencies set up to administer national and regional marketing plans. Provincial governments provide technical assistance and specialized advice and training to the agriculture industry. They set grading and quality standards for provincial agricultural products and have arranged for or established inspection facilities to maintain these standards. Federal food inspection and quarantine-related services are carried out by CFIA. Provincial legislation has been passed to allow producer-run marketing boards for a number of specific commodities. Some of these boards use production or marketing quotas to adjust supply and demand balance without destroying the price structure. Various provincial agencies provide low-interest or guaranteed loans to new farmers beginning operations and to existing farmers who are expanding or diversifying. The stability, diversification, and growth of farmlands in Manitoba, Saskatchewan, Alberta, and the Peace River region of British Columbia are promoted through a variety of soil and water conservation and development programs.

Canadian Dairy Commission The federal government, through the Canadian Dairy Commission, coordinates a market-sharing system for industrial milk and cream used in manufactured dairy products. The national market-sharing quota is divided among the provinces according to shares determined for each province by the Canadian Milk Supply Management Committee. The commission determines the target price for milk and administers direct subsidies to dairy farmers for manufacturing milk and cream. The commission also supports prices through a nationwide offer to purchase butter and skim milk powder.

Energy and Mineral Resources The federal Department of Natural Resources develops comprehensive policies for the sustainable development of energy and mineral resources, administers federal programs, and undertakes technical surveys and research. Various branches of the department perform research and development in mineral and energy technology, perform geological surveys, and provide maps, remotely sensed data, and geographically referenced information on the Canadian landmass. All provinces except Prince Edward Island have significant mineral resources. Provincial assistance to the mining and petroleum industries includes geophysical and geological surveys and maps, research, exploration, developing and upgrading native materials, allocating and protecting mineral rights, and mine safety programs. In certain cases (for example, Saskatche- wan’s potash and Alberta’s oil), the province controls production and sales. Provincial and territorial expenditures on energy and mineral resources are included in the totals for resource conservation and industrial assistance in table 13.2. 13:6 FINANCES OF THE NATION 2009

Megaproject agreements with the private sector and provincial governments, such as Hibernia, are negotiated and monitored by the federal government.

National Energy Board The National Energy Board (NEB) was established in 1959 to ensure the best use of energy resources in Canada. The board has two principal responsibilities: to regulate specific areas of the oil, gas, and electrical industries in the public interest; and to advise the government on the development and use of energy resources. The 2009-10 federal Main Estimates provide $44.4 million for expenditures of the NEB.

Fisheries and Oceans Canada can claim the world’s longest coastline, largest offshore economic zone, largest freshwater system, and longest inland waterway. Seafood is the single largest food commodity exported by Canada, placing Canada as the fifth largest global seafood exporter in an industry valued at about $5 billion annually. Annual commercial catches in the country’s fisheries are valued at about $2 billion. The value of annual aquaculture production is estimated at over $700 million. The federal Department of Fisheries and Oceans is responsible for fisheries management, conservation, and development on both coasts and in inland waters in the Atlantic provinces and in the Northwest Territories and Yukon. The department is also responsible for oceanographic research, hydrographic charting, and administering small craft harbours. The Canadian Wildlife Service manages the fisheries in national parks. The inland provinces (Quebec, Ontario, Manitoba, Saskatchewan, and Alberta) and British Columbia have considerable responsibility for their own freshwater fisheries. In provinces with commercial fishing industries (mainly the Atlantic provinces and British Columbia), the provincial government role in fisheries assistance is similar to its role in agriculture. The main programs include loan assistance, standard setting and enforcement, support for processing and storage facilities, and research and marketing assistance. In provinces with aquaculture, the provincial government’s role includes licensing producer and farm sites, market development assistance, and helping producers adopt effective production and management techniques. The federal Department of Fisheries and Oceans sets fisheries’ quotas, gear restrictions, and season closures, and issues licences for fishers and vessel registrations. Since 2005, the federal government has operated a full-time aerial surveillance program on the Pacific coast. The program operates year-round in a patrol area that extends from coastal British Columbia, including the headwaters of major inlets, to the 200-nautical-mile limit of Canada’s economic zone. Patrols identify vessels and their activities, document and report oil spills, monitor marine mammals, report on threats to fish habitats, and assist with search and rescue. RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:7

The federal government announced in July 2007 that it would provide $175 million to support one fishery for British Columbia. The funds will be provided over five years and will be used to enhance catch monitoring and reporting, strengthen enforcement, and facilitate greater participation in a wide range of commercial fisheries by First Nations throughout British Columbia. Under the 1999 Canada-US agreement on the management and conservation of Pacific salmon, both countries cooperate to conserve salmon stocks and protect their habitat. The federal government negotiates agreements on fish habitat management with the provinces. To date, Prince Edward Island, Nova Scotia, Manitoba, and British Columbia have signed such agreements. The federal department enforces the Fisheries Act and regulations with aerial surveillance and vessel patrols. Federal expenditures on fisheries and oceans are estimated at $1,641.5 million in 2009-10.

Forestry The provinces own 77 percent of the inventoried forest land of Canada. The federal government owns 16 percent; the remainder is under private ownership. About 22.8 million hectares are in their natural state and another 27.5 million hectares are protected from timber harvesting. Commercial forests cover about 235 million hectares. Provincial government departments manage and protect unoccupied Crown lands and supervise the timber harvest and subsequent replanting where necessary. They construct forest access roads or contribute to the private construction of such roads. Technical assistance is also available to private operators for silviculture, reforestation, woodlot management, inventories of timber resources, and new methods of harvesting and product use. The federal forest program includes protection, management, and utilization of Canada’s forest resources in cooperation with the provincial governments, research and educational institutions, and the forestry industry. Its research is based in six regional establishments that concentrate on issues of local concern and two national centres (the National Forestry Institute and the Forest Pest Management Institute). Forest products research is shared with industry. Research is conducted on forest production, protection from insects and disease, environment, and use to mitigate the effects of climate change, acid rain, and other pollutants on forest resources.

Forest Development Agreements The Canadian Forest Service promotes the sustainable development of Canada’s forests. Because forestry is primarily a provincial responsibility, the activities of the federal forest program are directed through federal-provincial shared-cost forest development agreements. The federal Department of Natural Resources is responsible for the subsidiary forestry agreements with the provinces. The agreements direct federal and provincial funds toward four activities: regeneration of harvested lands destroyed by disease, fire, or insects; forest management research; public communications; and evaluation of program impacts. 13:8 FINANCES OF THE NATION 2009

The Canadian Forest Service, in cooperation with the Department of Indian Affairs and Northern Development, implemented the First Nations forestry program. The program creates jobs, encourages viable forestry operations, and builds forest management skills in First Nations communities.

Environment Climate Change for Canada In April 2007, the federal government introduced its new action plan to reduce greenhouse gases (GHG) and air pollution. The new plan imposes targets on industry, and companies may choose the most cost-effective way to meet their targets from a wide range of options. The federal “turning the corner” plan is committed to reducing greenhouse gases by 20 percent by 2020. Greenhouse gas regulations are expected to be finalized in 2009 and come into force on January 1, 2010. In April 2008, the federal government introduced measures designed to reduce smog-contributing emissions from chemicals in consumer and commercial products, such as paints, varnishes, adhesives, and vehicle repair cleaners. The federal government introduced concentration limits of volatile organic compounds in 98 categories of consumer products; established concentration limits for 14 categories of coatings and surface cleaners used for refinishing or repairing the painted surfaces of automobiles, trucks, and other mobile equipment; and established concentration limits for 49 categories of architectural coatings, such as paints, stains, and varnishes. The federal government offers an offset system and credits for early action on reducing emissions. The credit for early action program is designed to recognize those facilities that took verified early action to reduce greenhouse gases between 1992 and 2006. The program will provide a one-time allocation of credits for facilities that could be subjected to the proposed industrial air emissions regulations in 2010. The early action credit budget is five megatonnes of carbon dioxide equivalent. A maximum of five megatonnes of early action credits will be allocated for use in each of 2010, 2011, and 2012. Federal expenditures on the environment are estimated at $2,700 million in 2008-9, as shown in table 13.1. Consolidated provincial, territorial, and local government expenditure on the environment is estimated at $14.8 billion for 2008-9, as shown in table 13.5. Expenditures on the environment by the provincial and territorial governments are shown in table 13.6 for fiscal years 2004-5 to 2008-9 and are estimated to total $2.8 billion in 2008-9. Local government responsibility for environmental expenditures includes water distribution, sewage treatment, and waste disposal. The estimates for local expenditures on these functions for 2008 are shown in table 13.7. The federal action plan for clean water has committed $96 million to restore Lake Winnipeg, Lake Simcoe, and areas of concern in the Great Lakes. The plan is in addition to other initiatives, such as the $33 billion infrastructure investment to help municipalities and First Nations upgrade their wastewater treatment facilities. RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:9

Table 13.5 Consolidated Provincial, Territorial, and Local Government Expenditure on the Environment, 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador . . . 120 148 147 150 125 Prince Edward Island...... 38 51 59 48 44 Nova Scotia...... 254 314 330 376 387 New Brunswick ...... 238 240 252 274 291 Quebec...... 2,077 2,398 2,507 2,711 3,349 Ontario...... 4,382 4,730 5,140 5,419 5,065 Manitoba...... 270 337 399 405 455 Saskatchewan ...... 306 337 343 381 500 Alberta...... 1,053 1,518 1,722 2,025 2,318 British Columbia ...... 1,358 1,495 1,566 1,737 2,075 Northwest Territories...... 56 38 32 37 41 Nunavut...... 42 59 61 64 57 Yukon ...... 22 23 22 30 49 Total...... 10,216 11,688 12,580 13,657 14,756 Source: Same as table 13.1.

Table 13.6 Provincial and Territorial Expenditure on the Environment, by Province and Territory, 2004-5 to 2008-9

Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador . . . 63 76 87 97 133 Prince Edward Island...... 23 29 30 38 42 Nova Scotia...... 54 44 43 62 63 New Brunswick ...... 56 38 73 57 60 Quebec...... 495 524 703 700 712 Ontario...... 421 363 407 448 533 Manitoba...... 55 74 75 66 71 Saskatchewan ...... 106 95 110 109 117 Alberta...... 242 479 473 593 723 British Columbia ...... 253 247 269 291 319 Northwest Territories...... 25 6 12 7 12 Nunavut...... 14 18 18 22 21 Yukon ...... 14 14 13 17 23 Total...... 1,821 2,007 2,313 2,507 2,829 Source: Same as table 13.1.

In August 2009, the federal government announced new regulations for managing municipal wastewater. The regulations will set national standards and monitoring and reporting requirements and cover more than 4,000 wastewater treatment facilities. Federal expenditures on the environment are made through the Depart- ment of the Environment and the Department of Indian Affairs and Northern Development. The Department of the Environment is responsible for the protection of water, air, and soil quality; renewable resources; meteorology; and international environmental agreements. 13:10 FINANCES OF THE NATION 2009

Table 13.7 Local Government Expenditure on the Environment, by Province and Territory, 2008 Water Sewage Garbage and purification collection waste collection Province/territory and supply and disposal and disposal Other Total thousands of dollars Newfoundland and Labrador...... 51.7 22.1 16.5 0.5 90.9 Prince Edward Island..... 4.5 6.0 .. 1.5 12.1 Nova Scotia...... 58.9 133.3 154.4 0.8 347.4 New Brunswick ...... 115.2 62.6 75.8 1.6 255.2 Quebec...... 1,362.8 814.4 832.9 81.8 3,091.9 Ontario ...... 1,635.1 1,708.0 1,127.2 90.7 4,561.0 Manitoba...... 206.3 108.8 54.3 24.7 394.1 Saskatchewan ...... 213.7 131.6 59.2 6.5 410.9 Alberta...... 618.1 654.2 400.3 22.2 1,694.9 British Columbia ...... 804.7 594.0 432.6 30.5 1,861.7 Northwest Territories..... 21.9 11.3 6.2 .. 39.4 Nunavut...... 22.0 14.7 3.6 0.6 40.9 Yukon ...... 9.9 12.7 3.6 .. 26.2 Total...... 5,124.8 4,273.7 3,166.6 261.4 12,826.6 Source: Same as table 13.1.

In an effort to reduce costs and streamline operations, the federal government has forged partnerships with other organizations and governments. International agreements include the North American agreement on environmental cooperation; an agreement for the conservation and enhancement of the environment in Canada, the United States, and Mexico; the North American waterfowl management plan; and the Canada-US Great Lakes water quality agreement. Most provincial governments have concluded agreements with the federal government to eliminate the duplication of programs and achieve a more streamlined, coordinated approach to protecting the environment. In 2004, the federal and US governments integrated their weather prediction systems and agreed to collaborate more closely on air quality forecasting and monitoring. Environment Canada assists in controlling pollution and cleaning up pol- luted sites and also functions as Canada’s national weather service. It provides meteorological and ice-reporting services to the public, the departments of National Defence and Transport, other government departments, and industry. It also manages the Great Lakes water quality agreement, monitors toxic chemicals in the Arctic, operates a national archive of atmospheric pollution data, and performs research on air quality. Total federal expenditures on the environment are estimated at $1,057.4 million in 2009-10. Of the total, $32.0 million will be spent by the Canadian Environmental Assessment Agency.

Environmental Protection Act Under the Canadian Environmental Protection Act, a framework is provided for the Department of the Environment to coordinate federal and provincial RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:11 environmental protection laws. The act sets out national standards to regulate the use of toxic chemicals.

Water Distribution, Sewage Treatment, and Waste Disposal Water purification and distribution systems and sewage treatment systems are mainly the responsibility of local governments, but the federal government and most provinces subsidize the related capital costs to some degree. Neighbour- ing municipalities may cooperate to establish a joint water authority or sewage treatment plan. Environmental controls at the provincial level regulate the building and placement of all such facilities. Urban municipal governments are responsible for garbage collection and disposal; waste disposal committees have jurisdiction in unorganized areas. Local authorities or private firms under municipal contract collect the refuse. Table 13.7 shows the estimated 2008 expenditures of local governments on water purification and supply, sewage collection and disposal, and garbage and waste collection and disposal. In Newfoundland and Labrador, water and sewage treatment and distribution and collection systems are provided by municipalities or quasi-municipal organizations and are subsidized by the provincial government. Nova Scotia provides financial assistance for municipal water supply, sewage disposal and solid waste studies, and capital projects. The Resource Recovery Fund Board (RRFB), a not-for-profit organization, provides municipalities with funding according to the quantity of municipal solid waste diverted. RRFB also provides funding for municipal and private sector initiatives that lead to greater diversion of municipal solid waste. Nova Sco- tia’s comprehensive drinking water strategy requires the Environment and Labour department to issue approvals for all construction and operation of water treatment and distribution facilities. In New Brunswick, municipalities or local commissions own and operate their own water and wastewater collection and treatment systems. Capital projects can be cost-shared through the Canada-New Brunswick infrastructure program or the Canada-New Brunswick municipal rural infrastructure fund agreement, with the municipal, provincial, and federal governments each providing 33.33 percent of the funds. Municipalities and the Department of Local Government provide for the collection of solid waste with disposal at regional landfills that are owned, operated, and maintained by regional solid waste commissions. Costs for water and wastewater systems are paid for with a combination of user fees and municipal taxes. Solid waste management is paid for through property taxation revenues. In Quebec, a public corporation carries out studies for the planning, design, and rehabilitation of municipal sewerage and sewage treatment systems. The corporation may also, with the agreement of the municipalities, design, construct, finance, and operate sewage treatment plants for municipalities or carry out rehabilitation work on municipal sewage systems. Quebec municipalities collect, transport, process, and dispose of their own municipal waste. Two provincial organizations offer funding for the recovery and reuse of solid 13:12 FINANCES OF THE NATION 2009 wastes. Recyc-Québec, a provincial Crown corporation, manages funding for recycling and educational school projects. Ontario municipalities are responsible for a wide range of public infrastructure assets, including drinking water and sewage and solid waste management infrastructure. Several federal-provincial assistance programs provide municipalities with access to capital grant funding. Infrastructure Ontario, a provincial Crown corporation, provides municipalities with low- interest, long-term loans for public infrastructure projects. Manitoba created the Water Stewardship department to protect and manage the province’s water supply. Manitoba’s Office of Drinking Water protects the province’s drinking water and monitors its quality. The province waives fees for bacteriological testing of private drinking water wells that have been affected by flooding. Saskatchewan’s safe drinking water strategy guides the management and improvement of municipal, semi-public, and larger commercial water and wastewater systems in the province. Significant improvements have been made to the monitoring of drinking water quality, and the province is moving to strengthen the protection of source water. Grants for the improvement of water and wastewater infrastructure are available on a priority, cost-shared basis. Additional funding is available for water and wastewater infrastructure through the Canada-Saskatchewan municipal rural infrastructure fund. Saskatchewan has implemented recycling initiatives for drink containers, used motor oil, and scrap tires. Recycling programs are also being implemented for paint and electronic waste. Provincial assistance to municipalities in Alberta for sewerage and water treatment facilities is based on population. It ranges from 75 percent for the first 600 inhabitants in the municipality to 50 percent for populations of 601 up to 100,000. In the Northwest Territories and Yukon, municipalities are responsible for providing adequate water services and sewage and solid waste disposal facilities. The territorial governments assist municipalities with the costs of implementing these systems. In unincorporated communities, the territorial governments assume responsibility for water and sewerage systems.

INDUSTRIAL ASSISTANCE Federal and provincial industrial and regional assistance programs are designed to assist the development of viable industries in Canada. Federal expenditures on industrial development for 2004-5 to 2008-9 are included in the totals shown in table 13.1. Consolidated provincial, territorial, and local expenditures on the same category for 2004-5 to 2008-9 are shown in table 13.2. Table 13.3 covers local government expenditures for 2005 to 2008. Provincial activities often parallel and supplement federal programs. Federal-provincial programs are usually administered by the province. Joint programs specific to certain client groups, such as agriculture or tourism, are managed by individual ministries in some provinces. Other provinces cus- RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:13 tomarily group under one department the programs for industrial promotion; assistance and incentive measures for new or expanding industries, services, or artisans; and domestic marketing and export assistance. Federal programs are expected to cost $2.5 billion in 2009-10; the major programs appear in the Estimates of Industry Canada and the agencies set up to encourage development outside the metropolitan areas of Canada.

Trade, Industrial and Regional Development, and Tourism Provincial governments have become increasingly involved in encouraging and developing tourism and with the processing, manufacturing, and service industries. Most provinces have established separate departments or branches to provide assistance, standard setting and enforcement, and advertising for their tourist industries. Provincial industrial assistance can be given as grants, tax or other incentives (such as electrical discounts to newly established industries), loans, loan guarantees, equity financing, basic scientific research, technical assistance, management and marketing consulting, joint marketing facilities, special training courses, rental accommodation, and servicing for industrial sites or parks. By taking the initiative, the provincial governments hope to increase personal income and employment, balance fluctuations that affect economies that are heavily dependent on the production and export of foodstuffs and raw materials, and provide alternative employment for capital and labour currently engaged in extracting non-renewable resources. These measures are also designed to reduce income disparities between rural and urban citizens and between provinces and to reduce the migration from certain areas or from a province as a whole. The federal expenditures in the 2009-10 Estimates that have been classified as trade and industrial development and tourism total $2,549.8 million, as follows: $ million Industry Canada ...... 1,391.7 Development agencies ...... 943.8 Other...... 214.4 Total ...... 2,549.8

Industry Canada The Department of Industry includes programs to improve the competitiveness of the manufacturing, processing, telecommunication, and tourism sectors of the economy. The department is responsible for the Ontario community futures and northern Ontario development programs, which assist economic development in Ontario. The department also assists aboriginal people develop a stronger business and capital base and promotes aboriginal self-reliance through greater participation in the economy. The 2009-10 Estimates of In- dustry Canada provide $21.8 million for community futures, $37.8 million for the northern Ontario development program, and $128.6 million to the Canada Foundation for Innovation. 13:14 FINANCES OF THE NATION 2009

Manufacturing and processing industries are provided with financial support, industrial and market intelligence, new technologies, and trade and investment brokering services. Tourism programs work with industry, provinces, and territories to promote Canada as a desirable tourist destination in the international marketplace. Canadian business service centres are one-stop centres that provide businesses with information on federal, provincial, and municipal programs, regulations, and services.

Development Agencies Atlantic Canada Opportunities Agency The Atlantic Canada Opportunities Agency (ACOA) will spend an estimated $332.4 million in 2009-10 to promote economic development in Atlantic Canada, particularly through assistance to small and medium-sized businesses. The agency was established in 1987 to develop and implement programs that contribute to the long-term economic development of Atlantic Canada. ACOA’s branches carry out programs that enhance the economy of the Atlantic region. The federal government and four Atlantic provinces share information and coordinate economic programs throughout the region. The agency provides direct financial assistance to business and creates provincial-private-sector partnerships to develop various sectors of the economy. ACOA also manages the fisheries alternatives program, which helps fishery-dependent communities diversify their local economies.

Enterprise Cape Breton Corporation Enterprise Cape Breton’s primary purposes are to promote and assist the financing and development of industry other than coal production on Cape Breton Island. Financial assistance includes grants, contributions (repayable and non-repayable), interest buydowns, loan insurance, and loan equity. The corporation will spend an estimated $8.7 million on such activities in 2009-10.

Western Economic Diversification Western Economic Diversification Canada is mandated to promote the development and diversification of the four western provinces. Unlike ACOA, over 70 percent of Western Economic Diversification’s contributions to business are repayable. Total transfers of $190.2 million include $180.8 million in contributions to projects that enhance the economic development and diversification of western Canada, and $3.5 million to western small and medium-sized enterprises in strategic growth industries.

Economic Development Agency: Quebec The Main Estimates of the Economic Development Agency of Canada for the Regions of Quebec provide $239.4 million in transfer payments and $47.0 million for operating expenditures in connection with the promotion of economic development in areas of low income and slow economic growth in RESOURCE CONSERVATION AND INDUSTRIAL ASSISTANCE 13:15

Quebec. The program concentrates on assisting small and medium-sized enterprises and developing entrepreneurial talent.

Canadian International Development Agency The Canadian International Development Agency (CIDA) is responsible for most of the official development assistance to less developed countries and also allocates funds for Canadian and international development initiatives.

Other National Research Council The 2009-10 Main Estimates of the National Research Council (NRC) provide $126.3 million to assist Canadian firms develop, acquire, and exploit technology. The industrial research assistance program (IRAP) is a national service network that provides technical advice and financial assistance to Canadian industry for research and development. Costs of IRAP projects are shared by individual firms and the NRC.

Canada Small Business Financing Act The Canada Small Business Financing Act 1998 assists businesses (except farming, charitable, and religious enterprises, which are covered by separate legislation) to obtain term loans and capital leases of up to $250,000. The loans are made directly by a qualified lender. Small businesses eligible for loans under the act are those whose estimated annual gross revenues do not exceed $5 million during the fiscal year in which they apply for a loan or lease. In addition to the loan program, small businesses may access capital lease financing for new or used equipment. The Small Business Loans Act continues to apply to loans made before April 1, 1999. The 2009-10 Estimates of Industry Canada provide $83.9 million for liabilities under the Canada Small Business Financing Act and $1.7 million for liabilities under the Small Business Loans Act.

RESEARCH ESTABLISHMENTS In 2009-10, the federal government will spend an estimated $1,958.2 million on research activities. Comparable data for this function are not available for provincial, territorial, and local governments. Four federal agencies—the National Research Council, the Natural Sciences and Engineering Research Council, the Canadian Space Agency, and Atomic Energy of Canada Limited—are responsible for most of this spending.

National Research Council The NRC, the federal government’s primary research and development organization, will spend an estimated $564.6 million in 2009-10. The council maintains scientific and technical facilities across Canada. Its laboratories are subdivided into 20 institutes organized into three key areas: physical sciences and engineering, life sciences and information technology, and technology and industry support. Although most of the laboratories are located in the national 13:16 FINANCES OF THE NATION 2009 capital region, regional laboratories operate in Halifax; St. John’s; Montreal and Boucherville, Quebec; Winnipeg; Saskatoon; and Vancouver. The NRC maintains astronomical observations, national physical standards and measurements, and standards for construction materials (such as time standards and primary calibration checks), and supports research into setting measurement standards for mass, length, electrical resistance, voltage, tem- perature, and luminous intensity.

Natural Sciences and Engineering Research Council The Main Estimates of Industry Canada provide $45.5 million for the 2009-10 operating expenditures of the Natural Sciences and Engineering Research Council and $922.9 million for grants and scholarships. The council promotes and assists research in universities to ensure that Canada has an adequate supply of highly qualified people in science and engineering. Its major activity is providing grants and scholarships mainly, but not exclusively, to Canadian universities and affiliated institutions. Private sector contributions to university research are matched by the federal government.

Canadian Space Agency The Canadian Space Agency (CSA) promotes the peaceful use and development of space and ensures that the scientific and technical advantages associated with space-related research benefit Canadians. To maximize the benefits of its space-related expenditures, Canada enters into cooperative agreements with other countries. Canada’s chief partners are the National Aeronautics and Space Administration in the United States and the European Space Agency. CSA will spend an estimated $315.5 million on research in 2009-10.

Atomic Energy of Canada Limited Atomic Energy of Canada Limited (AECL) operates national nuclear laboratories at Chalk River, Ontario and Whiteshell, Manitoba to provide a multi- disciplinary technology base for the Canadian atomic energy program. An extended shutdown of the Chalk River reactor in 2008 and 2009 resulted in a severe shortage of medical isotopes in Canada and abroad. AECL’s mandate is to secure for Canada a safe, reliable, long-term energy supply; increase the use of atomic energy to overcome future energy shortages; secure the CANDU option by improving reactor efficiency, integrity, and safety; and demonstrate the safe management of radioactive wastes and other byproducts. In 2009-10, AECL will spend about $108.7 million on operating expenses. 14 Other Expenditures

This chapter brings together government expenditures on various functions not covered in other sections. The spending categories covered here are foreign affairs and international assistance, citizenship and immigration, labour and employment, housing, and recreation and culture. Foreign affairs and international assistance and citizenship and immigration are primarily federal responsibilities. Governments at all three levels make financial commitments to labour and employment, housing, and recreation and culture. Federal expenditures on these functions for 2009-10 are estimated as follows: $ million Foreign affairs and international assistance...... 6,010.7 Citizenship and immigration ...... 1,471.7 Labour and employment ...... 3,486.3 Housing...... 2,044.7 Recreation and culture ...... 2,453.3 Federal expenditures from 2004-5 to 2008-9 on these functions are shown in table 14.1.

FOREIGN AFFAIRS AND INTERNATIONAL ASSISTANCE Federal expenditures in 2009-10 for foreign affairs and international assistance are expected to total $6,010.7 million.

Canadian Interests Abroad The Department of Foreign Affairs and International Trade (Foreign Affairs) implements the federal government’s foreign policy by supervising relations between Canada and other countries; represents Canada in foreign countries and at international conferences; analyzes and evaluates events abroad that have a bearing on Canadian interests; coordinates government programs abroad (such as export promotion, development assistance, defence relations, and environmental concerns); and assists Canadians travelling abroad. The department’s international commerce branch presides over all international trade programs. The Department of Foreign Affairs and International Trade is managed by the minister of foreign affairs, the minister of international trade, and the minister for international cooperation. The minister for foreign affairs oversees the International Development Research Centre, the International Joint Commission, and the International Centre for Human Rights and Democratic Development. The minister for international cooperation is responsible for the Canadian International Development Agency (CIDA). The minister for international cooperation is also responsible for Francophonie and Official xxxx

14:1 14:2 FINANCES OF THE NATION 2009

Table 14.1 Federal Expenditures on Other Functions, Fiscal Years 2004-5 to 2008-9 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Recreation and culture...... 4,235 4,191 4,323 4,347 4,232 Labour, employment, and immigration ...... 1,926 1,976 2,102 2,229 1,714 Housing...... 2,072 2,119 3,502 2,155 2,220 Foreign affairs and international assistance...... 5,561 5,586 6,502 6,215 6,513 Total...... 13,794 13,872 16,429 14,946 14,679 Source: Statistics Canada, June 2009.

Languages. The department is organized into two geographic branches, North America, which concentrates on the United States and Mexico, and the bilateral relations branch, which covers the rest of the world. The Department of Foreign Affairs and International Trade (international commerce branch) is also responsible for the Export Development Corp., the Canadian Commercial Corporation, the Northern Pipeline Agency, and the North American free trade agreement (NAFTA). The Passport Office is a special operating agency within the department. Foreign Affairs Canada operates in Canada through local and regional passport offices and a network of trade commissioners in regional offices. Outside Canada, the department operates through embassies, high commissions, consulates, and satellite offices.

United Nations The total allocated to foreign affairs includes expenditures on membership fees, contributions to international organizations, and the Canadian share of the operating and capital expenses of the United Nations (UN). The 2009-10 estimates of the Department of Foreign Affairs includes $80.6 million to the United Nations Organization, $189.9 million to UN peacekeeping operations, and $17.6 million to the World Health Organization. The operating costs of the United Nations are divided among member states on the basis of a formula that reflects their total gross national product, adjusted for a series of factors that includes per capita income and population. Canada is the fifth largest financial contributor to the United Nations and pays its assessment of the expenses of the United Nations and other international organizations through Foreign Affairs.

Foreign Aid Canadian International Development Agency Since its creation in 1968, CIDA has been the main conduit for Canadian official development assistance (ODA) to more than 120 developing countries and regions. Aid programs promote prosperity and employment, protect global security, and affirm the national concern for social justice and, as such, are an integral part of Canada’s foreign policy objectives. ODA funding is allocated OTHER EXPENDITURES 14:3

50 percent to multilateral programs involving Canada and other nations and 50 percent to geographic or bilateral programs and contributions to development projects decided on by the federal government. Each year Cabinet establishes five-year bilateral planning figures for every country eligible for development assistance using criteria that take account of the country’s needs, its human rights record, the quality of its economic and social policies, and Canada’s political and economic relations with the country. Cabinet considers information on human rights situations annually as part of the process of determining which channels of Canadian assistance may be used and what level of bilateral assistance to apply to each potential recipient. Bilateral aid is reduced or denied in countries where human rights violations are continuous, gross, and systematic. In these countries, multilateral organizations distribute aid at the grassroots level. Africa and the Middle East, which are made up of 66 countries and approximately 900 million people, account for over 50 percent of the bilateral aid budget of the Department of Foreign Affairs and International Trade. Of the 48 countries that the UN has designated as least developed, 33 are in Africa. The 2009-10 Main Estimates provide $3,069.3 million for CIDA’s expenditures on international assistance.

International Development Research Centre The federal government will spend an estimated $161.8 million on the International Development Research Centre (IDRC) in 2009-10. The IDRC supports and conducts research into the problems of the developing regions of the world and into the means of applying technology and other knowledge to the economic and social advancement of those regions.

International Joint Commission The International Joint Commission investigates and recommends on matters of dispute along the common border between Canada and the United States and deals with water boundaries and transborder air and water pollution. Canada’s responsibilities under an agreement with the United States on the water quality of the Great Lakes are expected to cost $2.2 million in 2009-10. Operating and administrative expenses of the commission are estimated at $6.8 million.

CITIZENSHIP AND IMMIGRATION Immigration is a shared federal-provincial responsibility, although the federal government assumes the primary burden. Under the Immigration Act, the federal government may negotiate agreements on sharing responsibility for immigration with provincial governments. The federal government has signed agreements with all the provinces and Yukon. The most extensive agreement is that with Quebec. Under this agreement, the federal government will pay $234.2 million to Quebec in 2009-10 in compensation for services that are now provided by the province. Newfoundland and Labrador, Nova Scotia, New Brunswick, Manitoba, Saskatchewan, and Alberta have signed provincial nominees agreements allowing them to select a small number of immigrants to meet specific labour-market needs. Agreements with Manitoba and British Columbia give those provinces funds and responsibility for 14:4 FINANCES OF THE NATION 2009 settlement services, a greater say in planning, and an agreement to attract business immigrants. The Main Estimates also include $581.9 million for the settlement program. Under the Immigration and Refugee Protection Act, those caught smuggling or trafficking in humans will face fines up to $1 million and life in prison. Other features of the legislation include the denial of sponsorship to those convicted of spousal abuse, in default of spousal or child support payments, and on social assistance. The legislation expanded the family class to include dependent children under age 22 (up from 19) and allows spouses and children to apply for permanent residence from within Canada. As shown in table 14.2, provincial and territorial expenditures on labour, employment, and immigration are estimated at $1,147 million in 2008-9. Federal expenditures, shown in table 14.1, totalled $1,714 million. These figures also include amounts spent on labour and employment. The minister of employment and immigration, after consultation with the provinces, announces annually the number of immigrants to be admitted over a specified time period. The federal government, through the Department of Citizenship and Immigration, will spend an estimated $1,471.7 million on immigration in 2009-10. The Foreign Credentials Referral Office (FCRO), a branch of Citizenship and Immigration Canada, opened in May 2007 to provide information and referral services to foreign-trained workers seeking to have their credentials assessed and recognized more quickly. As outlined in the 2007 federal budget, $32.2 million was provided for the first five years of FCRO’s operation. The federal government also provided about $18.8 million for Newfoundland and Labrador, Nova Scotia, New Brunswick, Ontario, Alberta, the Northwest Ter- ritories, and Yukon to enhance online information about settling and working xxxxxxx Table 14.2 Provincial and Territorial Expenditures on Other Functions, Fiscal Year 2008-9 Labour, Recreation employment, Province/territory and culture and immigration Housing millions of dollars Newfoundland and Labrador ...... 86 14 77 Prince Edward Island...... 33 4 11 Nova Scotia...... 86 14 164 New Brunswick ...... 64 31 84 Quebec...... 928 610 600 Ontario...... 772 220 829 Manitoba...... 120 41 95 Saskatchewan ...... 182 33 217 Alberta...... 519 116 553 British Columbia ...... 576 50 384 Northwest Territories...... 19 11 120 Nunavut...... 21 3 180 Yukon ...... 21 — 32 Total...... 3,427 1,147 3,346 Source: Same as table 14.1. OTHER EXPENDITURES 14:5 across Canada. Of that total, Ontario received $10 million. FCRO services are available at centres across Canada. The 2009 federal budget noted that provincial and territorial labour ministers are developing a common framework to provide timely assessment and recognition of foreign credentials. The budget provided $50 million over two years to support the development of a common approach to foreign cre- dential assessment and better integration of immigrants into the labour force. The 2008 federal budget provided $22 million in new funding to improve the responsiveness of Canada’s immigration system and better align it with labour market needs.

Department of Citizenship and Immigration The Department of Citizenship and Immigration enforces the provisions and regulations of the Immigration and Refugee Protection Act. Immigration policy is expected to fulfill certain social, humanitarian, and economic objectives. Social obligations include the reunification of Canadian citizens and permanent residents with immediate family members in Canada. To achieve its international commitments and humanitarian obligations, the department categorizes refugees as either convention refugees or other people in need of protection. Convention refugees, as defined in the 1951 United Nations convention, cannot return to their countries of residence for fear of persecution for reasons of race, religion, nationality, or political opinion. A person designated as being in need of protection cannot return to his or her home country because he or she risks torture, loss of life, or cruel and unusual treatment or punishment. The department may also consider for refugee status persons from countries where political or civil unrest has placed them in danger and who have close family links to Canada. Under the Canada-Quebec accord, Quebec is responsible for selecting refugees abroad who are destined for Quebec, and the federal government is responsible for ensuring that those selected are eligible for refugee status. Immigrants in the economic category are either business immigrants or skilled workers. Business immigrants are entrepreneurs, investors, and self- employed people chosen on the basis of criteria such as entrepreneurial skills, investment, and job creation. A skilled worker must meet minimum work experience requirements and meet the financial requirements—that is, have enough financial resources to support their families for six months after arrival in Canada.

Immigration and Refugee Board of Canada The Immigration and Refugee Board of Canada (IRB) is an independent statutory judicial tribunal that deals with refugee claims made by persons in Canada. Usually one member of the board examines claims and decides whether to accept or reject the claim. If a case is especially complex or unique, up to three board members may be on the panel. The federal Main Estimates provide $113.4 million for the board’s expenditures in 2009-10. 14:6 FINANCES OF THE NATION 2009

LABOUR AND EMPLOYMENT Provincial and territorial expenditures on labour, employment, and immigration in 2008-9 are estimated at $1,147 million (table 14.2). Federal expenditures on the same category are shown in table 14.1 for fiscal years 2004-5 to 2008-9.

Employment Benefits and Support Measures Under the Employment Insurance Act, the federal government makes payments to the provinces and territories to implement employment benefits and support measures. Provincial and territorial governments may charge administrative costs associated with the implementation of employment benefits and support measures to the employment insurance (EI) account. The federal government has signed labour market development agreements (LMDAs)with all provinces and territories. These agreements involve two types of arrangements: transfer agreements, whereby the provinces and territories have assumed responsibility for the design and delivery of employment programs (Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, British Columbia, the Northwest Territories, and Nunavut) and co- management agreements, whereby the federal government and the provinces and territories jointly assume responsibility for planning and designing employment programs (Yukon). Through the LMDAs, the federal government invests a total of $2 billion annually. The 2009 federal budget committed an additional $1 billion over two years in response to the increased unemployment and demand for labour market programs and training resulting from the economic slowdown. The federal Indian Affairs and Northern Development department has several programs that focus on creating employment opportunities for aboriginals, such as the First Nations and Inuit youth employment strategy, and the aboriginal workforce participation initiative. The federal aboriginal skills and employment partnership (ASEP) fosters partnerships between aboriginal organizations, the private sector, and provincial and territorial governments to ensure that aboriginals have access to skills and employment training. The 2007 federal budget provided an additional $105 million over the next five years, which more than doubled total funding for the program. The 2009 federal budget provided an additional $100 million over three years to ASEP for aboriginal employment and training opportunities. The Department of Human Resources Development maintains national labour market and self-help electronic products to meet the needs of the unemployed. These products include an electronic labour exchange; a national worker-employer matching service; and databases of national, regional, and local statistics that catalogue, for example, occupational profiles, growth industries, and future skills requirements. National employment service products are delivered through multimedia kiosks, the Internet, and a directory OTHER EXPENDITURES 14:7 of Internet sites related to work, career, and labour market information, training, social services, and other topics. The 2009-10 Main Estimates provide $3,486.3 million for expenditures on labour and employment programs. The Canada Industrial Relations Board is expected to spend $12.6 million on its activities in 2009-10.

HOUSING Among the economic stimulus measures contained in the 2009 federal budget were several initiatives on housing. The budget introduced a non-refundable tax credit of $5,000 for first-time homebuyers on a qualifying home purchased after January 27, 2009. The credit will provide up to $750 in tax relief in 2009. The budget also proposed to extend this credit to existing homeowners eligible for the disability tax credit who purchase a more accessible and/or functional home. In response to the demand for renovation and energy retrofits, the 2009 federal budget provided $1 billion over the next two years. The funding will be channelled through existing agreements and will be administered by the Canada Mortgage and Housing Corporation (CMHC) on a 50:50 cost-shared basis with provinces and territories. The initiative builds on the $1.9 billion provided over five years in the 2008 federal budget. The 2009 federal budget also provided $400 million over two years for the construction of housing units for low-income seniors and $75 million over the same period for the construction of housing for persons with disabilities. The federal government will provide $400 million over two years for First Nations on-reserve housing. The funds will be disbursed through CMHC and the Department of Indian Affairs and Northern Development. To address the housing shortage in Canada’s north, the 2009 federal budget provided $200 million over two years to construct social housing units. The funds will be distributed as follows: Northwest Territories, $50 million; Nunavut, $100 million; and Yukon, $50 million. As shown in table 14.2, the provinces and territories spent an estimated $3,346 million on housing in 2008-9. Table 14.1 shows federal expenditures on housing for fiscal years 2004-5 to 2008-9. Federal spending on housing, $2,220 million in 2008-9, is estimated at $2,044.7 million in 2009-10. Local government spending on housing from 2004 to 2008 is shown in table 14.3 and consolidated provincial, territorial, and local expenditure on housing from 2004-5 to 2008-9 is shown in table 14.4. The 2001 federal and provincial government bilateral agreements on affordable housing stated that because provinces and territories have primary responsibility for housing programs, they require programs with enough flexibility to address their individual needs and priorities. The intention of the federal-provincial agreements is to create affordable housing in each jurisdiction. Units funded under the program will remain affordable for a minimum of 10 years. The maximum federal contribution per housing unit is $25,000 over the duration of the program. Provinces and territories must match federal 14:8 FINANCES OF THE NATION 2009

Table 14.3 Local Government Expenditure on Housing, 2004 to 2008 Province/territory 2004 2005 2006 2007 2008 thousands of dollars Newfoundland and Labrador .... 2,233 2,220 3,067 4,432 4,541 Prince Edward Island...... 68 65 56 55 55 Nova Scotia...... 2,535 6,421 6,948 7,447 7,820 New Brunswick ...... 1,843 3,477 4,494 1,130 1,160 Quebec...... 386,344 456,645 492,119 561,185 666,150 Ontario...... 1,498,643 1,625,832 1,730,885 1,784,412 1,846,269 Manitoba...... 4,891 5,077 5,198 5,667 5,048 Saskatchewan ...... 1,308 1,470 1,438 1,582 7,906 Alberta...... 62,830 55,551 80,599 87,965 196,398 British Columbia ...... 28,123 25,369 48,529 25,502 34,319 Northwest Territories...... 3,505 2,683 4,950 4,953 2,934 Nunavut...... 16,991 14,132 12,394 14,533 14,872 Yukon ...... 58 44 43 40 37 Total...... 2,009,372 2,198,986 2,390,720 2,498,903 2,787,509 Source: Same as table 14.1.

Table 14.4 Consolidated Provincial, Territorial, and Local Government Expenditure on Housing, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 42 45 55 75 81 Prince Edward Island.... 4 6 9 10 11 Nova Scotia...... 128 159 161 167 171 New Brunswick ...... 69 74 82 84 85 Quebec...... 669 753 756 990 1,094 Ontario...... 1,426 1,788 1,910 2,030 2,087 Manitoba...... 84 88 93 97 100 Saskatchewan ...... 139 140 152 183 225 Alberta...... 238 293 409 563 744 British Columbia ...... 162 214 370 338 418 Northwest Territories.... 76 83 97 120 123 Nunavut...... 163 185 183 174 194 Yukon ...... 13 20 30 26 32 Total...... 3,214 3,847 4,306 4,854 5,366 Source: Same as table 14.1. contributions. All provinces and territories have signed agreements regarding the creation of affordable housing. As part of the $800 million expenditure on infrastructure, Newfoundland and Labrador’s 2009 budget announced that $28 million will be spent for housing infrastructure. Newfoundland and Labrador’s 2007 budget announced the development of a provincial housing strategy. Over the next five years, funding for the Newfoundland and Labrador housing modernization and improvement program will be increased by $27.5 million, more than doubling its financial resources, and will be used to modernize and improve the province’s social housing stock. As part of the housing strategy, the province will increase OTHER EXPENDITURES 14:9 funding to the home repair program by $24 million over the next six years. The program assists low-income homeowners with repairs and maintenance; the additional financial resources will help address the 4,000 applications on the wait list. Under the new housing trust fund, the province will spend $6.8 million to develop housing initiatives. Prince Edward Island’s 2009 budget increased funding for the seniors’ emergency house repair program to $500,000. For 2009-10, the province is allocating $500,000 for affordable housing grant projects and $970,000 for housing for seniors and persons with disabilities. Noting that, for the period January to April 2009, there was a 30 percent decrease in new home construction over the same period in 2008, Nova Scotia announced in July 2009 that the province is introducing a one-time new home construction rebate equivalent to 50 percent of the provincial portion of the harmonized sales tax (HST). Homeowners who have a municipal construction permit dated May 1, 2009 or later are eligible for the rebate, maximum $7,000. There are 1,500 rebates available for construction or purchases completed by March 31, 2010. In 2008, Quebec announced the construction of 2,000 new housing units, and the province’s 2009 budget announced the construction of 3,000 additional social housing units. The 2009 Ontario budget announced spending of over $1 billion to build new homes and improve existing housing for families, seniors, and persons with disabilities. The 2007 Ontario budget announced that the province was providing an additional $392 million for affordable housing. Included in the total were housing supplements of $100 per month to over 27,000 low-income working families, $127 million to municipalities to build new affordable homes and rehabilitate existing stock, and funds to build over 1,000 off-reserve homes for aboriginal families. Manitoba’s 2009 budget announced the province’s largest investment in social housing. The province will spend $387 million on social and affordable housing, more than double the expenditure of 10 years ago. Included in the total is funding for a range of housing options for individuals with mental health issues. Under Manitoba’s homeworks program, launched in 2007, the province allocated $39 million in the first year to build, rehabilitate, or repair 1,366 housing units and $48 million in 2008-9, the second year of the program. The 2007 Manitoba budget noted that, through the partnership with the federal housing trust, the province is committing $104 million to target the housing needs of aboriginals, seniors, the inner city, and the northern part of the province. The 2008 Manitoba budget provided an additional $16.6 million for its affordable housing strategy, as well as additional funding for aboriginal off-reserve housing. Housing expenditures proposed in Alberta’s 2009 budget included $468 million over three years as part of the province’s commitment to complete 14:10 FINANCES OF THE NATION 2009

11,000 affordable housing units, $400 million over three years to develop 2,700 housing units for the homeless, and $41 million for 3,600 spaces in emergency shelters. The 2009 budget announced that Alberta will build an additional 1,200 supportive living units for seniors over the next three years. In June 2009, Alberta and the federal government signed an amendment to the Canada-Alberta affordable housing program. Under the agreement, the federal government will contribute $135 million and Alberta, $251 million, to build new and renovate existing affordable housing. Alberta’s 2008 budget announced that the province will dedicate $500 million to housing and will construct 11,000 new, affordable housing spaces over five years. British Columbia’s 2008 budget expanded the rental assistance program to include families earning up to $35,000. Additional housing expenditures included $104 million for strategies to break the cycle of homelessness, and $23 million to buy and upgrade apartments to meet the province’s social housing needs. Building on the housing initiatives contained in its 2007 budget, the 2008 budget also raised the threshold for its first-time homebuyers’ program to $425,000 from $375,000. British Columbia’s 2007 budget focused primarily on housing issues. Among the province’s housing initiatives outlined in that budget was $45 million over four years to upgrade up to 750 social housing units. The budget lowered the age at which a homeowner can apply for property tax deferral to 55 from 60 years. Additionally, the budget made low-income seniors, veterans, and people with disabilities eligible for the provincial homeowner grant, regardless of their home’s assessed value. British Columbia’s 2007 budget announced a $250 million permanent housing endowment fund to help stimulate and encourage new ideas and innovation in housing. The Northwest Territories’ 2009 budget announced that the Northwest Territories Housing Corp. will receive an additional $2 million to increase the number of homes that can be repaired under the contributing assistance for repairs and enhancements program. The territory will spend $1.5 million to develop programs to increase the supply of housing available for government staff in communities where the housing supply is limited. The 2008 budget of the Northwest Territories provided $17.1 million for home construction in communities across the territory. The territory’s 2007 budget allocated $16.3 million, with matching funds from the federal government, to construct an additional 168 housing units. Nunavut’s housing shortage has been defined as “acute.” Through the Nunavut Housing Corporation, the territorial government maintains almost 4,000 public housing units. More than 50 percent of Nunavut’s population live in public housing. The Nunavut Housing Corporation initiated a tenant-to-own program that allows public housing tenants to purchase their own homes. Nunavut’s 2008 budget rolled back staff housing rents to January 2007 levels, effective April 1, 2008. The rollback represents a 20 percent rent reduction in Iqualuit, Rankin Inlet, and Cambridge Bay. For all other com- OTHER EXPENDITURES 14:11 munities, the decrease is 10 percent. The budget also noted that members of the public service who either own their own homes or rent accommodation on the private market will receive a housing allowance of $40 each month per household, effective April 1, 2008. Yukon’s 2009 budget noted that the Yukon Housing Corp. will build a 30- unit social housing complex under the Whitehorse affordable family housing project, an $11 million project aimed at meeting the growing need for affordable housing for single-parent families. The corporation is also constructing a 12-unit seniors’ housing complex in Watson Lake. The territory’s 2008 budget identified the largest gap in the need for affordable housing as that for single parents and victims of violence. The 2007 Yukon budget provided $1.8 million to construct a seniors’ affordable housing facility in Haines Junction. The Yukon Housing Corp. allocated $2 million in 2006-7 for the Canada-Yukon affordable housing agreement and adjusted the affordability threshold for first-time homebuyers with a better interest rate and extended amortization terms.

Canada Mortgage and Housing Corporation The Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation wholly owned by the federal government with its mandate provided under the National Housing Act (NHA). The 2009-10 federal Main Estimates of the Human Resources and Skills Development department provide $2,044.7 million to reimburse CMHC for its expenditures. CMHC undertakes housing research, works in partnership with the provinces in land development, administers assisted housing initiatives for the federal government, and provides financing, which includes mortgage insurance. The corporation also offers its services on a cost-plus basis to other government departments. Services include the development of surplus lands, inspections and appraisals, and mortgage administration.

Mortgage Loan Insurance CMHC’s main business activity, mortgage insurance, is a self-financing program funded from insurance fees paid by borrowers when NHA-approved private lenders issue mortgages. Under the program, a homebuyer who can raise 5 percent for a down payment is given a mortgage by a financial institution that is in turn insured by CMHC. Since 2004, a homeowner’s down payment can come from any source, including borrowed funds, and he or she will still qualify for mortgage insurance providing that the homeowner can meet the debt requirements. The minimum down payment required in order to avoid paying mortgage insurance was lowered in 2007 from 25 to 20 percent. In order to avoid problems similar to those experienced in the United States’ housing market in 2008, the federal government announced changes to the rules for government guaranteed mortgages. Under the new rules, the maximum amortization period for new government-backed mortgages is 35 years, the minimum down payment for new government-backed mortgages is 5 percent, and new loan documentation standards were introduced. 14:12 FINANCES OF THE NATION 2009

Social Housing Programs Social housing programs consist of both federal and provincial shared-cost subsidized housing. The major programs are non-profit housing, rent supplements, non-profit housing for urban native people and on-reserve Indians, rural and native housing, residential rehabilitation assistance, and the emergency repair program. Under a housing program for low-income households living in remote communities, CMHC pays for home construction, while client households provide volunteer labour. Under the federal government’s on-reserve housing policy, First Nations receive full subsidies to cover the difference between project costs and project revenues, which allows them to assist on-reserve low-income households.

RECREATION AND CULTURE The provinces and territories spent $3,427 million on recreation and culture in 2009-10 (table 14.2). Local government expenditure on recreation and culture from 2004 to 2008 is shown in table 14.5. Local governments alone spent $9.2 billion on this function in 2008, as shown in the table. Consolidated provincial, territorial, and local spending on this function from 2004-5 to 2008-9 is shown in table 14.6. Total federal spending on recreation and culture is estimated at $2,453.3 million in 2009-10. Most of the federal government’s arts and culture programs operate under the Canadian Heritage department. The department’s share of total spending on recreation and culture in 2009-10 is estimated at $1,691.3 million.

$ million Canadian Heritage Canadian heritage program...... 917.7 Canada Council for the Arts ...... 180.8 Telefilm Canada ...... 130.2 Canadian Museum of Civilization...... 77.3 Canadian Museum of Nature...... 34.1 Library and Archives of Canada...... 121.4 National Arts Centre ...... 46.4 National Film Board ...... 73.5 National Gallery ...... 60.0 National Museum of Science and Technology ...... 39.0 National Battlefields Commission ...... 9.3 Environment Parks Canada...... 619.3 Transport National Capital Commission...... 16.8 Parliament Libary of Parliament ...... 40.3 Other...... 87.1 Total ...... 2,453.3 A brief summary of the major federal expenditures on recreation and culture follows. OTHER EXPENDITURES 14:13

Table 14.5 Local Government Expenditure on Recreation and Culture, 2004 to 2008 Province/territory 2004 2005 2006 2007 2008 thousands of dollars Newfoundland and Labrador . . 53,406 55,977 63,821 60,278 66,311 Prince Edward Island...... 10,723 19,846 26,700 18,667 18,511 Nova Scotia...... 123,879 119,218 130,911 135,605 148,807 New Brunswick ...... 88,286 96,668 127,254 140,220 113,064 Quebec...... 1,532,062 1,704,145 1,658,958 1,887,938 2,179,426 Ontario...... 2,525,307 2,805,983 2,963,810 3,172,295 3,025,041 Manitoba...... 147,430 156,760 144,662 157,354 189,251 Saskatchewan ...... 189,403 216,680 193,275 253,476 254,939 Alberta...... 917,817 1,034,029 1,196,384 1,385,450 1,545,426 British Columbia ...... 1,117,397 1,258,882 1,343,532 1,388,377 1,586,102 Northwest Territories...... 20,966 28,125 24,856 28,548 22,493 Nunavut...... 18,450 18,862 18,388 19,439 18,000 Yukon ...... 29,578 23,836 22,171 22,570 21,417 Total...... 6,774,704 7,539,011 7,914,722 8,670,217 9,188,788 Source: Same as table 14.1.

Table 14.6 Consolidated Provincial, Territorial, and Local Government Expenditure on Recreation and Culture, Fiscal Years 2004-5 to 2008-9 Province/territory 2004-5 2005-6 2006-7 2007-8 2008-9 millions of dollars Newfoundland and Labrador...... 94 101 122 101 107 Prince Edward Island.... 31 46 55 50 51 Nova Scotia...... 164 177 188 198 217 New Brunswick ...... 134 151 184 200 175 Quebec...... 2,369 2,551 2,506 2,739 3,014 Ontario...... 3,098 3,441 3,681 3,860 3,697 Manitoba...... 260 273 271 273 308 Saskatchewan ...... 289 335 306 398 420 Alberta...... 1,293 1,477 1,691 1,879 2,044 British Columbia ...... 1,543 1,608 1,806 1,866 2,143 Northwest Territories.... 32 41 36 43 41 Nunavut...... 33 34 34 39 37 Yukon ...... 45 54 40 42 42 Total...... 9,383 30,288 10,920 11,689 12,294 Source: Same as table 14.1.

Canadian Heritage Program This program operates the federal government’s citizen participation, multiculturalism, and amateur sport activities. The Canadian Heritage department Estimates provide $101.6 million for the sports support program, $44.0 million for the 2009-10 games’ hosting program, and a grant of $26.7 million for the athlete assistance program. Grants and contributions for citizen participation programs, which include Canada Day celebrations and support for native associations and friendship centres, are estimated at $109.1 million. 14:14 FINANCES OF THE NATION 2009

The Main Estimates include grants and contributions of $16.7 million for multiculturalism in 2009-10. The balance of the total allocated as recreation and culture spending is earmarked for various cultural organizations and projects.

Canada Council for the Arts The Canada Council for the Arts, which was set up in 1957, assists the arts through annual subsidies to arts organizations and awards, bursaries, and short-term grants to individual artists. The council coordinates United Nations Educational, Scientific and Cultural Organization activities in Canada.

Telefilm Canada Telefilm Canada develops and promotes Canadian film, television, new media, and music industries. Projects supported by the corporation must benefit Canadian producers, creativity, and talent and reflect Canadian society and its cultural and linguistic duality. Revenues of the corporation are estimated at $25.6 million in 2009-10. The corporation administers the Canada feature film fund, which was provided with $95.2 million in 2009-10.

National Film Board The National Film Board (NFB) has developed from a supervisory body over government motion picture activities to a national documentary film- producing and distributing organization with centres in Halifax, Moncton, Toronto, Winnipeg, Edmonton, and Vancouver. The board also maintains offices in Paris and New York for the international marketing of its products. The operations of the Canadian government photo centre are amalgamated with those of the NFB. The NFB maintains separate English and French production branches. It acts as official government photographer, maintains extensive film libraries, and interprets Canada to Canadians and to people abroad. Income from non- government sales of film prints and other visual material is used to offset expenditures.

Parks Canada Parks Canada provides an opportunity for people to enjoy the outdoors while preserving the environment. In 1998, the Canadian Parks Agency was established as a departmental corporation. The new agency has greater authority and autonomy to complete national parks and expand the national historic sites and marine conservation area systems. Parks Canada administers 42 national parks, three national marine conservation areas (Fathom Five Marine Park and Lake Superior marine conservation area in Ontario and Saguenay-St. Lawrence Marine Park in Quebec), and 157 national historic sites (including canals, rivers, and other heritage areas) located in every province and territory. Agreements have been made with owners of other national historic sites for their conservation and presentation. Torngat Mountains National Park Reserve in northern Labrador is Canada’s newest national park. OTHER EXPENDITURES 14:15

The federal government signed a deal with Dene and Metis representatives in 2008 to establish a protected area around the headwaters of the South Nahanni River in the Northwest Territories. The Naats’ihch’oh National Park Reserve is about 7,600 square kilometres in size and will be contiguous with the existing Nahanni National Park Reserve. Parks Canada’s goal is to establish a national park in each of Canada’s 39 natural regions. The national park system is just over 60 percent completed. Thirteen of Parks Canada’s parks have received world heritage status and 13 have been designated as biosphere reserves. Parks Canada is also responsible for commemorating persons, places, and events that have been declared to be of major national significance in the historical development of Canada by the Historic Sites and Monuments Board of Canada. Federal-provincial agreements for recreation and conservation protect heritage canals and rivers.

xxxxxxxx 15 Public Debt

The public debt has been a major concern in policy debates for several years. However, even agreeing on the extent of the public debt can be difficult. Figures used for the public debt can vary widely depending on the context of the discussion. This chapter highlights the major approaches used to measure the public debt. Any examination of public debt and debt charges begins with a statement of assets and liabilities that records the value of assets and liabilities on a particular date. The statement measures total stock rather than changes during a period, thereby providing the basis for measuring the size of the public debt. Debt charges are the cost of servicing that debt. The comparisons between governments and levels of government provided in this chapter are useful for understanding government activities, but they can be misunderstood if not viewed in the context of each government. This caveat is particularly true of government debt, which is a sensitive area because, understandably, governments seek to maintain the best possible credit rating. Whether a debt level is appropriate and prudent depends on several factors other than the bare dollar total or per capita level compared with other jurisdictions. Factors to consider include the use to which borrowings are put, the revenue capacity of debt-financed undertakings, and the tax capacity of the government. The federal government’s accounting standard is the full accrual accounting system, which provides a comprehensive and current picture of the government’s financial situation. Under the full accrual accounting system, items such as tax revenue, are recorded in the year in which the taxable activity occurred. A receivable is therefore established for taxes still owing to the government, and a payable is established for tax refunds payable to taxpayers. In the full accrual system, the value of government’s physical assets is recognized in the financial statements, and there is a complete recording of liabilities. Under the full accrual system, net debt includes a comprehensive costing for financial liabilities but excludes non-financial assets. Accumulated deficit includes both financial liabilities and non-financial assets.

CONSOLIDATED PUBLIC DEBT As noted elsewhere, Statistics Canada’s financial management system (FMS) is designed to facilitate comparisons between governments and to allow consolidations of the financial statements of the different levels of government. The FMS presentation combines current and capital accounts. Some 15:2 FINANCES OF THE NATION 2009 items that appear on a government’s balance sheet may not be considered for the purposes of this presentation, while other items not shown on the balance sheet may be reflected. The differences arise because the various accounting systems are recast into one framework. Consolidated net debt for Canadian governments on March 31, 2007 amounted to an estimated $760.7 billion, up from $385.6 billion on March 31, 1987, as shown in table 15.1. The net debt of Canadian governments as a percentage of gross domestic product (GDP) is also shown. Consolidated net debt has grown from 71.6 percent of GDP in 1987, peaked at 102.1 percent of GDP in 1996, and declined to 49.5 percent in 2007. In order to conform to international naming conventions, Statistics Canada has changed its terminology in tables containing FMS balance sheet and net debt data. The term “asset” is replaced by “financial asset” and “net debt” is replaced by “net financial debt.” A negative net financial debt means that the financial assets exceed the liabilities. Because a negative net debt is a positive net wealth, previously negative net debt values are now shown as positive and vice versa. Care must therefore be taken when comparing data with tables in earlier editions of Finances of the Nation. The consolidated government balance sheet for fiscal years 2004 to 2007 is presented in table 15.2. From March 31, 2004 to March 31, 2007, assets grew by 26 percent, while liabilities grew at a much slower pace of 5 percent, giving rise to a net financial debt of $760.7 billion on March 31, 2007.

Table 15.1 Federal, Provincial/Territorial, and Local Government Net Debt on an FMS Basis on March 31, 1987 to 2008 Provincial Consolidated Net debt as a Net debt, Year Federal and territorial Local net debt % of GDPa per capitab millions of dollars % $ 1987 ..... 276,735 89,532 19,286 385,553 71.6 13,309 1988 ..... 305,438 97,494 20,221 423,153 71.0 14,499 1989 ..... 333,519 101,510 20,407 455,436 70.8 15,402 1990 ..... 362,920 112,015 19,575 494,510 73.1 16,273 1991 ..... 395,075 116,652 20,909 532,636 78.5 17,527 1992 ..... 428,682 143,065 22,050 593,797 85.7 21,002 1993 ..... 471,061 173,691 22,444 667,196 93.3 23,314 1994 ..... 513,219 202,446 23,457 739,122 98.5 25,541 1995 ..... 550,685 224,041 22,856 797,582 99.5 27,258 1996 ..... 578,718 235,896 22,379 836,993 102.1 28,298 1997 ..... 588,402 241,746 20,970 851,118 98.1 28,472 1998 ..... 581,581 245,223 20,514 847,318 93.4 28,087 1999 ..... 574,468 258,271 15,921 848,660 89.4 27,908 2000 ..... 561,733 256,166 14,788 832,687 80.1 27,179 2001 ..... 545,300 241,813 13,260 800,373 72.2 25,801 2002 ..... 534,690 249,431 12,622 796,743 69.0 25,396 2003 ..... 526,492 255,881 12,136 794,509 65.3 25,088 2004 ..... 523,648 263,277 11,436 798,361 61.9 24,740 2005 ..... 523,344 259,044 8,803 791,191 57.5 24,490 2006 ..... 514,099 253,049 9,455 776,603 53.5 23,840 2007 ..... 508,122 242,400 10,221 760,743 49.5 23,104 2008 ..... 490,412 ccc c c a GDP for the calendar year ending in the fiscal year. b Population on April 1. c The data are not available. Source: Statistics Canada, April 2009. PUBLIC DEBT 15:3

Table 15.2 Consolidated General Governmenta Balance Sheet on an FMS Basis on March 31, for Fiscal Years 2004 to 2007 2004 2005 2006 2007 millions of dollars Financial assets Cash on hand and on deposit...... 40,965 42,800 43,902 49,083 Receivables ...... 38,814 42,958 45,174 51,483 Advances...... 104,195 104,614 108,276 116,509 Securities ...... 166,064 189,730 205,200 228,147 Other financial assets...... 8,796 8,915 8,063 8,285 Total financial assets ...... 358,834 389,017 410,615 453,507 Liabilities Bank overdrafts ...... 7,226 7,719 8,445 8,577 Payables...... 70,832 80,578 86,204 93,363 Advances...... 15,672 17,070 18,245 18,902 Treasury bills ...... 112,392 126,216 132,419 136,113 Savings bonds ...... 34,425 29,280 25,327 20,915 Bonds and debentures ...... 527,578 505,053 477,725 468,150 Other securities ...... 77,991 97,358 111,377 125,956 Deposits...... 61,985 61,965 68,457 73,344 Liabilities to pension plans ...... 196,934 202,762 205,219 211,572 Other liabilities ...... 52,159 52,177 53,687 57,358 Total liabilities ...... 1,157,194 1,180,178 1,187,105 1,214,250 Net financial debt...... 798,360 791,161 776,490 760,743 a Local governments include general government and school boards. Source: Same as table 15.1.

Consolidated provincial, territorial, and local government balance sheet information for March 31, 2007 is shown in table 15.3. Only Alberta, the Northwest Territories, and Yukon have greater financial assets than liabilities. Quebec has the largest net financial debt and accounts for 48 percent of the net financial debt of the entire provincial-local sector, followed closely by Ontario with almost 44 percent. Data on gross and net debt charges for consolidated federal, provincial, territorial, and local governments for 2005-6 to 2008-9 are provided in table 15.4. Debt charges have declined by 3 percent since 2005-6 and investment income has increased by 19 percent, resulting in net debt charges of !$8,684 million in 2008-9.

FEDERAL GOVERNMENT DEBT Public Accounts Assets and Liabilities Table 15.5 presents a summarized statement of assets and liabilities (the balance sheet) of the federal government as reported in the public accounts. As previously mentioned, the assets reported include financial claims by the federal government and physical assets, such as land, buildings, and machinery. Tax revenues receivable are shown as an asset in the period to which they relate. Unlike the balance sheet of a private firm, the difference between assets and liabilities does not represent owner’s equity; it is, instead, the accumulated deficit of the federal government since Confederation. 15:4 FINANCES OF THE NATION 2009 120,950 121,990 227,968 248,567

!408 252,621

!186 137 General Government Balance Sheet Balance Government General

a millions of dollars 225,258 197,567120,584 27,650 110,687 19,378 11,768 26,719 7,374 114,421 706 -37,368 651 11,114 194 639,189 104,674 86,880 15,882 12,004 64,087 103,307 892 514 602 386,568 ncial, Territorial, and Local Territorial, and ncial, on an FMS Basis March 31, 2007 NL PE NS NB QC ON MB SK AB BC NT NU YT Total ...... 10,151 13,365 11,813 84,469 29,083 77,262 10,019 4,377 23 1,213 6,226 1 — Table 15.3 Consolidated Provi 15.3 Consolidated Table ...... 16,489 17,015 2,159 12,780 ...... 3,691 285 3,575 2,317 65,391 20,708 4,760 5,190 8,123 6,575 69 261 14 ...... — 87 1,193 — 42,427 64,706 5,012 1,305 961 6,222 77 — — ...... 494 — 100 — — 407 — 3,311 4,589 — 325 — 664 4,272 — 463 327 — — — — — 14 — — 8,048 — 5,740 ...... 558 188 1,926 1,299 20,082 15,599 1,075 1,581 5,546 141 6,892 131 84 54,577 ...... 1,578 375 2,715 8,363 63,792 46,229 4,915 462 5,047 243 80,036 55,685 338 Local governments include general government and school boards. and school government general include governments Local Source: Same as table 15.1. as table Same Source: a Net financial debt...... 11,238 6,229 1,373 10,079 financial Net Total liabilities Deposits...... Other liabilities 4 — — 373 214 744 309 96 63,170 3,662 1 — — 68,574 Other securities akoedat ...... Liabilities overdrafts Bank 27Payables...... 1,639 246Advances...... — 1,657 1,455Treasury 699 bills 20,329 19,413 2,142 1,789 bonds Savings 228 13 7,570 and debentures Bonds 423 7,298 205 558 142 115 9 63,783 7,452 1,001 5,832 1,120 212 41 307 154 1,770 80 308 184 1,719 36 289 18,531 33 — 2 3,605 Other financial assets...... assets 126 financial 2,701 786Other 58 financial 10,260 5,777 Total 230 91 1,526 2,391 130 184 292 1,499 45 3 9 6,584 Financial assets Financial on hand and Cash ...... deposit Receivables 195Advances...... 36 244Securities 129 414 492 117 390 2,000 17,274 13,416 6,862 9,245 4,485 2,900 10,394 1,466 53 707 13 1,098 191 4,486 124 64 107 55,220 21,620 PUBLIC DEBT 15:5

Table 15.4 Consolidateda Government Gross and Net Debt Charges on an FMS Basis, for Selected Fiscal Years 2005-6 to 2008-9 2005-6 2006-7 2007-8 2008-9 millions of dollars Debt charges...... 46,969 47,566 47,383 45,384 Investment income...... 45,357 46,744 48,323 54,068 Net debt charges...... 1,612 822 !940 !8,684 a Includes federal, provincial, territorial, and local governments, and CPP and QPP. Source: Statistics Canada, June 2009.

Table 15.5 Summary of Assets and Liabilities of the Federal Government on March 31, 2006, 2007, and 2008 2006 2007 2008 millions of dollars Liabilities Unmatured debt Marketable bonds ...... 261,134 257,482 253,550 Canada savings bonds ...... 17,342 15,175 13,068 Treasury bills ...... 131,597 134,074 116,936 Canada Pension Plan bonds ...... 3,102 1,743 1,042 Obligations related to capital leases...... 2,927 3,096 4,236 Payable in foreign currencies (net)...... 14,084 10,372 9,498 Cross-currency swap revaluation account ...... !2,258 !1,091 !1,420 Unamortized discounts, premiums, and commissions on market debt...... !6,780 !6,659 !6,213 Total unmatured debt...... 421,149 414,192 390,697 Superannuation accounts (less unamortized portion of actuarial deficiencies)...... 131,062 134,726 137,371 Canada Pension Plan account ...... 43,520 45,177 48,007 Holdings of bonds and provincial government securities ...... 8,355 563 Other specified purpose accounts ...... 5,342 5,157 5,789 Interest and matured debt outstanding (net)...... 7,875 7,516 7,182 Accounts payable ...... 54,124 56,792 53,669 Tax payables...... 38,402 41,388 49,010 Allowance for guarantees ...... 1,031 815 602 Total liabilities ...... 702,505 705,763 692,327 Assets Loans, investments, and advances to enterprise Crown corporations Canada Mortgage and Housing Corporation ...... 9,465 10,993 11,680 Export Development Corporation ...... 4,833 5,749 5,923 Farm Credit Corporation ...... 1,264 1,462 1,777 Other lending institutions ...... 1,691 1,808 1,867 Other Crown corporations...... 3,331 3,671 8,920 Total loans, investments, and advances to enterprise Crown corporations...... 20,584 23,683 30,167 Other loans, investments, and advances National governments, including developing countries ...... 14,441 14,852 15,031 Other ...... 23,662 23,744 23,254 Total other loans, investments, and advances ...... 38,103 38,596 38,285 Allowance for valuation...... !16,798 !17,185 !17,583 Total loans, investments, and advances ...... 41,889 45,094 50,869 (Table 15.5 is concluded on the next page.) 15:6 FINANCES OF THE NATION 2009

Table 15.5 Concluded 2006 2007 2008 millions of dollars Foreign exchange account ...... 40,827 44,178 42,299 International Monetary Fund subscriptions less notes payable and special drawing rights ...... !109 !495 !605 Accounts receivable ...... 2,581 3,398 3,247 Cash ...... 21,149 22,696 13,729 Tax receivables ...... 59,113 66,492 65,902 Net recorded financial assets...... 165,559 181,858 176,046 Excess of liabilities over assets—net debt or accumulated deficit ...... 481,499 467,268 457,637 Source: Public Accounts.

Investments in enterprise Crown corporations as well as other loans, investments, and advances are recorded at the lower of cost and realizable value. An allowance for valuation is maintained: it represents estimated losses on the realization of loans, investments, and advances. This allowance includes the full amount of concessionary loans (that is, interest-free or low-interest loans) made before April 1, 1987. Since that time, such loans have been treated as budgetary expenditures. The foreign exchange account is the Canadian dollar value of foreign currencies and securities and includes the government’s gold reserves. The gold reserves are valued at the Canadian dollar equivalent of 35 special drawing rights per fine ounce, which was $59.08 per fine ounce on March 31, 2008, for a total value in the assets statement of $42.3 million. The market value of the gold holdings was more than six times the value shown in the statement. The liability portion of the statement of assets and liabilities records the government’s financial obligations to outside organizations and individuals. Liabilities are recorded at the amounts ultimately payable. The borrowings of agent enterprise Crown corporations not expected to be repaid by the corporations themselves are recorded as liabilities. Termination benefits, superannuation plans, and government annuity accounts are reported on an actuarial basis. Actuarial liabilities are statistical estimates of future costs stemming from obligations that the government has already incurred. For example, an employee’s public service pension might not be paid out for many years, but the obligation to pay that pension arises out of the employee’s period of employment.

Contingent Liabilities In addition to the liabilities recorded on its balance sheet, the federal government also has significant contingent liabilities, which are liabilities for which the government is not currently responsible but for which it may be if some future event does or does not occur. Table 15.6 lists the federal government’s contingent liabilities on March 31, 2006, 2007, and 2008. Contingent liabilities on March 31, 2008 amounted to $204.2 billion, of which $180.7 billion was guaranteed loans and securities. The largest single guarantee category is borrowings by agent Crown corporations, representing PUBLIC DEBT 15:7

Table 15.6 Summary of Contingent Liabilities of the Federal Government on March 31, 2006, 2007, and 2008 2006 2007 2008 millions of dollars Explicit guarantees Borrowings under the Canada Student Loans Act ...... 240.5 177.5 129.6 Borrowings by Crown corporations that are agents of her Majesty ...... 119,696.8 141,781.8 171,042.3 Farm improvement loans acts ...... 216.5 140.8 129.0 Small Business Loans Act...... 891.0 860.1 789.8 Advance Payments for Crops Act...... 364.6 111.3 611.5 Enterprise development program ...... 0.2 0.2 0.2 Indian economic development program ...... 0.9 0.9 0.8 Aboriginal economic program ...... 1.5 0.8 0.6 Loans to Indians by CMHC...... 595.1 801.9 990.8 Loans to Indians for on-reserve housing ...... 751.9 716.7 691.5 Insurance against accidents at nuclear installations .... 583.9 583.1 582.8 Guarantees with respect to financial obligations re de Havilland DHC-7 and DHC-8 aircraft ...... 179.0 177.0 — Guarantees with respect to the regional aircraft credit facility ...... — — 178.1 Guarantees under the spring credit advance program and the enhanced spring credit advance program..... — 605.2 10.5 Export Development Corporation, insurance, and related guarantees ...... 1,289.4 532.4 468.0 Guarantees under the Agricultural Marketing Programs Act...... 29.6 27.2 8.8 Guarantees under the Canadian Wheat Board Act ..... 3,928.0 3,326.0 4,017.7 Guarantees under the Prairie Grain Advance Payments Act...... 320.0 165.1 — Guarantees of mortgages...... 962.3 1,195.2 1,575.6 Guarantees of loans to the national biomass ethanol program ...... — — 25.0 Loans to NewGrade Energy Inc. to finance construction of a heavy oil upgrader ...... 13.5 4.7 — Other ...... 115.7 238.6 — Allowance for losses ...... !1,031.3 !815.0 !602.1 Total explicit guarantees ...... 129,149.1 150,630.6 180,650.5 International organizations ...... 14,842.0 14,690.0 13,236.0 Pending and threatened litigation ...... 9,694.0 10,027.0 10,353.0 Total...... 153,685.1 175,347.6 204,239.5 Source: Public Accounts.

$171.0 billion. Since March 31, 1993, borrowings by agent Crown corporations have been considered contingent liabilities in the public accounts. Pending and threatened litigation accounts for $10.4 billion.

Liabilities of Crown Corporations All money borrowed by agent enterprise Crown corporations is fully backed by the government of Canada. Table 15.7 gives a summary of the borrowings and other liabilities of all agent enterprise Crown corporations on March 31, 2008. Liabilities owed to outside parties by these corporations totalled $240.6 billion, of which third-party borrowing amounted to $175.3 billion. 15:8 FINANCES OF THE NATION 2009

Table 15.7 Liabilities of Enterprise Crown Corporations on March 31, 2008 Government and other Outside parties Crown Borrowings Other corporations Total millions of dollars Canada Development Investment Corporation ...... — 23.6 — 23.6 Canada Deposit Insurance Corporation .... — 653.5 4.7 658.2 Canada Lands Company Limited ...... 31.1 30.5 38.5 100.1 Canada Post Corporation...... 58.0 3,572.8 107.6 3,738.3 Saint John Port Corporation ...... — 2.4 — 2.4 Canada Mortgage and Housing Corporation ...... 8,907.1 2,733.6 4,449.6 16,090.2 Export Development Corporation ...... 16,743.4 1,583.5 6.7 18,333.6 Farm Credit Corporation ...... 9,623.6 243.4 3,826.7 13,693.7 Business Development Bank of Canada.... 8,024.9 522.8 1,008.5 9,556.2 Canadian Wheat Board ...... 4,017.7 573.2 4.3 4,595.2 Freshwater Fish Marketing Corporation.... 18.8 9.9 — 28.7 Royal Canadian Mint...... 36.2 91.2 6.8 134.2 Other ...... 127,839.8 55,308.4 4,655.0 187,803.3 Total...... 175,300.6 65,348.8 14,108.4 254,757.7 Source: Public Accounts.

The liabilities of non-agent Crown corporations (such as the Canadian National Railway Company, VIA Rail, and the Bank of Canada) are not, in law, an obligation of Canada unless expressly guaranteed.

Debt The broadest measure of debt, gross public debt, is the total of all liabilities of the federal government. The federal government’s net debt is the gross public debt less financial assets. On March 31, 2008 total federal liabilities were $692.3 billion on a public accounts basis. Table 15.8 shows gross public debt, assets, and net debt for selected fiscal year-ends from 1927 to 2008.

Unmatured Debt The major portion of the gross public debt is made up of unmatured debt, as shown in table 15.5. This debt of $390.7 billion in 2007-8 is owed to external parties and consists of outstanding marketable bonds, treasury bills, Canada savings bonds, Canada bills, and notes and loans issued by the federal government. Also included is $1.0 billion borrowed from the Canada Pension Plan (CPP).

Specified Purpose Accounts The federal government borrows from a number of special accounts that it administers in order to finance a significant part of its financial requirements. At the end of 2007-8, borrowing from the specified purpose funds totalled $191.2 billion, of which $137.4 billion came from the federal pension accounts. The three main employee pension, or superannuation, accounts xxxxx PUBLIC DEBT 15:9

Table 15.8 Public Debt, Recorded Assets, and Net Debt on March 31, Selected Years, 1927 to 2008a

Liabilities Less Unmatured Other recorded Net Year debt liabilities Total assets debt millions of dollars 1927 ...... 2,435 291 2,726 378 2,348 1932 ...... 2,502 325 2,827 451 2,376 1937 ...... 3,276 266 3,542 458 3,084 1942 ...... 5,865 698 6,563 2,562 4,001 1947 ...... 16,542 307 16,849 4,180 12,669 1952 ...... 13,949 1,991 15,940 5,544 10,396 1957 ...... 13,573 2,918 16,491 5,045 11,446 1960 ...... 15,890 3,519 19,409 6,290 13,119 1965 ...... 18,934 7,270 26,204 9,291 16,913 1970 ...... 22,184 11,076 33,260 15,684 17,576 1975 ...... 33,086 19,780 52,866 27,285 25,581 1980 ...... 72,121 32,741 104,862 32,703 72,159 1985 ...... 172,719 71,039 243,758 35,772 207,986 1990 ...... 294,562 103,319 397,881 39,061 358,820 1995 ...... 440,998 143,800 584,798 39,126 545,672 2000 ...... 456,406 182,274 638,680 74,154 564,526 2005 ...... 435,460 270,281 705,741 205,878 499,863 2007 ...... 414,192 291,571 705,763 238,495 467,268 2008 ...... 390,697 301,630 692,327 234,690 457,637 a Figures have been restated to reflect the adoption of full accrual accounting. Figures before 2001-2 are not comparable. Source: Public Accounts. established by the federal government are for the public service, the Canadian forces, and the Royal Canadian Mounted Police. A fourth account—the supplementary retirement benefits account—is designed to protect the defined benefits of the other three from erosion due to inflation. There are also other smaller accounts such as the annuity accounts for members of Parliament and judges. No actual cash flows to or from these accounts. The government credits employee and employer contributions to the pension accounts, as well as interest on the account balances. Beneficiaries are paid from the consolidated revenue fund, and these payments are debited to the accounts. In effect, the government borrows the difference between annual credits to and debits from the pension accounts. The funds of the pension plans are not invested in marketable securities as are the funds in most private sector plans. Instead, the funds are borrowed by the government at interest rates based on long-term borrowing rates. All employee pension plans are valued on an actuarial basis. The government is responsible for any difference between the present value of estimated future pension payments and the value of the pension plans recorded in the public accounts. From time to time adjustments are made to bring the recorded liabilities into line with estimates of pension obligations. Another specified purpose account administered by the federal government is the CPP account. The gross value of the CPP account on March 31, 15:10 FINANCES OF THE NATION 2009

2008 was $90.5 billion. See chapter 8 for more detail on the operation of the CPP account.

Miscellaneous The federal government’s remaining liabilities are made up of items such as accounts payable, outstanding cheques and warrants, and allowances for ter- minations and vacations. Of the total, $53.7 billion is for accounts payable.

Debt Charges Interest expenses for both unmatured debt and specified purpose accounts are charged to budgetary expenditures on an accrual basis. The interest expenses for other liabilities are charged to budgetary expenditures as they fall due. Discounts on treasury bills are treated as an interest expense. Interest and other related charges for servicing the gross public debt are illustrated in table 15.9. Other related charges include the amortization of commissions and the cost of issuing new debt. In 2007-8, total interest and other debt charges on the gross public debt were $33.3 billion, down slightly from the previous year. Interest and other debt charges are a major component of the federal government’s expenditures, as shown in table 15.10. These charges peaked for recent times in 1996-97, when interest and other debt charges accounted for 30.0 percent of budgetary expenditures and were equal to 31.9 percent of budgetary revenues. In 1995-96, the charges were about 5.8 percent of GDP. Interest and other debt charges as a percentage of GDP was highest in 1990-91, when such charges reached 6.4 percent of GDP. Since 1990-91, interest and other debt charges as a percentage of GDP has fallen to 2.1 percent in 2007-8.

Net Public Debt Charges Just as the government’s financial assets can be subtracted from the gross public debt to arrive at a net debt figure, so can the income from government lending and investments be subtracted from interest and other debt charges to arrive at a net public debt charge. Interest and other returns, as shown in table 15.11, totalled $692 million for 2007-8 and reduced the net cost of federal borrowing to $32.6 billion.

Cash Needs The budgetary accounts by themselves do not provide a complete picture of the federal government’s fiscal activities. If budgetary revenues and expenditures were recorded entirely on a cash basis, a deficit would mean using all the government’s cash resources to meet the deficit. Because they are not, it is necessary to look at the government’s cash requirements separately. An alternative approach is based on the federal government’s cash needs. The cash needs analysis includes both budgetary and non-budgetary operations. Some budgetary expenses are book entries that do not involve cash, such as contributions to employee pension plans. Some non-budgetary transactions, such as the payment of pension benefits, do require cash. Transactions of the foreign exchange account are not included in the budgetary accounts but can PUBLIC DEBT 15:11 b 46,905 c ments in 1995-96. 152 the sale of invest Specified ng costs related to purpose accounts purpose illion in financi Canada millions of dollars lic Debt for Selected Fiscal Years, 1989-90 to 2007-8 Years, Fiscal for Selected lic Debt Includes $83 m c and loans fund loans Superannuation Other amounts Total a ills bonds b rrency Marketable bonds Marketable Excludes consolidated specified purpose accounts. accounts. purpose specified consolidated Excludes b Canadian foreign savings Treasury notes investment new for Other Payable inPayable in Payable Canada Foreign Plan Pension Charges Table 15.9 Interest and Other Debt Charges on Pub on Charges Debt Other and 15.9 Interest Table ...... 22,464 1,064 1,320 5,222 289 400 119 12,59341,647 na na ...... 13,045 20,597 372 645 4,857 12,989 2,232 11,764 104 379 — 307 53 71 10,481 602 6,373 600 102 38,820 ...... 23,060 23,069 758 1,129 1,272 1,206 5,061 5,017 137 26 391 361 145 150 12,160 11,70541,394 40,931 na na na na ...... 19,876...... 16,923...... 1,064 15,384...... 1,088 14,367 654...... 4,525 13,672 571 13,166 420 137 603 352 501 4,454 280 410 4,515 346 434 86 5,314 300 81 6,177 69 6,382 134 73 340 70 338 12,229 32339,651 215 91 na na 130 79 77 10,870 7335,769 10,696 53 na 34,118 10,614 na na 33,772 10,561 na na 33,945 10,486 na na na na na 33,325 Includes Canada bills. a Source: Public Accounts. Public Source: Year currency cu 1989-90 1995-96 1997-98 1998-99 1999-2000 2001-2 2003-4 2004-5 2005-6 2006-7 2007-8 15:12 FINANCES OF THE NATION 2009

Table 15.10 Interest and Other Debt Charges as a Percentage of Economic and Fiscal Indicators for Selected Fiscal Years, 1949-50 to 2007-8 Gross Debt charges domestic as percentage product Budgetary Budgetary Budgetary of Year (GDP)a revenues expenditures deficit gross debt 1949-50 ...... 2.6 17.5 18.4 na na 1959-60 ...... 2.1 13.3 12.1 130.6 na 1964-65 ...... 2.0 12.8 12.3 333.7 4.1 1969-70 ...... 2.1 12.0 12.3 na 5.0 1974-75 ...... 2.1 11.0 10.3 159.8 6.0 1979-80 ...... 3.1 20.3 16.0 74.1 7.9 1985-86 ...... 5.3 33.0 22.8 73.5 9.3 1989-90 ...... 6.0 34.1 27.2 134.1 9.8 1990-91 ...... 6.4 35.7 28.1 133.1 9.8 1993-94 ...... 5.3 32.7 24.0 90.4 7.0 1994-95 ...... 5.6 34.1 26.2 112.2 7.2 1995-96 ...... 5.8 36.0 29.5 163.9 7.5 1996-97 ...... 5.4 31.9 30.0 505.5 7.0 1997-98 ...... 4.7 26.7 27.3 1,176.9 6.4 1998-99 ...... 4.6 26.6 27.1 1,435.3 6.5 1999-2000 ..... 4.3 25.1 27.1 338.6 6.5 2000-1 ...... 4.0 23.6 26.1 245.5 6.7 2001-2 ...... 3.4 21.8 23.0 423.7 6.0 2002-3 ...... 3.1 19.6 20.3 534.8 6.0 2003-4 ...... 2.8 18.0 23.3 393.8 5.8 2004-5 ...... 2.5 16.1 16.2 2,093.1 5.5 2005-6 ...... 2.3 15.2 16.2 255.5 5.6 2006-7 ...... 2.3 14.4 15.3 242.5 4.8 2007-8 ...... 2.1 13.7 14.3 347.2 4.8 a Uses GDP for calendar year ending in fiscal year. Source: Public Accounts. have a significant effect on the cash needs of the government. Other substantial cash flows outside the budgetary framework include loans to Crown corporations, other governments, businesses, and individuals; investments in Crown corporations and other domestic corporations; investments in international organizations; and operations of the funds administered by the federal government as trustee. These cash flows result in changes to federal assets and liabilities and add to or subtract from the government’s cash needs arising from the budget. The combined effect of budgetary and non-budgetary transactions changes the cash resources and requirements of the government: any net deficiency is met by increasing debt or drawing down cash balances.

Financial Management System The federal balance sheet on an FMS basis is examined in table 15.12 for fiscal years 2005 to 2008. The net financial debt decreased to $490,412 million in 2008 from $523,344 million in 2005. The largest categories of liabilities on March 31, 2008 were bonds and debentures and liabilities to pension plans, making up 43.9 and 23.1 percent of total liabilities, respectively. The largest financial asset category of the federal government is advances, which are xxxxxxxx PUBLIC DEBT 15:13

Table 15.11 Net Public Debt Charges for Selected Fiscal Years,a 1939-40 to 2009-10 Total interest Total Amortization of Other and other net public Interest on discounts and debt debt Return on debt Year public debtb commissions charges charges investmentsc charges millions of dollars 1939-40 .... 129 5 1 135 15 120 1945-46 .... 409 15 14 438 70 368 1949-50 .... 440 10 1 451 92 359 1959-60 .... 736 45 3 784 240 544 1964-65 .... 1,012 36 3 1,051 423 629 1969-70 .... 1,676 34 7 1,717 860 857 1974-75 .... 3,164 41 6 3,211 1,831 1,379 1979-80 .... 8,339 153 32 8,524 3,344 5,180 1984-85 .... 22,119 285 54 22,458 5,202 17,257 1989-90d . . . 38,407 343 71 38,820 5,935 32,886 1994-95d . . . 41,575 393 78 42,046 5,021 37,025 1999-2000d . 41,025 503 119 41,647 5,251 36,396 2003-4 ..... 33,742 1,241 91 35,769 571 35,198 2004-5 ..... 32,284 1,755 79 34,118 491 33,627 2005-6 ..... 31,905 1,790 77 33,772 680 33,092 2006-7 ..... 32,491 1,359 95 33,945 1,160 32,785 2007-8 ..... 31,585 1,687 53 33,325 692 32,633 2008-9 ..... 33,830ef f33,830ef f 2009-10 .... 32,018ef f32,018ef f a Adoption of full accrual accounting means data prior to 2001-2 are not comparable. b In- cludes discounts on treasury bills. c Income derived from loans, investments, and other productive assets. Includes interest, dividends, and profits. d Excludes specified purpose accounts. e Estimate. Amortization of discounts and commissions and other debt charges are not separable from interest on the public debt. f The data are not available. Sources: Public Accounts; Main Estimates. monies paid out to governments, Crown corporations, and other entities where no securities are reported as being issued by the borrower and lodged with the lender. Advances accounted for 62.2 percent of the federal government’s financial assets on March 31, 2008.

Debt Charges Gross and net debt charge information for the federal government for selected fiscal years is provided in table 15.13. Net debt charges for the federal government are estimated at $4.6 billion for 2008-9.

PROVINCIAL/TERRITORIAL GOVERNMENT DEBT Public Accounts This section briefly examines the debt structure of each province using its own consolidated public accounts. Table 15.14 provides a summary of provincial/territorial direct and guaranteed debt on March 31, 2008. Debt is guaranteed primarily to facilitate the operations of a province’s Crown corporations. Although the data are not adjusted to provide complete comparability between provinces and territories, they do give a good indication of the varying approaches to borrowing. 15:14 FINANCES OF THE NATION 2009

Table 15.12 Federal Government Balance Sheet on an FMS Basis on March 31, Fiscal Years 2005 to 2008 2005 2006 2007 2008 millions of dollars Financial assets Cash on hand and on deposit...... 24,684 25,712 27,463 19,094 Receivables ...... 7,405 7,648 8,245 7,311 Advances...... 56,286 57,309 61,395 64,665 Securities ...... 12,943 13,368 11,853 11,205 Other financial assets...... 1,555 1,565 1,725 1,703 Total financial assets ...... 102,873 105,602 110,681 103,978 Liabilities Bank overdrafts ...... 4,294 4,753 4,972 5,649 Payables...... 35,897 37,043 40,919 37,340 Advances...... 544 219 477 388 Treasury bills ...... 127,200 131,600 134,100 117,000 Savings bonds ...... 19,080 17,342 15,175 13,068 Bonds and debentures ...... 280,011 272,672 266,406 261,040 Other securities ...... 6,705 6,740 3,966 3,626 Deposits...... 8,202 4,978 4,794 5,481 Liabilities to pension plans ...... 129,579 131,062 134,726 137,371 Other liabilities ...... 14,705 13,292 13,255 13,427 Total liabilities ...... 626,217 619,701 618,790 594,390 Net financial debt...... 523,344 514,099 508,109 490,412 Source: Statistics Canada, December 2008.

Table 15.13 Federal Government Gross and Net Debt Charges on an FMS Basis, for Fiscal Years 2005-6 to 2008-9 2005-6 2006-7 2007-8 2008-9 millions of dollars Debt charges...... 21,456 21,479 20,734 18,584 Return on investment...... 6,915 8,320 10,026 14,017 Net debt charges...... 14,541 13,159 10,708 4,567 Source: Same as table 15.4.

Newfoundland and Labrador Of Newfoundland and Labrador’s gross borrowing of $7.6 billion outstanding on March 31, 2008, 85.8 percent or $6,492.8 million was payable in Canadian dollars, and 14.2 percent or Cdn.$1,077.8 million was payable in US dollars. Included in direct debt are $490.2 million in treasury bill borrowings and $503.5 million in CPP funds. The province’s contingent liabilities totalled $1,296.0 million on March 31, 2008 and included $1,250.7 million (net) in debenture guarantees of the Newfoundland and Labrador Hydro-Electric Corporation, and $44.8 million (net) in guaranteed bank loans.

Prince Edward Island Prince Edward Island’s net funded debt totalled $1,059.5 million on March 31, 2008 and included $1,318.0 million in gross funded debt offset by contingency PUBLIC DEBT 15:15

Table 15.14 Provincial/Territorial Debt on March 31, 2008 Direct debt Treasury Total net Net total bills Gross Gross Sinking direct guaranteed Province/territory and loans CPP other debt funds debt debt millions of dollars Newfoundland and Labrador...... 490 a 7,062 !727 6,825 1,296 Prince Edward Island . . . 140 a 1,178 !266 1,052 211 Nova Scotia...... aa11,030 !2,012 9,018 381 New Brunswick ...... 712 a 10,702 !4,471 6,943 79 Quebec...... 3,292 a 125,667 !4,641 124,318 10,828 Ontario...... aa185,763 !43,345 142,418 2,300 Manitoba...... 850 a 22,629 !1,243 20,536 352 Saskatchewan ...... 430 a 11,838 !1,359 10,909 25 Alberta...... aa2,522 a 2,446 99 British Columbia ...... — a 37,276 !2,649 34,627 99 Northwest Territories . . . — aa a 54 290 Nunavut...... aaaaa a Yukon ...... aaaaa 38 a The data are not available. Sources: Federal and provincial Public Accounts. and sinking funds of $258.5 million. The province’s gross debt at March 31, 2008 included $1,177.7 million in debentures and $140.3 million in CPP funds. On March 31, 2008, Prince Edward Island had contingent liabilities of $210.7 million, including $49.9 million in debentures and $133.3 million in debt of consolidated agencies and Crown corporations.

Nova Scotia Nova Scotia’s total gross debenture debt on March 31, 2008 was $12.5 billion, offset by sinking funds of $3.0 billion. The province’s contingent liabilities of $380.7 million on March 31, 2008 included promissory notes of $2.5 million for the Nova Scotia Offshore Petroleum Board, $137.5 million in mortgages and other guarantees, and $239.3 million in bank loan guarantees.

New Brunswick On March 31, 2008, New Brunswick’s direct gross debt outstanding was $13.1 billion. Of the total outstanding, $11,664.7 million was payable in Canadian dollars and Cdn.$1,399.6 million in US dollars. New Brunswick’s contingent liabilities on March 31, 2008 included $569.5 million under the New Brunswick Municipal Finance Corporation Act, $83.4 million under the Economic Development Act, and $14.8 million under the Fisheries Development Act.

Quebec Quebec’s outstanding direct gross debt on March 31, 2008 of $102.6 billion included $93.2 million payable in Canadian funds, Cdn.$1.1 billion payable 15:16 FINANCES OF THE NATION 2009 in US funds, Cdn.$2.1 billion in Japanese yen, $3.1 billion in euros, and $3.1 billion in Swiss francs. Quebec’s contingent liabilities of $10.8 billion on March 31, 2008 included $2.2 billion in loans that are guaranteed by Investissement Québec, $4.3 billion in farm and forest producer loan guarantees, and $3.2 billion in student loan guarantees.

Ontario On March 31, 2008, the province’s total direct debt was $162.1 billion. This total includes $28.3 billion in debt incurred on behalf of the Ontario Electricity Financial Corporation, formerly Ontario Hydro. The $28.3 billion consisted of Cdn.$1.5 billion payable to the Canada Pension Plan, $16.3 billion payable to public investors, $1.2 billion in treasury bills, and $9.3 million in bonds. Debt incurred for provincial purposes was $133.8 billion and included $4.8 billion in treasury bills, $105.5 billion in publicly held debt, and $17.1 billion of non-publicly held debt, which consisted of $7.4 billion in CPP funds, $4.5 billion owing to the teachers’ pension fund, $2.3 billion to the public service pension funds, $1.2 billion to the Ontario Mortgage and Housing Corporation, $157.3 million to the Canada Mortgage and Housing Corporation (CMHC), and $587.7 million to the Ontario Immigrant Investor Corporation. Ontario’s contingent liabilities on March 31, 2008 were $2.3 billion, which included $1.7 billion for student loans, loan guarantees of $166.1 million from the Ministry of Municipal Affairs and Housing, $31.8 million for GO Transit, $136.9 million in agricultural loan guarantees, and $79.0 million for the Ontario Municipal Improvement Corporation.

Manitoba Manitoba’s gross debt on March 31, 2008 totalled $22.2 billion, of which $19.5 billion (87.8 percent) was payable in Canadian dollars and the remainder in US dollars. The Manitoba Hydro-Electric Board accounted for $7.5 billion. Manitoba had contingent liabilities of $519.0 million on March 31, 2008, which included $346.6 million in guaranteed debt for the Manitoba Hydro- Electric Board.

Saskatchewan On March 31, 2008, Saskatchewan’s total gross public debt was $11.6 billion. The Saskatchewan Power Corporation accounted for $2.4 billion, SaskEnergy Inc. for $752.9 million, and Saskatchewan Telecommunications for $347.3 million. Contingent liabilities in the form of guaranteed debt on March 31, 2008 totalled $25.2 million and included $23.0 million for loan guarantees under the Farm Financial Stability Act.

Alberta Alberta’s total net unmatured debt was $2.5 billion as of March 31, 2008. Debt of the Alberta Capital Finance Authority totalled $5.7 billion in 2007-8. Alberta’s debenture and loan guarantees to non-government entities totalled PUBLIC DEBT 15:17

$99 million on March 31, 2008. Guaranteed debentures and loan guarantees included $51 million under the Feeder Associations Guarantee Act, $19 million under the Agriculture Financial Services Act, $16 million under the Alberta Housing Act, and $11 million under the Student Loan Act.

British Columbia British Columbia’s consolidated direct debt at March 31, 2008 was $34.6 billion. The province’s net contingent liabilities in its consolidated revenue fund on March 31, 2008 totalled $417 million in guaranteed debt and consisted mainly of $375 million in loan guarantees under the Homeowner Protec- tion Act and student aid loans of $7 million under the Financial Administra- tion Act. The province also guaranteed $10 million under the Home Mortgage Assistance Program Act and $10 million under the Feeder Association’s loan guarantee program.

Northwest Territories The Northwest Territories’ government has guaranteed the repayment of $153.0 million in loans and debentures by the NWT Power Corporation, $24.7 million by the NWT Housing Corporation, $3.0 million for operating lines of credit, $76.8 million for the NWT opportunities fund, and $10.3 million for residential housing loans at March 31, 2007. Long-term debt of the territory totalled $113.1 million at March 31, 2007, $24.7 million of which consisted of CMHC loans to the NWT Housing Corporation.

Nunavut Nunavut’s long-term debt at March 31, 2007 totalled $117.5 million and included Nunavut Housing Corporation loans of $47.2 million and $65.4 million in loans to the Qulliq Energy Corporation.

Yukon Yukon’s gross long-term debt outstanding on March 31, 2008 totalled $19.5 million and included $15.7 million in mortgages and $3.5 million in loans from the CMHC. Guaranteed debt on March 31, 2008 included debts of the Yukon Develop- ment Corporation of $18.7 million, loans payable by the Yukon Housing Corporation of $19.2 million, and guarantees of $110,890 under the Economic Development Act.

Financial Management System Table 15.3 shows consolidated provincial, territorial, and local general government financial assets and liabilities on March 31, 2007. Only in Alberta, the Northwest Territories, and Yukon are financial assets higher than liabilities. The main assets are holdings of Canadian investments; the main liabilities are outstanding bonds and debentures issued to the general public and those issued to the CPP fund. Statistics Canada includes the operations of the Quebec Pension Plan (QPP) in its analysis of Quebec. Thus, provincial 15:18 FINANCES OF THE NATION 2009 borrowing from the QPP is not considered a liability, and QPP net assets are included in provincial net assets. In the other provinces, borrowing from the CPP is considered a liability. Internally generated funds are also used by the provinces to augment public bond sales. Funds accumulated by public service pension plans, teachers’ pension plans, and some municipal employees’ plans are also sources for provincial borrowing. The third major source of borrowing outside the capital market is the federal government. Through various programs, such as those for housing, employment, winter works, and industrial development, the provinces have been able to borrow significant sums from the federal government at favourable rates and often with forgiveness clauses. Traditionally, it has been the practice to assume that provincial debt issues are sold in the public bond market, thus raising money from individuals, corporations, and institutions. The provinces also have access to the funds raised by the CPP that are surplus to its current needs. The CPP investment fund purchases special, preferential-rate provincial securities every three months from the provinces. Some provinces use the funds themselves while others channel them through their agencies to local governments, schools, hospitals, and other provincially guaranteed borrowers. Table 15.15 shows that consolidated financial assets for all provinces, territories, and local general governments increased by 35 percent between the fiscal year-ends 2004 and 2007, total liabilities by 15 percent, and the net financial debt decreased by 15 percent.

LOCAL GOVERNMENT DEBT Because local governments are endowed only with the freedoms that the provinces confer on them and must adhere to provincial guidelines, they have significantly less flexibility with respect to debt than either the provincial or federal governments. Local governments are generally limited to borrowing to fund capital expenditures. Operating expenditures are almost exclusively paid for out of current revenue. Capital expenditures may be met from special assessments, reserve funds set aside for such eventualities, and grants. In practice, they are, however, financed mainly from borrowed money obtained through the sale of debentures to banks, trust or insurance companies, other private lenders, and governments or government agencies. The borrowed funds are held in a special capital fund account that is kept separate from current operating and other funds and are invested until they are needed. The interest earned is credited to the capital fund. The cost of interest paid out on debentures is charged annually to current operating expenditure. An annual sum for the retirement of the principal of the debt (a predetermined amount set out in the bylaw authorizing the borrowing) is also charged to current expenditure. In Ontario, for example, the annual charge is the amount required to meet the principal amount due each year with respect to instalment (or serial) debentures, together with the actuarially calculated sinking fund deposit required to be made for other debentures. The PUBLIC DEBT 15:19 debentures are issued for a term of years related to the useful life of the capital asset being acquired by the funds raised. Table 15.16 summarizes financial assets and liabilities of all local governments for 2003 to 2006 and table 15.17 presents a summary of the estimated financial assets and liabilities of local governments by province and territory for the 2006 calendar year on a financial management system basis.

Table 15.15 Consolidated Provincial, Territorial, and Locala General Government Balance Sheet on March 31, Fiscal Years 2003-4 to 2006-7 2003-4 2004-5 2005-6 2006-7 millions of dollars Financial assets Cash on hand and on deposit...... 16,585 18,116 18,190 21,620 Receivables ...... 37,701 43,120 47,228 54,577 Advances...... 46,056 48,366 51,071 55,220 Securities ...... 179,765 204,758 225,650 248,567 Other financial assets...... 7,094 7,360 6,498 6,584 Total financial assets ...... 287,201 321,720 348,637 386,568 Liabilities Bank overdrafts ...... 3,103 3,425 3,692 3,605 Payables...... 46,310 52,248 58,863 63,783 Advances...... 15,096 16,564 18,130 18,531 Treasury bills ...... 6,605 6,540 7,596 8,048 Savings bonds ...... 13,095 10,200 7,985 5,740 Bonds and debentures ...... 252,034 245,489 232,094 227,968 Other liabilities ...... 220,624 255,071 282,668 311,514 Total liabilities ...... 556,867 589,537 611,028 639,189 Net financial debt...... 269,666 267,817 262,391 252,621 a Local governments include general government and school boards. Source: Same as table 15.1.

Table 15.16 Summary of Financial Assets and Liabilities of All Local Governments Combined on December 31, 2003 to 2006 2003 2004 2005 2006 millions of dollars Financial assets Cash on hand and on deposit...... 12,468 14,044 14,014 15,934 Receivables ...... 12,965 14,026 15,085 15,782 Advances...... 2,797 2,832 2,925 3,083 Securities ...... 21,827 23,766 25,957 28,505 Other financial assets...... 3,889 4,182 3,902 4,076 Total financial assets ...... 53,946 58,850 61,883 67,380 Liabilities Payables...... 12,623 13,686 15,308 15,303 Bank loans...... 2,057 2,430 2,786 2,630 Advances...... 3,307 3,402 4,410 4,529 Bonds and debentures ...... 36,120 38,200 38,912 43,624 Other liabilities ...... 9,517 9,935 10,313 11,515 Total liabilities ...... 63,624 67,653 71,729 77,601 Net financial debt...... 9,678 8,803 9,846 10,221 Source: Same as table 15.1. 15:20 FINANCES OF THE NATION 2009

!27 10,221

!16

!2,025 on an FMS Basis

!2,454

!903 millions of dollars

!2,193 420 and Liabilities of Local Governments on December 31, 2006 December on NL PE NS NB QC ON MB SK AB BC NT NU YT Total Table 15.17 Summary of Financial Assets ...... 368 10 666 566 21,354 8,797 1,239 151 5,163 5,270 28 6 6 43,624 ...... 160 13 311 46 651 5,780 346 225 1,395 2,556 25 6 1 11,515 ...... 1,025 189 1,445 812 26,513 25,614 2,170 795 8,854 10,057 73 40 14 77,601 ...... 119 45 382 116 5,138 6,832 276 631 941 1,230 23 33 16 15,782 ...... 32 2 113 27 4,024 9,820 611 574 8,197 5,083 7 1 14 28,505 Source: Same as table 15.1. as table Same Source: Financial assets Financial on hand and Cash deposit...... assets Receivables 70Advances...... — assets...... 81 8 financial Securities 302 32Other financial 88 1 367 1,100Total 253 223 84 10,821 27,807 1,750 1,698Liabilities 20 15 11,308 12,082 74 1,031Payables...... loans...... 8,481 56 207Bank 6 625 696 41 271 29Advances...... 2,156 59 405 67,380 19 and debentures Bonds 303 ...... 40 120 debt 164Other liabilities 3 78 632 3,571 39Total liabilities 723 6,578 4,088 88 financial 101 40 518Net 461 1 21 907 345 11 127 270 221 559 41 15,692 680 — 15,934 2,147 536 1,624 17 30 4 18 9 1,268 1,145 3,779 — 7 1 113 115 — — 15,303 — 85 52 4,076 3,083 333 97 3 274 — — — 10 — 2,630 4,529 16 Crown Corporations

All three levels of government use Crown, or government-owned, corporations to pursue economic and social objectives such as controlling the distribution, use, and price of certain goods and services. Crown corporations are also used as financing vehicles for development and capital projects because of their independent access to financial markets. The flexibility of the corporate form allows them to provide services that range from printing and property management to government itself. Crown corporations that provide goods and services to the public can either compete with private enterprise (for example, transportation and housing) or operate as a monopoly (for example, the sale of liquor, electricity, and natural gas). As well, governments invest in private corporations in order to ensure the provision of goods and services that are too expensive or risky for the private sector to undertake alone. The corresponding entity for Statistics Canada’s purposes, the government business enterprise, is defined as an organization that is separate from, but owned by, government and derives most of its revenue by selling goods and/or services on the open market. This definition includes a number of non- corporate entities (for example, the federal foreign exchange fund account) and excludes Crown corporations that provide government-like services and furnish goods or services to government itself and those that channel funds between levels of government. Such corporations are instead treated as part of the government universe and include agricultural and industrial development corporations, financing corporations, and many transportation systems and facilities.

FEDERAL GOVERNMENT ENTERPRISES Since 1952, federal entities and Crown corporations have been classified under the rules established by the Financial Administration Act (FAA). The legislation categorizes the federal government’s corporate interests as departmental corporations, agency Crown corporations, proprietary Crown corporations, and exempt Crown corporations. The distinction rests mainly on their proximity to government operations and the source and nature of their funding. Crown corporations have varying degrees of independence from government. A departmental corporation, for example, is treated much the same as a branch of the department to which it reports, and exempt Crown corporations, such as the Bank of Canada, are governed by their own acts, not the FAA. At July 31, 2008, 45 parent Crown corporations held 76 wholly owned subsidiaries. In addition, three wholly owned subsidiaries, Old Port of 16:2 FINANCES OF THE NATION 2009

Montreal Corp., Parc Downsview Park Inc., and PPP Canada Inc., have been directed to report as parent Crown corporations. The federal government also had interests in two joint enterprises. Excluding the Bank of Canada and various pension investment accounts, Crown corporations had total assets of $60.6 billion at the latest fiscal year-end on or before July 31, 2008. In the fiscal year ending on or before July 31, 2008, Crown corporations are estimated to have received $5,129.4 million in budgetary appropriations. The Canada Employment Insurance Financing Board (CEIFB) was created on June 20, 2008. The corporation, included in schedule III, part I of the Financial Administration Act, sets the employment insurance (EI) premium rate and manages a separate EI account where excess premiums are held and invested. The First Nations Statistical Institute, a non-agent Crown corporation under schedule III, part I of the FAA, was created on April 1, 2006. The new corporation provides statistical information and analysis of the fiscal, economic, and social condition of First Nations. The Corporation for the Mitigation of Mackenzie Gas Pipeline Project Impacts was created in 2006 to provide contributions to regional organizations with respect to projects that mitigate or anticipate the socio-economic impact of the Mackenzie gas pipeline on NWT communities. Legislation amending the Canada Pension Plan (CPP) and the Canada Pension Plan Investment Board Act became effective on April 1, 2004. As a result, CPP fixed income assets, both bonds and cash, were transferred to the Canada Pension Plan Investment Board. Contributions to the CPP flow to the board, and benefits are paid by the board. Over the last few years, there has been a move toward shared-governance status for several corporations. Seven local port authorities, for example, are shared-governance structures with associated municipalities and provinces, and each appoints a member to the board of governors. The federal government appoints the majority. The Canadian Wheat Board is a shared- governance corporation: the governor in council appoints 5 directors, and the farmers elect the remaining 10.

Crown Corporations Crown corporations are accountable to Parliament, through a minister, for the conduct of their affairs. Under the FAA, a Crown corporation is defined as a parent Crown corporation or a subsidiary that is wholly owned, either directly or indirectly, by one or more parent Crown corporation. Parent Crown corporations are wholly owned directly by the Crown, excluding departmental corporations (listed in schedule II to the FAA). The corporate form gives a measure of independence to the management of certain types of activities, independence from the close financial and personnel controls that accompany departmental administration, and independence from Parliament and government in the day-to-day management of activities. Management has more flexibility to acquire, hold, and dispose of property and has the right to sue and be sued in the corporation’s own name. Where the provisions of the FAA conflict with the provisions of any other act, CROWN CORPORATIONS 16:3 the latter generally prevails. One exception is the clause in the FAA that authorizes the appointment of the auditor general as auditor or joint auditor of Crown corporations. The FAA divides parent Crown corporations into three classes: agency, proprietary, and exempt. The extent to which the activities of Crown corporations affect budgetary accounts is described in previous chapters. Although Crown corporations are generally exempt from income taxation, a group of prescribed Crown corporations are subject to federal income taxation: Canada Deposit Insurance Corporation, Canada Development Investment Corporation, Canada Mortgage and Housing Corporation, Canada Post Corporation, Canadian Broadcasting Corporation, Cape Breton Devel- opment Corporation, Farm Credit Canada, Freshwater Fish Marketing Corporation, Royal Canadian Mint, and VIA Rail. VIA also pays provincial income taxes. Property owned by Crown corporations that qualifies as federal property is exempt from property taxation. Grants to municipalities in lieu of property taxes are made either directly by the Crown corporation or on its behalf by the federal government. All federal Crown corporations pay the federal goods and services tax and are liable for provincial sales taxes, gasoline taxes, and motor vehicle licence fees.

Agency Corporations Agency corporations (part I of schedule III to the FAA) manage trading or service operations on a quasi-commercial basis as well as procurement, construction, and disposal activities. Agency corporations must have both their operating and capital budgets approved by the Treasury Board on the recommendation of the appropriate minister and their annual corporate plans must be approved by Cabinet. These corporations operate in government- program oriented environments and depend in part on government appropriations for operating or lending purposes. For the fiscal year ending on or before July 31, 2008, these corporations received a total of $3.4 billion in federal budgetary appropriations. Of this amount, $2.0 billion went to the Canada Mortgage and Housing Corporation. The federal government’s agency Crown corporations as of July 31, 2008 are

Atlantic Pilotage Authority Canadian Museum of Nature Atomic Energy of Canada Limited Canadian Tourism Commission Blue Water Bridge Authority Cape Breton Development Corporation Business Development Bank of Canada Corporation for the Mitigation of Canada Deposit Insurance Corporation Mackenzie Gas Project Impacts Canada Employment Insurance Defence Construction (1951) Limited Financing Board Enterprise Cape Breton Corporation Canada Lands Company Limited Export Development Corporation Canada Mortgage and Housing Farm Credit Canada Corporation The Federal Bridge Corporation Canadian Air Transport Security Limited Authority First Nations Statistical Institute Canadian Commercial Corporation Freshwater Fish Marketing Corporation Canadian Dairy Commission Great Lakes Pilotage Authority, Ltd. Canadian Museum of Civilization Laurentian Pilotage Authority 16:4 FINANCES OF THE NATION 2009

Marine Atlantic Inc. Pacific Pilotage Authority National Capital Commission Ridley Terminals Inc. National Gallery of Canada Standards Council of Canada National Museum of Science and VIA Rail Canada Inc. Technology

Proprietary Corporations Proprietary (or enterprise) corporations operate in a competitive environment and ordinarily conduct their operations without appropriations. Their operating budgets are free from government supervision; only their capital budgets require the Treasury Board’s approval. Annual corporate plans for these corporations must be approved by Cabinet. For fiscal years ending on or before July 31, 2008, these corporations received a total of $106.0 million in budgetary appropriations, all of which went to Canada Post. The federal government’s proprietary corporations are listed in part II of schedule III to the FAA and, as of July 31, 2008, are Canada Development Investment Canada Post Corporation Corporation Royal Canadian Mint

Exempt Corporations Exempt corporations operate under their own implementing legislation and are not subject to the provisions of the FAA. These corporations are listed in section 85(1) of the FAA. For the fiscal year ending on or before July 31, 2008 exempt corporations received federal funding that totalled $1.6 billion. The federal government’s exempt Crown corporations, as of July 31, 2008, are Bank of Canada International Development Research Canada Council for the Arts Centre Canada Pension Plan Investment National Arts Centre Corporation Board Public Sector Investment Board Canadian Broadcasting Corporation Telefilm Canada

Financial Implications Tables 16.1 and 16.2 show the active federal loans to and investments in enterprise Crown corporations at March 31, 1998, 2007, and 2008 and the return on these investments (including interest and profits). Loans and advances to Crown corporations bear interest, which appears as budgetary revenue under “return on investments.” The accounts of the government and the Crown corporations have a concomitant relationship: for example, the administration of funds in excess of immediate requirements to be held for subsequent use such as contractors’ security deposits, contractors’ holdbacks, and unclaimed wages.

Employment in Crown Corporations Table 16.3 shows employment in Crown corporations for the fiscal year ending on or before July 31, 2008 and current federal budgetary funding as reported in the 2009-10 Main Estimates. CROWN CORPORATIONS 16:5

Table 16.1 Loans to and Investments in Crown Corporations on March 31, 1998, 2007, and 2008 Crown corporation 1998 2007 2008 millions of dollars Bank of Canada ...... 5.9 aa Business Development Bank of Canada...... 403.4 a 1,000.0 Canada Deposit Insurance Corporation ...... 395.0 — a Canada Development Investment Corporation ...... 395.7 aa Canada Hibernia Holding Corporation...... 419.3 aa Canada Lands Company Limited ...... — 49.1 37.4 Canada Mortgage and Housing Corporation ...... 6,733.2 4,651.2 4,392.8 Canada Ports Corporation ...... 44.0 — a Canada Post...... 80.0 — a Canadian Dairy Commission...... 53.5 46.0 96.9 Cape Breton Development Corporation...... — aa Export Development Corporation ...... 983.2 3.4 — Farm Credit Corporation ...... 3,045.4 a 3,840.0 Montreal Port Corporation...... 2.2 — a Royal Canadian Mint...... 40.0 aa Other Crown corporations...... — 18,933.4 20,800.0 Total...... 12,600.8 23,683.1 30,167.2 a Not available. Source: Public Accounts.

Table 16.2 Return on Loans to and Investments in Enterprise Crown Corporations for Fiscal Years Ending on March 31, 1998, 2007, and 2008 Crown corporation 1998 2007 2008 millions of dollars Atomic Energy of Canada Limited...... 0.4 0.1 .. Bank of Canada ...... 1,509.4 1,983.5 1,921.0 Business Development Bank of Canada...... 3.4 20.8 23.4 Canada Deposit Insurance Corporation ...... 49.0 — — Canada Development Investment Corporation ...... 5.0 156.0 234.2 Canada Lands Company Limited ...... 20.4 7.3 7.5 Canada Mortgage and Housing Corporation ...... 610.0 429.6 412.3 Canada Post...... 17.8 79.6 47.7 Canadian Dairy Commission...... 2.8 3.2 2.1 Export Development Canada ...... — 350.0 250.0 Farm Credit Corporation ...... 169.1 5.5 25.4 Halifax Port Authority...... 0.6 1.2 1.1 Montreal Port Corporation...... 3.6 3.7 3.7 Prince Rupert Port Corporation...... 0.5 0.1 0.2 Royal Canadian Mint...... 1.0 1.0 Saint John Port Corporation ...... 0.1 0.3 0.3 St. John's Port Corporation ...... 0.1 0.1 Vancouver Fraser Port Authoritya ...... 0.1 4.1 5.0 Other Crown corporations...... 1.6 2.6 2.4 Total...... 2,393.8 3,048.7 2,937.4 a On January 1, 2008, the Fraser River Port Authority, North Fraser Port Authority, and Vancouver Port Authority were amalgamated to form the Vancouver Fraser Port Authority. Source: Public Accounts. 16:6 FINANCES OF THE NATION 2009

Table 16.3 Employmenta in and Federal Budgetary Funding for Crown Corporations 2009-10 federal Crown corporation Employeesa budgetary funding number $ million Atlantic Pilotage Authority ...... 77 — Atomic Energy of Canada Limited...... 4,728 108.7 Bank of Canada ...... 1,183 — Blue Water Bridge Authority ...... 55 — Business Development Bank of Canada...... 1,732 — Canada Council for the Arts ...... 212 180.8 Canada Deposit Insurance Corporation ...... 83 — Canada Development Investment Corporation ...... 3 — Canada Lands Company Limited ...... 337 — Canada Mortgage and Housing Corporation ...... 1,888 2,044.7 Canada Pension Plan Investment Board...... 368 — Canada Post Corporation...... 61,557 72.2 Canadian Air Transport Security Authority...... 330 262.5 Canadian Broadcasting Corporation...... 7,784 1,052.6 Canadian Commercial Corporation ...... 117 15.2 Canadian Dairy Commission...... 67 3.7 Canadian Museum of Civilization ...... 392 62.3 Canadian Museum of Nature...... 180 32.4 Canadian Race Relations Foundation ...... 9 — Canadian Tourism Commission ...... 161 83.5 Cape Breton Development Corporation...... 16 73.5 Defence Construction (1951) Limited ...... 606 — Enterprise Cape Breton Corporation...... 42 8.7 Export Development Corporation ...... 1,068 — Farm Credit Corporation ...... 1,457 — Federal Bridge Corporation Limitedb ...... 155 40.9 Freshwater Fish Marketing Corporation...... 200 — Great Lakes Pilotage Authority, Ltd...... 81 — International Development Research Centre...... 455 161.8 Laurentian Pilotage Authority...... 51 — Marine Atlantic Inc...... 954 101.3 National Arts Centre Corporation...... 286 35.2 National Capital Commission ...... 434 110.0 National Gallery of Canada...... 261 49.7 National Museum of Science and Technology ...... 189 34.6 Old Port of Montrealc ...... 163 19.8 Pacific Pilotage Authority...... 157 — Parc Downsview Park Inc...... 37 — Ridley Terminals Inc...... 80 — Royal Canadian Mint...... 669 — Standards Council of Canada ...... 85 7.1 Telefilm Canada...... 200 104.7 VIA Rail Canada, Inc...... 3,017 351.9 Other ...... 229 — Total...... 92,155 5,017.8 a For the fiscal year ending on or before July 31, 2008. b Upon dissolution of the St. Lawrence Seaway Authority on December 1, 1998, the Federal Bridge Corporation Limited became parent corporation for the Jacques Cartier and Champlain Bridges Inc. and The Seaway International Bridge Corporation, Ltd. c Wholly owned subsidiary that receives direct funding from the federal government and is not consolidated with a parent Crown corporation. Sources: Canada, Treasury Board, 2008 Annual Report to Parliament, Crown Corporations and Other Corporate Interests of Canada (Ottawa: Treasury Board of Canada Secretariat, 2008); and 2009-10 Main Estimates. CROWN CORPORATIONS 16:7

Departmental Corporations Departmental corporations (schedule II to the FAA) are distinct from Crown corporations and are considered departments under the FAA. They are corporations established by Parliament to perform administrative, research, supervisory, and regulatory services of a governmental nature. Ministers or other government officers exert financial control and direction over departmental corporations, which are generally treated like government departments. Their financial transactions are accounted for as budgetary revenues and expenditures. Departmental corporations as of May 1, 2008 are as follows: Assisted Human Reproduction Agency Canadian Polar Commission of Canada Canadian Transportation Accident Canada Border Services Agency Investigation and Safety Board Canada Emission Reduction Incentives Law Commission of Canada Agency National Battlefields Commission Canada Employment Insurance National Research Council of Canada Commission National Round Table on the Canada Revenue Agency Environment and the Economy Canada School of Public Service Natural Sciences and Engineering Canadian Centre for Occupational Research Council Health and Safety Parks Canada Agency Canadian Food Inspection Agency Social Sciences and Humanities Canadian Institutes of Health Research Research Council Canadian Nuclear Safety Commission

Joint Enterprises The federal government has partial ownership in a number of corporations, as well as shares in two joint enterprises. In a “joint enterprise,” ownership is shared with other governments.

Other Corporate Interests Other corporate interests are bodies without share capital that do not operate as a branch of government but for which the federal government, either directly or through a Crown corporation, has the right to appoint one or more members of the board of directors or similar governing body. Organizations in this category include bodies such as the Canadian International Grains Institute and the International Monetary Fund.

PROVINCIAL GOVERNMENT ENTERPRISES Like the federal government, the provinces have used Crown corporations to achieve governmental ends for many years. By definition, a provincial government parent Crown corporation is more than 50 percent directly owned by the province. Provincial Crown corporations perform a wide variety of functions ranging from waste management to banking services and investing pension funds. The first major provincial Crown corporation was created in Ontario in 1906 to generate and distribute electricity to municipalities. Electric utilities 16:8 FINANCES OF THE NATION 2009 are, by far, the largest provincial Crown corporations and supply energy in most provinces. Electric utilities are operated by private enterprise in Prince Edward Island and Nova Scotia and by a mixture of private and municipal government agencies in Alberta. Nova Scotia Power Corporation was privatized in August 1992 when all its assets, liabilities, and retained earnings, except for its long-term debt and sinking fund assets, were transferred to Nova Scotia Power Inc. Ontario Hydro, which formerly had a monopoly to provide electricity in the province, was restructured in 1999 into five companies. Of these, two are commercial: Ontario Power Generation generates electricity and competes with other generating companies in the marketplace, and Hydro One trans- mits, distributes, and sells electricity. The Ontario Electricity Financial Corporation, a Crown corporation, is responsible for servicing and paying down Ontario Hydro’s stranded debt. Crown corporations develop and operate provincial public housing in all provinces except Nova Scotia, where a department is responsible. All provinces and territories, except Alberta, which privatized the retail sale of alcohol, have commissions to control, distribute, and sell liquor. Several of the major provincial Crown corporations and their responsibilities are described below in order to provide a sense of their size and the variety of functions they perform. However, not all provincial Crown corporations are examined nor is an exhaustive analysis of them made.

Newfoundland and Labrador Newfoundland and Labrador Hydro (Hydro) was created in 1954 to develop, generate, and sell electric power. It is the parent corporation for the Hydro group of companies. Hydro is mainly a wholesaler and sells bulk energy to utilities and industrial customers. It also supplies energy directly in rural areas not serviced by another utility. For the year ended December 31, 2007, Hydro earned net income of $81.6 million ($70.0 million in 2006) on revenues of $573.4 million.

Nova Scotia Nova Scotia Business Incorporated (NSBI) began operations in November 2001. The corporation took over the files of the former Nova Scotia Business Corporation. Unlike its predecessor, NSBI is managed by a private sector board of directors. The main functions of the new Crown corporation are attracting business to the province and providing financial services and export development. For fiscal year 2007-8, the corporation had income of $26.8 million on revenues of $36.8 million. Assets of the corporation totalled $149.5 million.

New Brunswick The New Brunswick Power Corporation was established in 1920 as the New Brunswick Electric Power Commission to provide the province with a reliable, reasonably priced supply of electricity. On March 31, 2008 the CROWN CORPORATIONS 16:9 corporation had $4,686 million in assets and owed $2,891 million to the province. For the fiscal year, the corporation incurred net income of $89 million on revenue of $1,712 million.

Quebec The Caisse de dépôt et placement du Québec was founded in 1965 to invest the funds of the Quebec Pension Plan (QPP). It now invests money for the QPP, Quebec auto insurance funds, and other public funds and agencies. The caisse’s goals are to ensure the highest financial return possible and to contribute to Quebec’s economic development. On December 31, 2008, it had net assets of $120.1 billion and during the year earned net investment income of $5.8 billion. Hydro-Quebec, created in 1944 from the assets of three private electricity companies in the greater Montreal area, has gradually acquired most of the electricity companies, cooperatives, and municipal systems in the province. In 1981 Hydro-Quebec became a joint stock company with a single share- holder (the Quebec government) and, in 1983, its mandate was broadened from only supplying power to being involved in other energy-related areas. On December 31, 2008 it had total assets of $66.8 billion and owed long-term debt of $36.4 billion. On revenues of $12.7 billion, it earned net income of $3.1 billion for the year.

Ontario The Greater Toronto Transit Authority (GO Transit) was created in 1974 to design and operate interregional transit for people whose travel takes them through more than one regional municipality and to encourage the efficient meshing of the transit systems operating in the greater Toronto area. The GO system services a population of 5 million in an area stretching from Hamilton and Guelph in the west to Barrie in the north and Newcastle in the east. From January 1998 to December 2001, GO transit was funded by municipalities within the service area. On January 1, 2002, the province resumed responsibility for GO transit. Operating costs not recovered through passenger fares and other revenue (approximately 20 percent) are covered by the province. In 2007-8, GO Transit recovered 88 percent of its operating costs. One third of capital costs related to growth and expansion are provided by the province, with the remaining two thirds shared by the federal and local governments. For the fiscal year 2007-8, farebox revenues accounted for $250.8 million, the provincial government provided $520.8 million, the municipal contribution was $46.7 million, and the federal share was $72.8 million.

Manitoba The Manitoba Public Insurance Corporation, established in 1970, provides universal compulsory automobile insurance, as well as extension and special risk coverage. For the fiscal year ended February 28, 2008, the automobile insurance division paid out $689 million in claims and had net income of $34.9 million on revenues of $869.7 million. 16:10 FINANCES OF THE NATION 2009

Saskatchewan The Crown Investments Corporation of Saskatchewan (CIC) is a Crown corporation without share capital that was established in 1978 to hold Crown corporations and other investments. On December 31, 2008, the CIC held 12 Crown corporations and reported total consolidated assets of $10.6 billion and long-term debt of $4.0 billion. It had net earnings for the year of $977.0 million on total revenues of $4.8 billion. Saskatchewan Power Corporation was established on April 8, 1950 to generate, purchase, transmit, distribute, and sell electricity. For the year ended December 31, 2008, the corporation reported net income of $64 million on revenue of $1.5 billion. Corporation assets totalled $4,520 million and liabilities, $2,991 million, of which $2,571 million was owed to the province. Saskatchewan Telecommunications and The Saskatchewan Telecom- munications Holding Corporation (collectively SaskTel) date back to 1908 when the Department of Railways, Telegraphs and Telephones was established. Saskatchewan Government Telephones, a Crown corporation, suc- ceeded the original department in 1947, and was renamed SaskTel in 1969. The holding corporation was set up in 1993. SaskTel markets and supplies voice, data, text, and image products, systems, and services. For the fiscal year ended December 31, 2008, SaskTel reported net earnings of $121.4 million on operating revenues of $1,137.8 million.

Alberta Alberta’s Treasury Branches Deposits Fund was established in 1938 to provide banking support for Albertans regardless of the prevailing economic conditions. For the fiscal year ended March 31, 2008, the Treasury Branches reported net income of $30 million. Assets totalled $23.3 billion on March 31, 2008.

British Columbia British Columbia Hydro and Power Authority (BC Hydro) was formed in 1962 through a merger of British Columbia Power Commission and BC Electric Corporation. It is the third largest electric utility in Canada, and its mandate is to generate, transmit, and distribute electricity throughout the province. For the fiscal year ending March 31, 2008, BC Hydro reported net income of $369 million on sales of $4.9 billion. Liabilities included $7.0 billion in long-term debt. The Insurance Corporation of British Columbia (ICBC) was established in 1973 to administer Autoplan, a compulsory automobile insurance program that provides basic liability coverage and accident benefits to all licensed motor vehicle owners in the province on a cost-recovery basis. All vehicle owners in the province are required to purchase basic Autoplan coverage for their vehicles. During the fiscal year ended December 31, 2008, total claims and expenses were $3,379.6 million, offset by premium income of $3,700.4 million and investment income of $280.4 million. The corporation’s net income at December 31, 2008 was $497.4 million. CROWN CORPORATIONS 16:11

ICBC had total assets of $11,476.5 million and total liabilities of $8,725.1 million at December 31, 2008. Of the liabilities, $5,730 million were unpaid claims.

Financial Summary Table 16.4 provides summary information on assets, liabilities, revenues, and expenditures for provincial and territorial government enterprises by province and territory, as at December 31, 2006. Electric utilities are by far the largest group of Crown corporations. Provincial government borrowing on behalf of government enterprises is discussed in chapter 15.

LOCAL GOVERNMENT ENTERPRISES Municipal governments have established many enterprises that carry out a wide variety of activities. Most of these fall outside Statistics Canada’s definition of government enterprises and are treated instead as part of local government. Included in the local government universe are corporations that operate water supply systems, municipal airports, housing authorities, development commissions, and many other special purpose local government boards and commissions. Statistics Canada’s definition of local government business enterprises includes local utilities that provide electricity, urban transit, gas distribution, and telephone services. Table 16.5 shows income and expenses, by industry, for local government business enterprises in 2006, and table 16.6 shows income and expenses by province and territory. Municipal government enterprises usually charge user fees for the services they provide. User fees, such as those for parking meters and off-street parking facilities, are often set well beyond the breakeven point. However, not all municipally controlled enterprises show a profit. Municipal transit systems are almost invariably subsidized. Similarly, municipal cemeteries seldom pay their own way. 16:12 FINANCES OF THE NATION 2009 millions of dollars ness Enterprises, Financial Statistics for Fiscal Year for Fiscal Statistics Financial Enterprises, ness

!2,734.7 1,786.7 3,546.8 1,806.9 4,373.1 93.0 50.4 62.4 32,614.9 0,2.5,2.1,3.1,7.2,9.2,7.3056.189242,652.1 101,328.155,222.213,933.111,073.520,698.926,871.6350.5165.9188.9 Ending Nearest to December 31, 2006 to December Nearest Ending 27.3 4.8 21.2 341.7 1,165.4 4,036.5 1,014.2 1,082.0 1,087.7 4,174.4 4.7 23.8 1.9 12,985.4 NL PE NS NB QC ON MB SK AB BC NT NU YT Total 631.8 12.8 85.1 210.9 22,690.1 492.2 79.6298.8 599.11,434.6 19.8 8,173.314,297.1 1,754.3 3,780.9 169.4 2,213.7 6,433.3 773.2791.0 55.3 7,182.9 99.4 5,495.3 45.7 1,943.1 768.52,207.815,356.219,792.4 1,667.3 27.6 3,697.4 5,448.2 3,105.811,254.5103.0 39,386.6 288.4 81.6 892.1 26.4 4,821.2 49.6 239.4 47.7 62,755.5 35.9 270.5 22.0 5,420.4 5,466.0 23,368.9 687.9 885.0 2,456.5 2,655.4 31.3 4.3 13.1 18,444.3 2,481.6 91.72,029.28,217.1 1,849.8 210,037.2 7,526.718,892.022,498.5257.5115.5126.5 78.91,944.18,006.278,638.057,956.912,146.4 1,052.1121.0 986.72,136.619,611.221,221.9 3,371.1 5,251.2 4,474.6 9,735.5129.6 4,385.31,079.4125.81,007.92,478.320,776.625,258.4 62.1 6,333.2 5,562.313,909.9134.3 60.8 85.9 68,214.4 62.7 81,199.8 ......

!) after Table 16.4 Provincial and Territorial Government Busi Territorial Government and 16.4 Provincial Table ...... a services...... expenditure...... Capital stock held by provincial governments, provincial government enterprises, and others; equity reserves and surplus. reserves equity and others; enterprises, government provincial governments, by provincial held stock Capital Source: Statistics Canada, April 2009. April Canada, Statistics Source: Sales of goods and of Sales goods sold of Cost oa urn noe...... income Other...... current Total Other...... Total current a Total liabilities worth Net Current income expenditure Current Net profit or loss ( noetxs...... taxes income oa ses...... assets Total CROWN CORPORATIONS 16:13

Table 16.5 Local Government Business Enterprise Income and Expenses, by Industry, for Fiscal Year Ending Nearest to December 31, 2006 Electric Gas Transportation power distribution Telephone Total millions of dollars Income Sales of goods and services...... 2,395.9 13,103.4 351.8 136.3 15,987.5 Investment income..... 31.5 72.2 10.7 0.1 114.4 Subsidies...... 2,316.5 — 0.6 — 2,317.1 Other ...... 144.4 320.8 13.1 5.1 483.4 Total income...... 4,888.3 13,496.4 376.2 141.5 18,902.4 Expenses Cost of goods and servicesa ...... 4,375.5 11,233.0 194.2 76.3 15,878.9 Debt charges...... 167.4 415.8 0.9 1.5 585.7 Provision for depreciation and depletion ...... 198.5 727.9 36.3 32.5 995.3 Other ...... 36.4 101.6 67.3 4.3 209.5 Total expenses ...... 4,777.8 12,478.3 298.6 114.6 17,669.3 Net income or loss (!) . . 110.5 1,018.2 77.5 26.9 1,233.1 a Includes salaries and wages. Source: Same as table 16.4. 16:14 FINANCES OF THE NATION 2009

!0.1 1,233.1 Province and Territory, and Province 120.2 8.7 na na — 209.5 millions of dollars 491.1 — — 356.4 69.6 na na — 995.3 119.5 .. 0.5 249.3 56.7 na na — 483.4 234.4 2.8 .. 190.5 59.9 na na 0.1 585.7 Income and Expenses, by Expenses, and Income 696.2 741.9 60.5 26.1 193.8 554.1 na na 1.3 2,317.1 111.3 848.0 9,324.4124.5 60.5 1,610.3 139.6 10,227.3 5,011.4 121.5 428.4 166.2 5,491.1 na 1,061.1 na na 0.7 na 15,987.6 2.0 18,902.5 121.5 1,558.6 9,773.2 111.6 138.9 4,945.8 920.1 na na 2.1 17,669.4 116.4 1,376.9 8,986.8 108.8 136.6 4,278.7 781.9 na na 2.0 15,878.9 for Fiscal Year Ending Nearest to December 31, 2006 to December Nearest Ending Year for Fiscal 0.3 0.3 0.8 3.0 51.7 454.1 9.9 27.3 545.3 141.0 na na

NL PE NS NB QC ON MB SK AB! BC NT NU YT Total

!)...... Table 16.6 Local Government Business Enterprise Business 16.6 Local Government Table ...... 11.6 14.6 64.6 a Includes salaries and wages. salaries Includes Source: Same as table 16.4. as table Same Source: a neteticm ...... income — ...... Investment —Subsidies 5.6 ...... Other 0.7 0.1 27.9 0.5 3.7 —Expenses 9.0 goods and of Cost 10.1 0.3 services 41.4 0.6 0.5 56.0 — 36.7 21.9 na na — 114.4 Income goods and of Sales services...... 5.2 14.2 43.9 ...... income 11.4 14.9Total 72.1 Net income or loss ( addpein...... depreciation for Provision depletion — and ...... Other 11.7 expenses...... — 14.6 71.3 —Total 0.4 — — 0.2 77.8 3.2 14.0 60.9 — 2.3 etcags...... charges 0.1Debt — 6.1 1.9 89.9 Appendix A Financial Management System Perspective: All Governments

In addition to the government revenue and expenditure data calculated for the national accounts (described in appendix B), Statistics Canada issues more detailed information for all levels of government using the financial management system (FMS). The FMS data are on a fiscal-year basis only; the system of national accounts (SNA) data are available on both a calendar-year and quarterly basis. The references in this appendix are to fiscal years ending nearest to March 31—that is, the fiscal year for federal and provincial governments and the nearest calendar year for local governments. The FMS analyses for different levels of government can be consolidated. Transfers from one level of government to another are identified and deleted from the originating government’s expenditure and the recipient government’s revenue. The totals for consolidated all government expenditure are, however, less than the federal and provincial/territorial-local totals combined. This result occurs because interprovincial purchases are eliminated from the national totals. Statistics Canada only distinguishes between two levels of government in its consolidations: federal and provincial/territorial-local. Provincial/territorial and local figures are not separated for two reasons. First, the division of responsibilities between the two levels varies from province to province. Second, the specific purpose and general purpose transfers made by provinces to local governments do not always fit the definitions used by Statistics Canada when analyzing local government. Therefore, consolidating local government revenues and expenditures separately produces misleading figures. Statistics Canada has harmonized the FMS and SNA data. This appendix reviews government revenue and expenditure for the nine-year period 2000-1 to 2008-9. Consolidated government figures are estimated for 2009. Consoli- dated government revenue and expenditure are reviewed for the period 2001 to 2009. The latest year for which local government data are available is 2008. Federal and provincial revenue and expenditure data in this publication are estimates for 2008-9.

CONSOLIDATED GOVERNMENT FINANCES Revenue Sources Table A.1 shows federal, consolidated provincial/territorial-local, and consolidated all government own-source revenue for fiscal years ending nearest to March 31, 2001 and 2009. As shown in the table, revenue derived from consumption taxes over the nine-year period rose by 32 percent for provincial and local governments and by 9 percent for the federal government. A:2 FINANCES OF THE NATION 2009

Table A.1 Government Own-Source Revenue, All Levels, Fiscal Years Ending Nearest to March 31, 2001 and 2009 2001 2009 Consoli- Consoli- Consoli- Consoli- dated dated dated dated prov.- all prov.- all Federal local gov’t.a Federal local gov’t.a millions of dollars Income taxes Personal...... 89,183 53,933 143,116 114,321 74,901 189,222 Corporateb ...... 28,823 14,439 43,262 31,273 19,005 50,277 On payments to non-residents .... 4,312 — 4,312 7,410 — 7,410 Other ...... — 454 454 — 1,747 1,747 Total...... 122,318 68,826 191,144 153,004 95,653 248,656 Property and related taxes ...... — 41,063 41,063 — 54,862 54,862 Consumption taxes General sales...... 27,801 27,722 55,523 28,674 38,327 67,001 Gasoline and motive fuel...... 4,807 6,937 11,745 5,279 8,249 13,528 Alcoholic beverages and tobacco ..... 3,247 2,955 6,203 3,817 4,747 8,565 Customs duties .... 2,807 — 2,807 4,055 — 4,055 Other ...... 300 11,293 11,593 709 13,291 14,001 Total...... 38,962 48,907 87,871 42,534 64,614 107,150 Health and drug insurance premiums . . . — 2,178 2,178 — 3,390 3,390 Contributions to social security plans...... 22,591 7,496 57,530 22,538 12,866 80,010 Other taxes ...... 585 14,572 15,157 1,207 20,600 21,807 Sales of goods and services...... 4,472 31,524 34,415 9,588 46,213 53,168 Investment income.... 7,060 30,689 38,836 14,017 40,051 57,793 Other revenue...... 741 5,246 6,943 439 5,581 6,836 Total own-source revenue...... 196,731 216,227 475,137 243,326 278,735 633,672 a Consolidated all government data total includes the Canada and Quebec Pension Plans. b Includes capital taxes. Source: Statistics Canada, June 2009.

For the federal government, the increase in revenue from general sales taxes was a mere 3 percent, dwarfed by the 38 percent increase in general sales tax revenue for the provinces and territories. Revenue from personal income taxes increased by 28 percent for both the federal and provincial/territorial-local governments over the period 2001 to 2009. Federal revenue from gasoline and motive fuel rose by almost 9 percent, while provincial/territorial-local revenue from the same source increased by 19 percent over the period between 2001 and 2009. Revenue from alcoholic beverages and tobacco increased by 61 percent for provincial/territorial and local governments from 2001 to 2009 and by 18 percent for the federal government over the same period. FINANCIAL MANAGEMENT SYSTEM PERSPECTIVE A:3

Federal revenue from social security plans, which includes employment insurance premiums, decreased by 2 percent between 2001 and 2009. Custom duties provided 45 percent more revenue for the federal government in 2009 than nine years previously. The revenue that provincial/territorial and local governments derived from property and related taxes increased from $41.1 billion in 2001 to $54.9 billion in 2009, or 34 percent. Provincial/territorial and local revenue from sales of goods and services in 2009 was 47 percent greater than in 2001. Provin- cial/territorial and local government investment income increased by 31 percent over the period, while federal government investment income almost doubled. Overall, federal own-source revenue increased by 24 percent during the period shown in table A.1 and consolidated provincial/territorial-local own-source revenue increased by 29 percent. Table A.2 shows details of consolidated revenue for all levels of government for fiscal years from 2000-1 to 2008-9. Overall, total government revenue has increased by about 33 percent.

Expenditure Functions Federal and consolidated provincial/territorial-local expenditure for 2001 and 2009 are shown in table A.3. Because the classification of provincial/territorial-local expenditures on health and social services institutions changed in 1997-98, prior years are not strictly comparable. Specific purpose transfers previously provided by the federal government to the provinces under the established programs financing (EPF) program and the Canada Assistance Plan (CAP) were combined into a block general transfer (Canada health and social transfer [CHST]) in 1996-97. In 2004, the CHST was restructured into two transfers, the Canada social transfer (CST) and the Canada health transfer (CHT). See chapters 7, 8, 9, and 10 for more detail. Total federal spending increased by 32 percent between 2001 and 2009. Provincial/territorial-local expenditures increased by 54 percent. Debt charges to the federal government decreased by 43 percent between 2001 and 2009 and by 7 percent for the provincial/territorial and local governments. Table A.4 shows consolidated expenditure for all levels of government from 2000-1 to 2008-9. On this basis, total government expenditure increased by 41 percent over the period.

FEDERAL NINE-YEAR REVIEW A summary of federal revenue and expenditure is shown on an FMS basis in table A.5 for selected fiscal years from 2000-1 to 2008-9. Overall, federal revenue has increased by almost 24 percent over the period shown in the table. Corporate income taxes are expected to bring in 9 percent more revenue in 2008-9 than in 2000-1, and revenue from personal income taxes will increase by 28 percent. The revenue generated by general sales taxes has increased by only 3 percent over the period but, reflecting the decrease in the goods and services tax rate to 5 percent on January 1, 2008, decreased by 19 percent between 2007-8 and 2008-9. Revenue from investments increased by 99 percent between 2000-1 and 2008-9. A:4 FINANCES OF THE NATION 2009 104,495 107,857 105,809 111,684 107,150 millions of dollars Years Ending Nearest to March 31, 2001 to 2009 , All Levels, Fiscal Federal capital taxes are included in the corporate income tax. income corporate the in are included taxes capital Federal b 2001 2002 2003 2004 2005 2006 2007 2008 2009 191,144 188,012 178,173 188,620 207,416 225,158 245,866 269,468 248,656 475,137 468,149 481,412 505,434 538,265 573,572 604,592 647,552 633,672 143,116 144,746 139,836 145,324 155,136 167,276 179,869 193,525 189,222 Government Revenue

a ...... 6,203 7,201 8,800 9,260 9,673 9,024 8,595 8,634 8,565 ...... 34,415 34,594 37,299 38,704 40,822 42,966 44,913 49,685 53,168 ...... 43,262 38,819 33,608 38,925 46,928 50,966 58,131 67,642 50,277 b Table A.2 Consolidated Does not include the Canada and Quebec Pension Plans. Plans. and Quebec Pension Canada the include Does not a Source: Same as table A.1. as table Same Source: npyet onnrsdns...... 4,312 non-residents...... to 4,150 payments On 4,377Other...... 4,156 ...... Total 4,822 454 6,159 6,896 297 duties...... 7,109 2,807 352Customs 7,410 Other...... 3,018 ...... 11,592Total 215 3,189 10,949 87,870 11,895 2,804 88,987 11,925 96,431 530 12,729 3,041 98,918 12,927 13,119 3,429 13,691 757 14,001 3,651 3,803 970 4,055 1,192 1,747 Gasoline and motive fuel...... sales...... motive 11,745 and 11,743 55,523General 12,337 56,076 12,760 60,210Gasoline 12,700 62,169 beverages and tobacco Alcoholic 13,016 66,352 13,025 69,461 13,462 67,419 13,528 72,094 67,001 Personal...... Corporate Property and related taxes...... 41,063 related 41,730 and 42,529 44,244Property 46,721 49,509 taxes Consumption 51,277 plans...... 53,882 54,862 57,530 59,953 security 63,489 premiums...... social 67,568 2,178 to 69,039 insurance 71,532 2,282 74,697 drug and 77,740 3,000Contributions ...... 80,010 taxes...... sources Health ...... 3,132 own income 15,157Other 6,943 from revenue...... 14,940 3,206 38,836 goods and services of Sales 16,083 5,381 32,269 revenue Investment 17,037 3,258 34,838 18,018 9,570Other 37,267 consolidated 3,268 18,917 40,525 20,489Total 9,946 47,544 3,457 21,129 50,122 21,807 8,022 52,436 3,390 57,793 6,830 8,151 8,070 6,836 Income taxes FINANCIAL MANAGEMENT SYSTEM PERSPECTIVE A:5

Table A.3 Government Expenditure, All Levels, Fiscal Years Ending Nearest to March 31, 2001 and 2009 2001 2009 Consoli- Consoli- Consoli- Consoli- dated dated dated dated prov.- all prov.- all Federal local gov't.a Federal local gov't.a millions of dollars General services...... 8,905 7,317 15,968 9,588 13,580 22,822 Protection of persons and property ...... 18,789 15,204 32,978 28,937 23,673 50,790 Transportation and communications...... 1,992 16,209 17,070 3,537 29,667 32,197 Healthb ...... 3,630 68,429 70,465 26,061 116,631 121,577 Social servicesb ...... 68,127 42,168 135,793 88,788 63,843 190,276 Educationb ...... 5,104 60,227 63,522 5,781 92,319 95,732 Resource conservation and industrial development . . . 6,791 9,768 15,713 9,856 13,878 19,975 Environment...... 1,554 7,761 9,222 2,700 14,756 16,933 Recreation and culture..... 3,372 7,561 10,871 4,232 12,294 16,306 Labour, employment, and immigration ...... 2,409 827 2,882 1,714 1,144 2,395 Housing...... 1,885 3,148 3,723 2,220 5,366 6,120 Foreign affairs and international assistance...... 4,488 — 4,477 6,513 — 6,508 Regional planning and development...... 389 1,504 1,847 1,409 2,391 2,775 Research establishments . . . 1,901 281 1,419 3,700 625 2,268 Debt charges...... 32,614 28,876 57,790 18,584 26,800 43,634 Other ...... 126 1,731 1,979 29 924 945 Total expenditure ...... 162,075 271,010 446,505 213,650 417,891 631,251 a National totals shown are less because interprovincial purchases have been eliminated. b Specific purpose transfers previously provided to provinces and territories under established programs financing and Canada Assistance Plan were combined into a block general transfer (CHST) in 1996-97. In 2004, the CHST was restructured into the CST and CHT. Prior years are, therefore, not strictly comparable. Source: Same as table A.1.

On the expenditure side, debt charges are estimated to cost the federal government 43 percent less in 2008-9 than they did in 2000-1. Expenditures on transportation and communications, previously in decline, have increased dramatically: 78 percent over the period. Federal expenditures on protection of persons and property have increased by 54 percent over the period 2000-1 to 2008-9. Federal spending over the nine-year period shown in table A.5 has increased by 29 percent overall while revenue grew by almost 24 percent.

PROVINCIAL/TERRITORIAL NINE-YEAR REVIEW Tables A.6 and A.7 provide summaries of provincial/territorial revenue and expenditure on an FMS basis for fiscal years 2000-1 and 2008-9, respectively. Provincial revenue increases over the period range from a low of 37 percent for Manitoba and 40 percent for Prince Edward Island to a high of 85 percent for Newfoundland and Labrador, 72 percent for Saskatchewan, 65 percent for Yukon, 52 percent for the Northwest Territories, 49 percent for Nunavut, 46 xxxxxxx A:6 FINANCES OF THE NATION 2009 107,497 114,245 121,577 ars Ending Nearest to March 31, 2001 to 2009 millions of dollars vels, Fiscal Ye 2001 2002 2003 2004 2005 2006 2007 2008 2009 135,793 141,751 145,398 150,827 156,762 164,568 174,290 187,734 190,276 446,506 461,306 480,917 501,884 516,575 547,464 578,175 616,092 631,253 Government Expenditure, All Le ...... 2,882 3,019 3,395 3,440 2,328 2,480 2,619 2,917 2,395

a Table A.4 Consolidated Does not include the Canada and Quebec Pension Plans. and Quebec Pension Canada the include Does not Source: Same as table A.1. as table Same Source: a rnprainadcmuiain ...... property...... 32,978 and 35,218 ...... 17,979 37,193 communications persons services 18,628 39,154 of and 15,968 19,148 41,096 15,765 20,258General 43,299 17,520 21,172 46,396Protection 18,633 24,838 50,689Transportation 18,792 26,280 50,790 services...... 20,074 29,966Health...... 20,857 32,197 70,465Social 21,505 76,935 22,822 Education...... 83,315 63,522 89,479 66,559 and industrial conservation Resource ...... culture...... 70,533 94,497 10,871 15,713 and development...... 99,531 74,246 11,347 16,329Environment 77,140 11,690 18,784 ...... 9,222 84,760 13,143 19,430Recreation 87,455 13,476 18,652 9,853 and immigration development employment, Labour, 92,722 14,268 19,760 1,847 and 10,259 95,732 Housing...... 15,008 21,078 11,391 ...... 15,809 2,099 21,360Foreign affairs and international 3,723 11,903 planning 16,306 19,975 13,158 1,419 assistance 2,111 establishments...... 3,420 14,420 4,477Regional ...... 1,767 15,516 2,133 expenditure...... 3,624Research 16,933 4,562 charges 1,881 57,790 2,057Debt 3,833 5,128 ...... 52,075Other 1,890 consolidated 2,235 49,475 3,880 4,611 46,917Total 1,823 2,338 1,857 45,506 4,527 5,556 44,784 1,859 2,524 1,979 45,578 4,942 5,585 45,715 2,023 2,775 1,463 43,634 5,544 6,500 2,332 2,499 6,120 6,211 2,268 1,935 6,508 1,738 894 1,303 945 FINANCIAL MANAGEMENT SYSTEM PERSPECTIVE A:7

Table A.5 Summary of Federal Revenue and Expenditure on a Financial Management System Basis, Selected Fiscal Years, 2000-1 to 2008-9 2000-1 2005-6 2006-7 2007-8 2008-9 millions of dollars Revenue Income taxes Personal income...... 89,183 105,562 108,138 118,391 114,321 Corporate incomea ...... 28,823 33,001 38,070 42,299 31,273 Other ...... 4,312 6,159 6,896 7,109 7,410 Consumption taxes General sales...... 27,801 35,605 32,120 35,435 28,674 Gasoline and motive fuel . . 4,807 5,173 5,073 5,426 5,279 Alcohol and tobacco ...... 3,247 3,975 3,668 3,782 3,817 Customs duties ...... 2,807 3,429 3,651 3,803 4,055 Other ...... 300 647 627 697 709 Investment income ...... 7,060 6,915 8,320 10,026 14,017 Contributions to social security plans...... 22,591 21,851 21,932 21,974 22,538 Sales of goods and services . . . 4,472 5,740 5,811 7,453 9,588 Other revenue...... 1,900 1,980 2,783 2,949 2,069 Total revenue ...... 197,303 230,037 237,089 259,344 243,750 Expenditure General services...... 8,905 8,891 9,011 9,389 9,588 Protection of persons and property ...... 18,789 25,485 27,308 29,783 28,937 Transportation and communications...... 1,992 3,096 3,668 2,636 3,537 Healthb ...... 3,630 21,823 22,898 25,895 26,061 Social servicesb ...... 68,127 81,034 84,001 91,458 88,788 Educationb ...... 5,104 5,385 6,659 5,741 5,781 Resource conservation and industrial development ..... 6,791 9,881 9,801 11,550 9,856 Housing...... 1,885 2,119 3,502 2,155 2,220 General purpose transfers to other governmentsb ...... 26,015 24,328 22,463 26,672 29,217 Debt charges...... 32,614 21,456 21,479 20,734 18,584 Other ...... 14,238 16,998 18,807 20,570 20,298 Total expenditure ...... 188,090 220,496 229,597 246,583 242,867 Surplus...... 9,213 9,541 7,492 12,761 883 a Includes capital taxes. b Specific purpose transfers previously provided under EPF and CAP were combined into a block transfer (CHST) that provinces allocated according to their priorities. In 2004, the CHST was restructured into the CST and CHT. Prior years are, therefore, not strictly comparable. Source: Same as table A.1. percent for Nova Scotia, and 44 percent for New Brunswick. Quebec and Ontario revenues both grew by 42 percent over the period, Alberta’s grew by 41 percent, and British Columbia’s by 38 percent. Over the nine-year period, provincial and territorial revenue in the country as a whole increased by 43 percent. Of the provinces, Alberta’s expenditure increased the most, at 83 percent; followed by Saskatchewan, at 63 percent; Ontario, at 55 percent; Nova Scotia, at 52 percent; New Brunswick and Quebec, at 51 percent; Newfound- land and Labrador, at 50 percent; and Prince Edward Island, 48 percent. The A:8 FINANCES OF THE NATION 2009 smallest increase among all other provinces was 42 percent for Manitoba and 44 percent for British Columbia. Growth in total gross general expenditure for all provinces and territories over the period was 55 percent.

LOCAL GOVERNMENT NINE-YEAR REVIEW Local government revenue and expenditure are summarized in tables A.8 (2000) and A.9 (2008). Local government revenue increased the most (87 percent) in Alberta over the nine years shown in the tables, followed by Saskatchewan (70 percent), the Northwest Territories (69 percent), Prince Edward Island (57 percent), and Ontario (56 percent). The lowest revenue increases over the period were recorded by Manitoba, at 29 percent; New- foundland and Labrador, at 34 percent; Quebec and Yukon, at 36 percent; and Nunavut, at 6 percent. In the period between 2000 and 2008, Alberta’s local governments increased their yield from property and related taxes by 98 percent, Nuna- vut’s by 89 percent, New Brunswick’s by 58 percent, Newfoundland and Labrador’s by 53 percent, Prince Edward Island’s by 49 percent, and British Columbia’s by 47 percent. Total revenue from this source rose by 39 percent in Ontario and Saskatchewan between 2000 and 2008, 35 percent in Quebec, and only 19 percent in Manitoba. Nationally, revenue from property and related taxes rose by 43 percent. Transfers from other governments generated 65 percent more revenue for local governments nationally in 2008 than nine years earlier. Every province and territory except Nunavut experienced an increase in transfers to local governments over the period, ranging from an increase of 145 percent in Saskatchewan, 97 percent in Alberta, 81 percent in the Northwest Territories, 75 percent in Ontario, 59 percent in Prince Edward Island, 50 percent in New Brunswick, 45 percent in Nova Scotia and Yukon, 44 percent in Quebec, 42 percent in British Columbia, 34 percent in Manitoba, and 24 percent in Newfoundland and Labrador. In Nunavut, transfers to local governments declined over the period 2000 to 2008 by 23 percent. Across the country, local government expenditure increased by 56 percent between 2000 and 2008. Of the provinces, Alberta local government spending increased the most (91 percent), followed by Saskatchewan (65 percent), British Columbia (59 percent), Nova Scotia and Quebec (56 percent), Yukon (51 percent), Manitoba and the Northwest Territories (49 percent), and Ontario (48 percent). New Brunswick, Prince Edward Island, and Nunavut local government spending increased 44, 25, and 19 percent, respectively. At 17 percent, Newfoundland and Labrador local government spending increased the least over the period between 2000 and 2008. FINANCIAL MANAGEMENT SYSTEM PERSPECTIVE A:9

225,645 238,130 a 17328,716 192917,883 997-98. The data for prior years prior for data The 997-98. Year 2000-1 millions of dollars Basis, Fiscal rial Government Revenue and Expenditure and Revenue rial Government

!39 182 32 1,889 1,145 274 1,162 7,667 237 94 74 43 12,485 273

NL PE NS NB QC ON MB SK AB BC NT NU YT Total ! on a Financial Management ...... 1,772 1,168 2,313 2,114 10,005 701 7,300 412 1,846 3,309 772 2,221 442 34,373 ...... 44 5 28 102 612 221 194 69 75 26 39 18 12 1,444 Table A.6 Summary of Provincial/Territo Summary A.6 Table ...... 357 108 802 422 3,963 8,637 537 765 4,053 2,357 31 48 14 21,823 ...... 152 132 228 221 3,042 1,465 329 497 1,174 1,497 90 54 42 8,922 ...... 555 76 660 1,046 1,258 3,330 4,972 12,713 592 97 14,218 64 71 39,647 not comparable. not a ...... 1,493 1,748 6,440 165 7,071 17,082 173 1,038 112 13,050 266 1,366 1,631 51,608 a ...... 2,177 2,616 6,148 190 9,806 25,820 140 1,363 15,747 299 1,663 82 2,131 67,947 a The procedures used to classify provincial and territorial expenditures on health, education, and education, services changed social in 1 on health, expenditures and territorial provincial classify used to procedures The a Source: Same as table A.1. as table Same Source: Resource conservation and conservation Resource ...... development industrial charges Debt 619 governments local to Transfers (–)...... 120 1,149 911 1,019 5,751 deficit 1,773 1,516 9,985 3,033 or 15 26Surplus 2 25,919 oa rs eea xedtr ..... ,6 ,1 ,1 ,0 0277,6 ,2 ,6 2932,7 916 808 29,979 527 22,933 7,460 9,025 ...... 76,064 60,297 5,708 6,512 1,119 4,567 expenditure general ...... Other gross Total 173 48 190 175 2,664 2,662 339 388 2,171 748 113 151 42 9,866 esnlicm a ...... tax ...... tax taxes...... income Revenue 633 income related 141 1,255Personal 1,817 1,324 77 4,320 and 7 6,148 19,336 910 81 17,897 Corporate 33 36Property 45 37 187 53,933 61 182 2,662 7,284 291 453 2,103 2,163 330 341 2,000 103 1,112 343 1,189 2 2,16 10 14,439 Contributions to social security plans...... 132 security ...... premiums...... 18 taxes social — to 163 2,296 1,753 868 insurance 2,442 101 6,322 20,868 — 40 11,474 Consumption 237 drug 3,045 1,080 1,412 2,482 882 13 and 570 139Contributions 20 30,2161,010 114Health 30,600 ...... 8,622 9 48,824 9,299 ...... income 77,209 goods and services of Sales 421 62,186 5,740 revenue 6,694 — 1,080 government federal from Transfers 4,294 262 866Investment general 12 ...... 47 —Other 574 gross 389 —Total 186 679 2 12,328 6,075 1,710 3,043 26 1,338 2,525 36 — 7,496 9 126 34 229 — 7,420 28,465 6,614 608 700 641 1,033 895 97 — — — 2,178 rnprainadcmuiain ...... 363 communications services Expenditure and 85 79General 238Protection...... 181 443 54Transportation 2,063 2,126 34 242Health 34 223 308 157 1,217 78 1,289 72 1,899 1,251 3,046 340 31 944 77 335 186 8,552 569 128 1,225 71 293 48 312 40 64 103 8,167 47 3,573 Social services Social Education are, therefore, therefore, are, A:10 FINANCES OF THE NATION 2009 a

!8,602 115,501

!15

!144 4

!1,438 Year 2008-9 millions of dollars 8,298 4 2,640 1,195 sis, Fiscal ! Government Revenue and Expenditure on a on Expenditure and Revenue Government 109,761 12,778 14,836 43,253 41,777 1,538 1,318 942 341,582

!3,029

!371

!106 Financial Management Ba The procedures used to classify provincial and territorial expenditures on health, education, and social services and social education, on health, expenditures The procedures and territorial used to provincial classify b !140 NL PE NS NB QC ON MB SK AB BC NT NU YT Total ...... 481 151 1,206 630 5,956 12,388 810 1,151 3,185 3,821 118 51 42 29,862 Table A.7 Summary of Provincial/Territorial Summary A.7 Table ...... 270 125 301 271 3,316 2,556 522 855 2,464 1,593 133 57 85 12,547

!) ...... 1,098 ...... 757 129 1,171 892 1,874 1,129 18,399 24,533 5,260 7,233 152 105 114 61,738 b ...... 1,448 427 11,448 2,563 2,849 11,807 28,431 2,545 1,888 17,753 314 251 157 81,819 b ...... 2,228 491 14,877 4,429 4,178 12,954 44,481 3,312 3,246 24,549 376 288 138 b Figures may not add to total due to rounding. rounding. due to total add to may not Figures a Source: Same as table A.1. as table Same Source: Social services Social Resource conservation and conservation Resource ...... development industrial charges Debt 535 governments local to Transfers . 121 ...... Other 997 expenditure general gross Total 397 936 . . 74 7,081Surplus or deficit ( 9,558 1,378 96 6,853 792 502 23 1,652 576 278 9,903 140 2,168 3,594 8,625 2,989 15 468 91,023 124 118,059 645 12,774 35 1,050 12,196 2,447 1,419 42,058 3 244 1,904 43,215 272 24,196 125 302 1,682 13,476 1,314 276 957 350,184 673 185 65 31 15 4,861 esnlicm a ...... tax ...... tax taxes...... income 899Revenue income 329 related 10Personal 234 ...... 2,447 1,901 and 29,249 1,844 1,340 21,806 taxes 8,666Corporate 39 6,298 1,202 87 133Property 304 2,595 2,322 25,307 1,927 1,633 384 15,709 4,026Consumption 9,368 68 31 128 ...... insurance and drug Health 58 3,959 408 51 premiums 7,048 1,178 — 74,901 380 security social to Contributions 2,298 18 ...... 373 taxes...... 596 plans 30 — 3,774 122Other 246 ...... 149 2,275 64,499 ..... 1,462 income goods and services of Sales 2,655 69 revenue 35 7,951 government 32 federal from Transfers 1,512 9,797 8,254 87,994 617 48 22 207Investment general 255 3,968 — ...... 43 6Other 164 gross 188 2 ...... 7,772 315 557 17Total 5,825 6,931 50 3,723 services 975 688 3,540 651 19,005 Expenditure 237 3 1,340 223 7,185 1,389 2,666 —General 3,538 1,039 4,020 265 14,528 30 5,262 16,224 8,689 901 65 372Protection...... 1,025 1,104 40 and communications 17,370Transportation — 111 3 11 47 38Health 3,907 146 549 7 380 409 — 2,114 — 1,873 2 1,733 1,405 253 31 128 1,909 167 4,299 26 2,639 10 339 37,314 4,513 1,005 181 790 12,866 444 19,660 6,626 484 1,577 109 828 1,025 — 562 1,890 591 1,270 1,197 1,301 24 842 — 4,635 731 110 123 — 3,495 64,225 86 4 151 89 79 587 1 3,390 12,093 6,530 729 7,171 3,779 2,149 150 38 152 17,423 Education changed in 1997-98. The data for prior years are, therefore, not comparable. not therefore, are, years prior for data The 1997-98. changed in FINANCIAL MANAGEMENT SYSTEM PERSPECTIVE A:11

!4.3 703.3

!2.9

!82.6 6.6 l Management Basis, 2000

!28.4 678.3 millions of dollars 316.1 3.9 8.1 67.8 6.8 1.6 4.0 — 5,532.1 251.4 162.9 243.9 13.2 9.7 77.9 116.9 1.0 0.4 0.6745.6 513.8 21.9 7.7 72.5 46.1! 10.6 1.4 0.2 914.9 nd Expenditure on a Financia 272.8 830.8264.5 127.2 252.8 66.7147.2 28.2 627.9 1,071.8 69.3 187.3 460.6 93.9 141.8 2.4 511.6 2.2 46.0 2.7 506.6 0.7 2,441.9 15.3184.8 0.4 17.0 11.8332.8 2,144.7 0.2 3,836.9 807.4 101.5 714.7 769.2 1,915.8 148.2 165.1 62.0 725.9 24.1 62.1 945.6 471.2 303.0 13.3 342.3 19.3 17.4 277.8 2.2 5,538.0 5.5 0.4 30.3 0.7 3.2 3,174.8 3,541.4

!39.2 246.0 696.8 329.0 7,609.5175.8 16,269.0 165.2 1,049.6 1,142.6 2,642.3 2,366.4 5,086.0 2,599.6 346.8 31.0 306.8 5.5 1,660.0 20.8 1,557.2 32,347.1 26.6175.9 137.7 39.2 1,680.0142.7 9.3 129.6 12,094.7 3,158.1 2,096.3 229.2 3,621.1 182.7151.1 289.8 177.6 613.2 315.0 1,363.9 1,361.7 974.5 2,977.4 797.6 192.1 5.0 15.8 183.0 4.1 25.0 11.7 589.1 4.7 8,918.1 7,194.1 998.4 24.1 28.5 7.7 6,797.0 ernment Revenue a

!4.6 41.2 205.4 1,671.7 608.4 17,636.5 35,786.1 2,727.6 2,220.0 8,854.9 8,521.1 138.4 127.1 53.5 79,592.7 153.1 853.2 0.3 7,696.3 14,372.2210.0 1,311.9 1,630.5 1,175.7 647.6 3,460.6 17,390.5 3,708.0 36,037.5 2,564.7 38.4 2,248.4 8,176.6 — 8,603.7 131.8 0.4 130.0 33,442.1 57.8 78,889.4 18.1 NL PE NS NB QC ON MB SK AB BC NT NU YT! Total ...... 67.9 11.6

!) ...... Table A.8 Summary of Local Gov Source: Same as table A.1. as table Same Source: Property and related taxes...... 191.5 35.7 related and Revenue Property Other taxes...... income Other 3.5 0.3 6.6Investment 0.7 governments other from Transfers . 5.3 ...... 35.9Other 1,042.2 revenue...... 3.0 5.4 ...... Total 770.2 services 38.1 156.2 2.5Expenditure 59.4 0.9 750.3General 9.8 103.1 persons of Protection 7.6 property...... 95.4 6,809.3 61.7 and 1, 2.7 13,103.6 17.8 11.2 and 1,162.6Transportation 96.1 15.6 communications...... 624.9Health...... 4,028.8 3,740.8 culture...... 0.2 and 58.9 76.7 0.1 7.4Environment ...... 79.4 94.9 19.9Recreation 95.7 charges 9.3 2.2 75.4 1, 31,426.0 Debt 1,060.3 1.0 50.2 ...... Other expenditure...... 1.9Total 5.3 39.3 29.8 10.1 1, Surplus or 1.6 deficit ( 28.5 34.5 Sales of goods and services of Sales services...... Social 0.7 ..Education...... 672.0 46.5 — 76.5 5, A:12 FINANCES OF THE NATION 2009

!1,076.4

!14.3

!20.8

!1,146.3 38.0 l Management Basis, 2008

!314.0 67.1 992.7 millions of dollars 379.3 27.8 12.1 144.1 10.0 1.6 5.0 — 6,684.1 358.3 20.5 19.0 225.2 245.5 1.9 0.4 0.8 940.4 540.6 41.5 12.2 164.6 84.5 1.9 3.2 0.2 1,927.0 nd Expenditure on a Financia 218.7 1,654.0 81.7379.4 85.1 493.0 744.2 50.3 101.7 512.7 142.1 3.4 2.4 73.9 1.5 1.1 3,355.2 0.3 0.3204.9 1,271.3 417.9 998.5 2,821.1 111.9 89.6 25.1 97.7 374.9 817.4 398.5 422.4 1.0 11.9 25.1 1.0 3.8 0.5 5,843.9 3,222.5

!3,069.9 2,293.8

!25.0 78.0 ernment Revenue a

316.9 195.7 2,547.8 5,443.4 350.7 304.4347.4 1,299.4 255.2148.8 1,581.0 113.1 3,091.9 2,179.4 13.0 4,561.0 3,025.0 394.1 4.9 189.3 6.6 410.9! 12,124.2 254.9 1,694.9 1,545.4 1,861.7 1,586.1 39.4 22.5 40.9 26.2 18.0 12,826.6 21.4 9,188.8 NL PE NS NB QC ON MB SK AB BC NT NU YT Total 156.2 43.9 293.2 53.3118.9 961.6 518.8 19.2 10,253.9 22,642.5 346.1 1,253.7 219.0 1,591.7 3,350.1 4,694.1 7,780.0 3,830.5 541.9 41.5 439.0 10.4 28.1 2,840.4 46,173.3 2,566.4 47.9 60.0 13.2 18,342.1 957.7 248.9 1,090.5 155.0393.6 323.2 9,800.6 2,458.0 22,881.4 909.6 1,557.4115.5 24,050.0 1,530.6 55,809.2 14.5 7,935.2 3,505.5 3,767.1 184.9 5,325.1 16,581.2 138.7 12,554.1 88.3120.8 234.5 61.0 1,889.8 134.5 28.8 19.7 72.7 2,495.6 121,793.2 51,710.9 248.9 260.7752.7 194.6 192.1 4,271.1 1,135.5 216.8 5,494.8 0.1 960.2 10,385.6 540.5 20,756.1 1,813.4 903.0 645.6237.4 1,720.3 279.3 2,750.7 25.5 5,836.9 2,536.0 24.8 1,479.8 934.6 5,373.4 14.7 27,119.9 30.9 53,515.4 48.8 7,194.2 3,819.5 32.4 3,700.0 — 13.6 15,588.5 15,843.3 13,700.4 — 196.5 155.3 48,015.0 87.0 122,869.6 ......

!) ...... Table A.9 Summary of Local Gov ...... Source: Same as table A.1. as table Same Source: Property and related taxes...... related and Revenue taxes...... Property ...... income Other 5.7 goods and services of Sales 14.5 0.6Investment 0.1 31.2 8.9 5.7 6.4 47.3 Transfers from other Transfers governments revenue...... 1, Total 1, ...... Other expenditure...... Total 17.5 2.7 66.6 50.2 1, te ...... Other ...... services 3.6Expenditure 1.1General 19.7 persons of Protection property...... 4.7 and 44.9 15.7 and Transportation communications...... services...... Health...... Social 1.4 ...... culture...... 0.1 and Education...... 0.1 66.3 18.5 0.2Environment ...... 43.9 — 90.9 12.1 Recreation charges 2.9Debt 2.4 27.3 58.9 3.7 6, 72.6 1, 40.2 35.0 1, Surplus or deficit ( Appendix B Economic Perspective

The broad measures of economic activity—income, spending, and saving—are designed by economists to reflect actions by all sectors of the national economy. The national income and expenditure analysis devised by Statistics Canada encompasses all income and spending activities to arrive at overall measures such as gross domestic product (GDP) and net national income. The national accounts are cast in terms that are consistent with accounting practices used in the private sector and with current international conventions as developed by the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund.

THE SCOPE OF THE NATIONAL ACCOUNTS BUDGET The “government sector” of Statistics Canada’s national income and expenditure accounts—often called the national accounts budget—is made up of data on the federal, provincial, and local governments and the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP). The original data come from the periodic financial statements issued by each level, but they have been adjusted to accord with an accrual system of accounting and to reflect the much broader definition of government used in the national accounts budgets. They are prepared on a quarterly and calendar-year basis, not on the fiscal-year basis used by the federal and provincial governments or the school-year basis used by boards of education. The national accounts budgets provide perspective on the relative importance of the public sector in the community as a whole. They compare the various levels within government using an accounting system that is comparable between governments and over time.

The Organization of the National Accounts Budget The national income and expenditure accounts concentrate on the main economic measurements such as spending on goods and services, transfer payments to individuals and businesses, interest on debt, and the purchase of capital assets. This analysis is applied to public sector spending, in sharp contrast to the financial management system (FMS), which focuses on spending by function, as seen in appendix A. Revenues are broken down by type of tax or form of revenue, much like the FMS analysis; however, using accrual accounting and a broader definition of the government sector leads to different results than either the traditional public accounts or the FMS. The organization of the national accounts budget has been redefined in recent years, and revised data are available only back to 1961. The historical tables in this appendix go back to 1926; the numbers prior to 1971 are presented on the old, unrevised basis; the new analysis is shown for selected B:2 FINANCES OF THE NATION 2009 years from 1970 to the present. The overlap provides an indication of the magnitude of the revisions, for that year at least.

THE NATION AS A WHOLE Table B.1 shows the size of the public sector in current dollars and in relation to the economic strength of the country, as measured by GDP. All governments in Canada collected $486 billion in taxes in 2008, equivalent to 30.4 percent of GDP, as well as $150 billion in other current revenue. Total current spending amounted to $610 billion, equivalent to 38.1 percent of GDP. Capital spending exceeded income by $24 billion, leading to an overall surplus of $2 billion—0.1 percent of GDP—the 12th consecutive surplus (albeit much reduced from the $22 billion of 2007) after 22 years of deficits. The federal government accounted for 43.5 percent of all taxes collected in 2008 and 37.6 percent of total revenue, including capital income. All governments spent $364 billion,

Table B.1 Revenue and Expenditure of All Levels of Government, Excluding Intergovernmental Grants, Calendar Year 2008 CPP and Federal Provincial Local QPP Totala millions of dollars Current transactions Tax revenue...... 211,293 183,615 47,611 43,451 485,970 Other revenue...... 34,235 89,058 21,205 5,461 149,959 Total revenue ...... 245,528 272,673 68,816 48,912 635,929 Expenditure on goods and services ..... 62,023 197,482 103,894 558 363,957 Transfers to persons...... 80,651 40,852 3,330 37,217 162,050 Interest on the public debt...... 30,034 28,755 3,495 — 62,284 Other expenditure...... 8,378 11,020 2,155 398 21,951 Total expenditure ...... 181,086 278,109 112,874 38,173 610,242 Current surplus or deficit (!)...... 64,442 !5,436 !44,058 10,739 25,687 Capital transactions Income...... 4,488 12,318 12,856 — 29,662 Outflows ...... 4,703 26,357 22,276 — 53,336 Overall surplus or deficit (!) ...... 64,227 !19,475 !53,478 10,739 2,013 as a percentage of gross domestic product Current transactions Tax revenue...... 13.2 11.5 3.0 2.7 30.4 Other revenue...... 2.1 5.6 1.3 0.3 9.4 Total revenue ...... 15.3 17.0 4.3 3.1 39.7 Expenditure on goods and services ..... 3.9 12.3 6.5 — 22.7 Transfers to persons...... 5.0 2.6 0.2 2.3 10.1 Interest on the public debt...... 1.9 1.8 0.2 — 3.9 Other expenditure...... 0.5 0.7 0.1 — 1.4 Total expenditure ...... 11.3 17.4 7.1 2.4 38.1 Current surplus or deficit (!)...... 4.0 !0.3 !2.8 0.7 1.6 Capital transactions Income...... 0.3 0.8 0.8 — 1.9 Outflows ...... 0.3 1.6 1.4 — 3.3 Overall...... surplus or deficit (!) ...... 4.0 !1.2 !3.3 0.7 0.1 a Figures may not add to totals because of rounding and residual error adjustment. Source: Statistics Canada, CANSIM, table 380-0007, November 2009. ECONOMIC PERSPECTIVE B:3 or 22.7 percent of GDP, on goods and services (including salaries), of which the federal government accounted for 17.0 percent. The central government’s transfers to persons amounted to $81 billion (49.8 percent of all transfers). Total transfers to persons were equivalent to 10.1 percent of GDP. The federal government accounted for 48.2 percent of all interest on the public debt, which was equivalent to 3.9 percent of GDP. The emphasis in the tables in this appendix is on revenues and expenditures after the elimination of intergovernmental grants. To prevent double counting, grants are deducted from the spending of the paying government (because the money is subsequently spent again on other expenditures) and the revenue of the recipient government (because the money was not raised from the economy by that level). Table B.2 illustrates the importance of these grants, which are discussed in more detail in chapter 7. The federal surplus of over $64 billion, as shown in table B.1, was reduced to $2 billion after taking into account the $62 billion transferred to the provinces. The provinces registered a deficit of $19 billion in 2008 (as shown in table B.1), which shrank to $10 billion after taking into account the grants received from the federal government and the grants made to the local level. The federal government’s share of total revenue was the largest until 1979. From 1980 to 2002, the provincial governments collected more (exclusive of grants), as shown in table B.3. From 2003 to 2008, the federal government’s share of total revenue is once again the largest.

Table B.2 Revenue and Expenditure of All Levels of Government, Excluding and Including Intergovernmental Grants, Calendar Year 2008 CPP and Federal Provincial Local QPP Totala millions of dollars Current and capital revenue from own sources ...... 249,428 284,991 81,134 48,912 664,465 Plus grants from Federal government ...... 61,726 735 — 62,461 Provincial governments ...... 902 51,090 — 51,992 Local governments ...... 139 139 Total revenueb ...... 250,330 346,856 132,959 48,912 779,057 Current and capital expenditure for own purposes...... 185,789 304,466 135,150 38,173 663,578 Plus grants to Federal government ...... 902 — — 902 Provincial governments ...... 61,726 — 139 — 61,865 Local governments ...... 735 51,090 — — 51,825 Total expenditureb ...... 248,250 356,458 135,289 38,173 778,170 Surplus or deficit (!) ...... 2,080 !9,602 !2,330 10,739 887 a Figures may not add to totals because of rounding and residual error adjustment. b Because these figures include intergovernmental grants, there is double counting of the amounts transferred from one level of government to another, and the totals are, therefore, inflated by these amounts. Net revenue and expenditure are shown in lines 1 and 6. Source: Same as table B.1. B:4 FINANCES OF THE NATION 2009 Total, 123,137 millions of dollars 106,754 83,994 43,333 25,129 9,897 196,803 break in national accounts series, not entirely comparable entirely not series, accounts national break in (Table B.3 is concluded on the next page.) next on the concluded is B.3 (Table Federal Provincial Local grants grants grants grants grants grants QPP grants 250,016 249,114 282,441 231,233 72,117 25,529 48,912 554,788 247,239 246,281 273,688 217,155 68,378 26,979 48,857 539,272 231,772 230,935 264,844 225,291 64,569 26,644 46,638 529,508 221,961 220,912 247,374 207,214 60,596 25,445 43,077 496,648 210,279 209,282 229,797 196,503 58,472 24,376 40,943 471,104 200,876 200,087 214,904 174,744 60,596 25,445 39,189 439,465 196,302 195,396 235,868 202,574 92,568 58,472 36,835 493,277 200,429 199,633 236,024 201,121 89,587 56,792 32,686 490,232 202,845 202,106 236,038 203,634 86,300 54,903 29,676 490,319 184,185 183,400 216,202 183,558 86,716 55,657 25,536 448,151 174,333 173,621 198,399 172,000 85,621 54,834 22,932 423,387 169,820 169,158 194,667 169,275 79,524 49,983 20,339 408,755 144,315 143,558 187,272 154,110 79,095 47,207 19,831 364,706 121,777 121,521 154,492 126,347 65,123 39,330 15,719 302,917 Including Excluding Including Excluding Including Excluding and CPP excluding from Revenue of Recipient Government, Selected Calendar Years, 1926 to 2008 1926 to Years, Calendar Selected Government, Recipient of Revenue from Table B.3 Total Government Revenue Before and After Excluding Intergovernmental Grants Intergovernmental After Excluding and Before Revenue Government Total B.3 Table ...... 78,043...... 77,783 ...... 389 481...... 2,632 15,106...... 3,020 15,106 49,477 6,517 177 15,538 49,310 723 397 1,226 15,898 13,890 3,319 64,966 12,220 156 10,543 51,597 965 542 311 2,340 8,282 29,389 7,455 16,562 5,083 345 2,599 4,275 821 519 402 1,853 5,668 1,330 322 1,327 649 440 370 — 33,739 31,800 — — — — 10,710 867 4,634 3,614 1,162 a 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1995 1985 1990 Year 1926 1939 1946 1950 1960 1970 1970 1980 ECONOMIC PERSPECTIVE B:5 Total, as a percentage of gross domestic product gross domestic of as a percentage break in national accounts series, not entirely comparable entirely not series, accounts national break in Table B.3 Concluded Federal Provincial Local grants grants grants grants grants grants QPP grants Including Excluding Including Excluding Including Excluding and CPP excluding ...... na...... na...... na...... na...... 7.3 na 8.2 na 21.6...... 15.8...... 16.7 16.5...... 3.3 15.7 17.4...... 6.8 16.0 5.9 16.7...... 17.9 6.4 15.6...... 2.9 17.8 8.4 16.0 15.6...... 5.3 19.2 17.9 4.5 17.6...... 19.1 17.7 5.0 20.6...... 18.7 11.8 19.2 5.9 21.9...... 6.4 18.8 13.5 19.0 22.7...... 6.8 18.1 16.4 4.3 18.7 23.1...... 17.0 17.3 4.3 18.8 22.1 6.0...... 8.4 16.6 18.6 6.6 18.0 21.7 6.3 9.2...... 16.3 3.6 19.0 16.9 22.0...... 9.3 16.2 3.4 19.2 16.5 21.9 4.8 8.9...... 16.0 4.7 18.8 16.2 5.6 21.3 —...... 9.6 16.1 18.7 16.1 5.3 20.4 — 9.8 — 15.6 18.9 15.9 5.2 17.7 9.0 — 18.2 16.0 1.5 5.8 17.8 9.4 — 17.6 15.6 1.5 5.8 18.0 16.2 8.8 14.4 1.8 5.7 18.3 19.8 8.0 29.7 15.2 2.0 6.0 17.8 8.1 24.2 35.7 15.1 2.3 5.7 17.7 8.0 37.3 27.1 15.5 2.4 5.1 5.0 39.1 14.1 2.3 5.1 4.5 40.4 14.5 2.5 5.1 4.4 44.6 2.6 2.1 4.5 45.0 2.8 1.9 4.5 46.3 2.9 1.9 4.5 46.3 3.2 1.8 45.6 3.2 1.8 45.5 3.2 1.6 44.2 3.1 42.7 3.2 36.2 3.2 36.5 3.1 36.2 36.5 35.1 34.7 a Includes Newfoundland and Labrador for 1950 and subsequent years. 1950 and subsequent for and Labrador Newfoundland Includes Source: Same as table B.1. as table Same Source: a 1926 1939 1946 1950 1960 1970 1970 1980 1985 1990 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year B:6 FINANCES OF THE NATION 2009

Both the federal and provincial governments depend on the personal income tax for a significant part of their total tax revenue, as shown in table B.4. Their personal income tax collections have increased from 10.2 percent of GDP in 1980 to 12 percent in 2008. Federal and provincial collections of corporate income tax have risen substantially since 1995, from 2.7 percent of GDP to 3.8 percent in 2008. Public sector spending rose from 43.1 percent of GDP in 1980 to a peak of 50.4 percent in 1990 and has since declined to 41.5 percent in 2008 (as shown in table B.5). Federal spending, excluding grants to other levels of government, declined from 17.6 percent of GDP in 1995 to 11.6 percent in 2008. Provincial and local spending also declined during the past 12 years, to 19 percent and 8.4 percent of GDP, respectively. Table B.6 shows how the overall balance has changed over the past 12 years. In 1995, all governments registered a deficit equivalent to 5.3 percent of GDP. By 2008, the balance had changed to a surplus of 0.1 percent of GDP.

PROVINCIAL COMPARISONS Tables B.7 and B.8 are based on Statistics Canada’s Provincial Economic Accounts, which provide information on the provincial economies on a basis consistent with that provided in the national income and expenditure accounts, including information on the public sector in each province. The formulas for allocating federal revenues and expenditures among the provinces are not reflective of the ultimate incidence of taxes and spending. For example, collections of customs duties are allocated to the province of entry into Canada regardless of the province of final consumption. The formulas do, however, provide a rough indication of where Ottawa raises its money and where it is spent. The details on provincial and local governments and the Canada and Quebec Pension Plans provide an up-to-date indication of total public sector activities in each province. Details for the three territories have been omitted from tables B.7 and B.8 but are included in the national totals. The ratio of total taxes to gross domestic provincial product (GDPP) in calendar year 2007 (the latest year for which information is available) ranged from a high of 33.7 percent in Quebec to a low of 16.7 percent in Newfoundland and Labrador, as shown in table B.7. Total public sector spending was equivalent to 57.4 percent in Prince Edward Island, but only 20.2 percent in Alberta (see table B.8).

INTERNATIONAL COMPARISONS The figures provided by Statistics Canada are not always cast in the same mold as those provided by other countries’ national statistical agencies. Table B.9 is based on figures available from the Department of Finance using the analysis developed by the OECD. Canada’s balance shows the same pattern as in the previous tables and is more pronounced than the other G7 countries shown in the table. ECONOMIC PERSPECTIVE B:7 149,883 238,369 284,726 321,234 333,255 355,987 384,627 383,637 387,511 403,366 439,185 millions of dollars break in national accounts, not entirely comparable entirely not accounts, national break in (Table B.4 is concluded on the next page.) next on the concluded is B.4 (Table Contri- on Taxes Contri- on Taxes Federal Provincial Table B.4 Tax Revenue of All Levels of Government, Selected Calendar Years, 1926 to 2008 1926 to Years, Calendar Selected Government, of Levels All of Revenue Tax B.4 Table tax tax insurance imports taxes tax tax insurance imports taxes QPP taxes income income social to and tion Other income income social to and tion government and Total Personal Corporate butions produc- Personal Corporate butions produc- Local CPP 117,853 41,038 16,875 44,597 7,806 74,301 19,629 10,559 80,357 47,611 43,451 504,077 117,243 38,976 16,689 48,586 6,891 73,482 18,772 10,309 83,181 45,597 43,469 503,195 105,024 37,567 16,949 48,103 7,003 68,528 17,958 10,186 85,962 42,855 41,643 481,778 102,450 32,201 17,830 48,516 5,478 62,601 16,486 8,710 88,407 40,851 38,834 462,364 ...... 6,413...... 19,132 2,276 8,406 32,141 11,586 3,125 490 8,753 1,013 12,312 19,113 13,007 955 4,045 3,672 260 21,121 1,782 3,977 14,292 2,656 3,176 27,342 10,771 794 16,015 3,539 336 91,051 5,704 4,457 3,726 1,057 26,510 ...... 58,636 10,442 13,027 1,727 27,160 37,535 6,392 5,800 42,685 24,848 10,117 ...... 63,582 13,372...... 73,735 19,497 20,229 1,964 31,447 ...... 80,043 20,212 42,608 19,416 2,958 34,936 ...... 82,573 19,005 8,766 47,055 25,798 2,817 35,457 ...... 12,021 90,220 18,659 6,536 48,892 31,763 3,386 36,237 6,217...... 11,384 93,446 18,751 52,737 51,624 24,223 3,755 38,339 56,685 6,180...... 13,612 87,484 18,344 53,731 24,258 4,530 39,841 60,262 6,062...... 16,412 29,761 88,511 18,213 31,586 52,480 27,893 4,381 43,229 64,295 6,076...... 12,129 94,943 14,456 17,833 31,519 51,171 15,600 31,744 4,157 45,084 67,715 6,213 11,488 17,172 32,741 18,280 52,292 4,643 46,551 69,842 6,563 12,016 32,944 56,421 21,000 73,218 7,363 14,500 33,968 24,921 76,458 8,145 34,979 28,621 89,685 36,551 32,527 38,576 35,208 36,805 ...... 18...... 46...... 711...... 612 32 1,917 652 98 6,302 1,308 847 2,276 na na na na na na na na na na na na 2,842 305 1,084 5,437 326 1,363 .. 2,509 62 .. 1 12 794 280 na 2 146 na 17 2 na 4,811 na na na 1,360 3,628 1,593 617 415 205 107 1,054 26,811 — 506 332 284 252 9,362 — — — — 4,091 3,196 988 717 a 2008 2007 2006 1970 1980 1985 1990 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year 1926 1939 1946 1950 1960 1970 B:8 FINANCES OF THE NATION 2009 Table B.4 Concluded as a percentage of gross domestic product gross domestic of as a percentage break in national accounts series, not entirely comparable entirely not series, accounts national break in Contri- on Taxes Contri- on Taxes Federal Provincial tax tax insurance imports taxes tax tax insurance imports taxes QPP taxes income income social to and tion Other income income social to and tion government and Total Personal Corporate butions produc- Personal Corporate butions produc- Local CPP ...... 0.3...... 0.8...... 5.8...... 0.6 3.2...... 1.7 4.9 5.4 7.1 na 4.4 na 3.3 na 2.6 na na na na na na 5.7 na 5.5 na 8.9 .. na 7.1 0.2 7.2 .. 6.1 .. 0.3 .. 0.2 2.8 .. na 0.8 0.7 na 0.9 na 3.5 na na 2.0 na 3.4 3.2 3.4 4.8 5.4 4.7 2.7 2.6 4.0 — — 4.1 — 16.8 — — 13.4 1.2 26.3 21.4 23.7 30.1 ...... 7.1...... 6.1...... 6.6...... 2.5 8.6...... 2.7 7.8...... 2.4 8.4...... 0.5 1.5 8.7...... 1.0 1.6 8.4...... 1.8 2.3 4.5 8.4...... 1.9 2.1 3.9 8.4...... 2.4 0.3 2.6 3.9 7.6...... 2.3 0.3 3.0 4.0 7.3...... 2.1 0.2 2.2 3.9 2.9 7.4...... 1.9 0.3 2.1 4.0 4.1 7.5...... 1.7 0.2 2.3 3.9 4.3 7.2...... 1.7 0.9 0.3 2.5 3.7 5.5 7.6 1.6 1.2 0.3 2.3 3.6 5.3 7.4 1.5 0.8 0.3 2.6 3.6 5.3 0.4 1.3 0.9 0.3 2.5 3.7 5.3 0.6 1.3 1.1 0.4 2.6 3.7 5.3 0.7 1.2 1.4 4.9 0.4 3.6 5.0 0.9 1.1 1.2 4.5 0.3 3.5 4.7 0.8 1.1 1.4 5.6 0.4 3.3 4.4 0.7 1.5 6.3 0.4 3.2 4.3 0.7 4.1 1.1 6.5 0.5 2.8 4.4 0.6 3.4 1.0 6.4 0.4 4.6 0.6 3.3 1.0 6.6 0.5 4.7 0.6 3.7 1.2 1.1 6.5 4.8 0.6 3.7 1.1 1.2 6.3 4.6 0.6 3.6 1.2 1.2 29.3 6.3 0.6 3.4 1.5 1.2 6.3 28.9 0.6 3.3 1.8 1.2 30.8 6.3 0.7 3.1 1.8 6.9 35.1 0.7 3.1 2.0 35.1 6.4 0.7 3.0 2.1 5.9 36.4 3.0 2.3 36.4 5.4 3.0 2.6 5.0 36.2 3.0 2.8 35.7 3.0 2.9 34.6 3.0 2.9 33.6 3.0 2.8 33.2 2.9 34.0 2.8 33.7 2.7 33.2 32.8 31.5 a Includes Newfoundland and Labrador for 1950 and subsequent years. 1950 and subsequent for and Labrador Newfoundland Includes Source: Same as table B.1. as table Same Source: a Year 1926 1939 1946 1950 1960 1970 1970 1980 1985 1990 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 ECONOMIC PERSPECTIVE B:9 Total, 135,924 millions of dollars break in national accounts series, not entirely comparable entirely not series, accounts national break in (Table B.5 is concluded on the next page.) next on the concluded is B.5 (Table Federal Provincial Local grants grants grants grants grants grants QPP grants 248,250 185,789 356,458 304,466 135,289 135,150 38,173 663,578 224,563 168,061 333,932 286,033 126,649 126,512 36,202 616,808 221,459 169,414 315,488 268,587 121,220 121,088 34,521 593,610 221,991 165,172 292,723 250,418 112,903 112,786 32,826 561,202 200,446 160,850 276,297 237,519 105,175 105,074 31,406 534,849 197,544 157,353 266,648 230,840 100,147 100,046 29,690 517,929 186,906 153,590 252,899 218,014 94,474 94,379 28,382 494,365 188,419 153,482 244,547 211,088 91,484 91,386 26,984 482,940 182,817 150,578 227,889 195,930 86,741 86,399 25,707 458,614 175,415 142,957 213,366 181,772 83,266 82,830 24,737 432,296 166,657 140,205 208,085 177,123 81,663 81,179 24,115 422,622 163,344 137,647 197,846 168,252 78,458 78,154 23,062 407,115 176,015 142,552 197,886 165,653 78,934 78,823 20,859 407,887 155,086 126,620 162,843 137,253 65,147 65,009 13,668 342,550 116,041 93,267 112,412 94,066 44,574 44,470 6,712 238,515 Including Excluding Including Excluding Including Excluding and CPP excluding from Revenue of Recipient Government, Selected Calendar Years, 1926 to 2008 1926 to Years, Calendar Selected Government, Recipient of Revenue from Table B.5 Total Government Expenditure Before and After Excluding Intergovernmental Grants Intergovernmental After Excluding and Before Expenditure Government Total B.5 Table ...... 321...... 483 2,877...... 2,370 306...... 2,703 6,746 404 15,291 2,119 11,894 5,752...... 630 187 1,230 14,146 15,527...... 468 3,532 11,890 62,022 1,059 8,752 48,715 551 164 2,818 16,148 436 67,701 12,954 7,978 913 54,764 2,827 7,914 504 346 9,132 2,810 29,908 372 902 29,789 9,086 497 134 340 — 365 2,656 — 134 31,088 — — — 11,380 34,064 4,080 3,751 810 1,205 a 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1995 1990 1985 Year 1926 1939 1946 1950 1960 1970 1970 1980 B:10 FINANCES OF THE NATION 2009 Total, as a percentage of gross domestic product gross domestic of as a percentage break in national accounts series, not entirely comparable entirely not series, accounts national break in Table B.5 Concluded Federal Provincial Local grants grants grants grants grants grants QPP grants Including Excluding Including Excluding Including Excluding and CPP excluding ...... 6.0...... 8.2...... 23.6...... 12.4 5.7...... 17.1 22.2 6.9 17.2 11.1 14.6...... 13.3 3.5...... 17.2 5.2 8.0...... 19.7 6.4...... 23.8 9.0 13.2 3.1 15.9...... 22.8 4.5 15.5 7.4...... 21.7 5.5 19.2...... 18.5 7.1 18.6 9.8 17.9...... 18.2 17.6 6.5 21.5...... 17.9 4.1 15.6 6.3 23.1...... 17.0 14.3 4.8 15.3 24.0...... 17.0 17.4 7.2 6.4 14.6 9.0 24.4...... 4.1 16.2 19.3 6.2 14.0 22.4...... 4.7 16.3 20.2 13.9 10.1 22.7...... 7.1 15.5 20.4 8.9 13.3 21.7 9.5...... 16.2 19.1 — 13.0 10.1 21.2...... 9.2 — 15.3 19.4 — 12.5 22.1 9.6...... — 14.6 18.5 12.0 9.4 21.9 9.7 — 0.2 15.5 18.2 11.7 9.1 22.0 8.9 0.1 19.1 15.1 11.0 9.6 21.4 8.9 30.8 18.9 20.5 11.6 9.7 21.3 8.5 21.3 19.0 0.8 34.9 8.9 21.8 8.1 28.8 18.4 1.4 8.9 37.7 21.8 8.3 18.2 2.0 8.4 22.3 8.2 18.5 2.6 8.0 8.3 43.1 18.7 2.6 8.2 8.1 49.0 19.0 2.6 8.2 8.2 50.4 2.5 8.2 8.4 50.3 2.4 8.1 8.3 46.1 2.4 8.2 8.5 46.2 2.5 8.4 44.0 2.4 8.3 42.6 2.4 8.4 43.6 2.4 42.8 2.4 42.7 2.4 41.4 2.4 40.8 41.0 40.2 41.5 a Includes Newfoundland and Labrador for 1950 and subsequent years. 1950 and subsequent for and Labrador Newfoundland Includes Source: Same as table B.1. as table Same Source: a 1926 1939 1946 1950 1960 1970 1970 1980 1985 1990 1995 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year ECONOMIC PERSPECTIVE B:11 43 137 670 ! 325 ! ! ! 1,088 1,024 12,787 41,712 39,633 43,181 Total, ! ! ! ! ! !

!1,028 !2,723!1,183 1,640 765 1857 — — 57

! ! 253957 — — 554 ! ! 3,6394,003 1,193 1,196 712

! ! 13,22719,34125,67931,616 3,012 28,171 3,185 26,345 2,051 27,17331,49634,59435,90738,110 799 3,96940,505 5,70213,090 8,453 11,689 15,855 9,499 31,705 12,366 9,53753,478 10,251 7,292 12,117 12,655 11,146 10,739 52,673 59,637 60,513 2,013 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1

! 92 24

! 228 523 850 519 ! 441 ! ! ! ! ! 1,241 1,897 1,906 3,060 2,681 1,792

! 26,829 ! ! ! ! ! ! 8 915

! ! 94

125! 478 30734 5 — millions of dollars ! ! ! 3,167 5,123 9,967 7,315 1,2773,149 204 145

! 10,072 10,906 11,543! 161 ! 15,440 15,936 ! ! ! 10,47419,475 310 ! ! ! ! ! ! ! 4

10 71 !

! ! 213 256 1,791 250 ! ! ! 2,735 5,658 8,351 3,179 1,0238,523 1,066 6,540 2,557 9,602

! ! ! 10,614 ! 36,085 29,80856,659! 1,78617,031 7,704 11,584 ! 3,450 ! ! ! ! ! ! ! ! break in national accounts series, not entirely comparable entirely not series, accounts national break in

) Before and After Excluding Intergovernmental Grants, Intergovernmental After Excluding and !) Before !71 93 5,099

15,484 ! ! Selected Calendar Years, 1926 to 2008 1926 to Years, Calendar Selected (Table B.6 is concluded on the next page.) next on the concluded is B.6 (Table Federal Provincial Local !277 !245 !229 765 !421 3,216 12,54537,998 33,309 31,700 595 1,006 grants grants grants grants! grants! ! ! grants QPP grants Including Excluding Including Excluding Including Excluding and CPP excluding Table B.6 Surpluses or Deficits ( ...... 20,028...... 51,528 12,010...... 46,151 9,396 41,806 ...... 1,019 11,150...... 56,789 62,358 15,154...... 70,698 2,668 12,963 1,438 64,227 ...... 68 83 ...... 4,121 10,830 43,523 49,429 ...... 6,476 31,511 ...... 6,964 7,985 33,416 40,443 ...... 650 247 901 3,644 a Year 2000 2001 2002 2005 2006 2007 2008 1926 2003 2004 1960 1946 1985 1990 1995 1997 1970 1980 1939 1998 1999 1950 1970 B:12 FINANCES OF THE NATION 2009 0.7 1.1 1.7 ! ! ! !0.4 !4.1 !8.6 !5.8 !5.3 !0.1 !0.1 Total,

!0.1 !0.3!0.1 0.2 0.1 2.9 0.41.00.80.8 2.9 0.7 0.8 0.8 3.8 4.1 3.9 !0.5!1.3!2.4!4.1 — —!4.4 — !4.2 1.4!4.0!3.8!3.9 2.9 1.3 !3.2 1.0 !2.9 0.8 0.7 !2.8 0.3 ! !3.1!3.1!3.1 0.1!3.1! 0.5! 0.7 ! 0.8 !3.3 1.6 0.7 0.7 0.7 0.9 0.1

!0.5 !0.6 !0.6 !0.9 !0.2 !0.3 !2.9 !0.2 !0.2 !0.3 !0.2 !0.1

!0.1!2.1!0.1!0.5 !1.2 .. 0.5 0.1 !0.8 .. 0.1!1.0 !2.1 !1.6!1.4 — —!0.6 .. .. !0.9 !1.3 1.1 !1.3 !0.6 !0.1!0.2!0.7!1.2 — — — as a percentage of gross domestic product gross domestic of as a percentage

!0.2 !1.2 !0.5 !0.3!0.3 2.0 !0.9 !1.2 !1.2 !1.3 !0.4!3.9 !3.0!5.3 0.1!0.8 !1.5 0.2!1.0 0.7!0.5 0.1 !0.2 0.4 !0.6 — break in national accounts series, not entirely comparable entirely not series, accounts national break in Table B.6 Concluded

!0.6 0.8 !3.2 !0.7 Federal Provincial Local

!2.0 !0.6 1.9 !0.5!4.0!7.8 !4.9 3.6 !3.9 0.2 0.1 grants grants grants grants grants grants QPP grants Including Excluding Including Excluding Including Excluding and CPP excluding ...... 0.8 0.8 3.7 4.1 ...... 1.3 1.6 ...... 0.7 3.6 ...... 0.3 0.8 3.6 3.8 ...... 3.4...... 0.3 4.7 4.1 ...... 1.3 ...... 1.1 4.2 ...... 0.8...... 1.0 0.2 4.3 4.6 4.0 0.1 ...... 1.9...... 0.8 4.8 ...... 3.6 0.1 4.1 0.9 a Includes Newfoundland and Labrador for 1950 and subsequent years. 1950 and subsequent for and Labrador Newfoundland Includes Source: Same as table B.1. as table Same Source: a 1998 1999 1926 1980 1985 1990 1995 1997 2003 2004 Year 1946 1950 1970 1939 2001 2006 2007 2008 1970 1960 2000 2002 2005 ECONOMIC PERSPECTIVE B:13 a All 136,765 153,264 0.3 12.2 5.2 2.8 !162 31,337 9,945 42,449 !

!6.5 !3,146 domestic provincial product provincial domestic 110,728 11,183 9,677 32,198 33,986 294,776 millions of dollars

!1.7 5.1 !4,945 29,826 100,112 180,600 13,024 12,393 55,663 52,119 437,954 129,538 222,334 17,421 17,409 83,107134,483 71,111 192,508 574,719 20,567 17,571 51,770 61,166 532,270 14.3

3,849 ! ! as a percentage of gross of as a percentage 15.2

5,008 ! ! , catalogue no. 13-213-XDB. no. catalogue , 802 ! !17.9 10.2 NL PE NS NB QC ON MB SK AB BC Canada

2,975 ! ! Intergovernmental Grants, by Province, Calendar Year 2007 Calendar Province, by Grants, Intergovernmental Table B.7 Revenue and Expenditure of All Levels of Government, Excluding ...... 6,372 1,438 10,411 7,663 67,110 ...... 21.8 32.0 31.6 28.4 22.6 18.9 23.0 19.0 12.5 17.7 19.2 Provincial Economic Accounts Economic Provincial

!) ...... !) ...... Includes the territories and federal operations outside Canada. outside operations and federal territories the Includes Source: Statistics Canada, Canada, Statistics Source: a te eeu ...... revenue...... 4,888 1,384 revenue Tax 9,362 2,860 7,124 Other 390 3,134 2,683 29,426 41,734 4,397 18,992 5,016 27,444 rnfr opros...... revenue...... debt...... 7,748 1,774 12,496 9,807 persons 1,063Total to public 3,103 259 the 780 on goods and services Expenditure ...... on 1,946 4,849 1,633Transfers 4,070 20,406 22,646 13,656 39,982 2,576 17,504 expenditure 2,534Interest 10,723 55,496 185 6,244 1,762 18,962 5,309 13,548 4,312Other expenditure...... 6,739 99 63,452 Total Surplus or deficit ( 298 290 6,985 3,638 606 823 1,712 1,479 20,778 te eeu ...... revenue...... revenue Tax 16.7 30.8Other ...... revenue...... debt...... 9.8 persons 26.5 28.4Total to public 39.5 8.7 10.6 3.6 26.4 the on goods and services Expenditure ...... on 17.4 37.9Transfers 5.8 9.5 33.7 14.7 36.3 expenditure Interest 0.6 15.1 5.9 36.7Other 30.8 9.9 expenditure...... 43.6 57.4 2.2 26.7Total 13.4 6.0 53.2 38.0 9.9 24.4Surplus or deficit ( 0.9 50.6 35.8 9.5 21.7 6.9 34.3 1.1 45.2 7.1 12.8 27.2 32.3 10.4 32.9 3.9 28.6 9.0 37.1 2.3 42.2 5.3 5.2 37.5 9.9 34.6 0.6 9.9 20.2 10.7 3.5 1.2 31.9 10.0 9.9 1.7 34.7 1.6 3.5 8.9 0.7 4.1 0.8 1.4 B:14 FINANCES OF THE NATION 2009 a 2.7 All !

!2.5

!1.7

!2.1 !0.3 12.2 5.2 2.8

!1.3!2.9!3.1 0.8 0.5!6.5 8.9 3.7 6.0 0.8 4.7 —

!2.9

!1.6!3.3 0.6 !1.7 5.1 4.30.5 2.8 6.5 Government as a Percentage of GDPP, by Province and Province by of GDPP, as a Percentage Government

! 10.1 ! 14.3 ! ! 6.9 4.8 3.5

! ! ! 15.2 ! 6.6 7.3 4.5

! ! ! 17.9 ! 0.2 7.4 2.7 10.1 NL PE NS NB QC ON! ! ! MB SK AB BC Canada ! Level of Government, Excluding Intergovernmental Grants, Calendar Year 2007 Calendar Grants, Intergovernmental Excluding Government, of Level Table B.8 Revenue and Expenditure of All Levels of Levels of All Expenditure and Revenue B.8 Table

!) Includes the territories and federal operations outside Canada. outside operations and federal territories the Includes Source: Same as table B.7. as table Same Source: a Revenue Federal...... 12.3 10.9Provincial...... QPP...... Local and 17.8 16.2CPP 2.3 1.0Total...... 16.2 15.0 26.6Expenditure 4.2 14.2 1.2 16.3Federal...... 12.6 39.5 18.3Provincial...... 15.2 21.3 ...... QPP...... Local 3.7 3.0 and 16.6 37.9 24.4 13.8 23.5CPP 2.0 3.8 13.6 15.8Total...... 23.1 36.3 19.8 3.9 1.9 12.5 36.7 15.6 ( or deficit Surplus 43.6 3.7 18.5 5.7 14.4 26.5 13.4 3.5 3.6 38.0 57.4 12.4 16.0 22.9 15.4 35.8 3.8 3.3 6.6 4.2 10.1 53.2 13.3 15.5 15.5 34.3 14.9 18.7 3.5 50.6 2.9 32.3 3.3 2.3 11.7 15.1 45.2 37.1 2.7 3.5 3.0 6.9 5.5 32.9 9.6 37.5 2.4 2.1 42.2 10.0 2.4 14.6 7.1 34.6 10.8 3.4 15.6 2.3 2.7 6.0 20.2 31.9 3.2 3.3 2.2 5.6 34.7 1.1 3.8 2.5 4.9 2.4 6.0 Provincial...... Local CPP and QPP...... and CPP 0.2Total...... 0.5 — 0.6 0.5 0.9 0.9 0.5 1.3 0.9 0.8 Federal...... ECONOMIC PERSPECTIVE B:15

Table B.9 Receipts, Outlays, and Financial Balances in G7 Countries, Selected Years, 1980 to 2008 United United G7 Canada States Japan Kingdom Germany France Italy average as a percentage of gross domestic product Tax and non- tax receipts 1980 ...... 37.5 31.5 29.7 42.6 — 45.6 33.8 34.0 1985 ...... 39.5 31.8 32.3 44.1 — 48.7 37.4 35.3 1990 ...... 43.0 32.8 34.0 40.1 — 47.0 41.5 36.1 1995 ...... 43.2 33.8 31.4 38.8 45.1 48.9 45.1 37.3 2000 ...... 44.1 35.8 31.4 41.0 46.4 50.1 45.3 38.7 2003 ...... 41.1 31.9 30.5 39.4 44.4 49.1 44.7 36.1 2004 ...... 40.7 32.1 30.9 39.5 43.5 49.6 44.2 36.1 2005 ...... 40.8 33.4 31.7 40.8 43.6 50.5 43.8 37.0 2006 ...... 41.0 34.2 34.5 41.6 43.8 50.3 45.3 38.0 2007 ...... 40.7 34.5 33.5 41.4 43.9 49.6 46.4 38.0 2008 ...... 39.8 33.1 34.4 42.6 43.9 49.3 46.0 37.4

General government outlays 1980 ...... 41.6 34.1 34.2 46.3 — 45.7 40.8 37.3 1985 ...... 48.3 36.8 33.7 47.3 — 51.7 49.8 40.1 1990 ...... 48.8 37.1 32.0 41.9 — 49.4 52.9 39.5 1995 ...... 48.5 37.0 36.5 44.5 48.3 54.4 52.5 41.6 2000 ...... 41.1 34.2 39.0 37.0 45.1 51.6 46.1 38.7 2003 ...... 41.2 36.8 38.4 42.8 48.4 53.2 48.3 40.9 2004 ...... 39.9 36.4 37.0 43.2 47.3 53.3 47.8 40.3 2005 ...... 39.3 36.6 38.4 44.2 46.9 53.5 48.1 40.6 2006 ...... 39.4 36.5 36.2 44.3 45.3 52.7 48.7 40.0 2007 ...... 39.1 37.4 36.0 44.1 44.1 52.3 47.9 40.2 2008 ...... 39.7 39.0 37.1 48.1 44.0 52.7 48.7 41.6

Government financial balance 1980 ...... !4.1 !2.6 !4.5 !3.7 — !0.1 !7.0 !3.3 1985 ...... !8.9 !5.0 !1.4 !3.3 — !3.0 !12.4 !4.8 1990 ...... !5.8 !4.2 2.1 !1.8 — !2.4 !11.4 !3.3 1995 ...... !5.3 !3.1 !5.1 !5.8 !3.2 !5.5 !7.4 !4.3 2000 ...... 2.9 1.6 !7.6 4.0 1.3 !1.5 !0.9 !0.1 2003 ...... !0.1 !4.8 !7.9 !3.3 !4.0 !4.1 !3.5 !4.8 2004 ...... 0.9 !4.4 !6.2 !3.7 !3.8 !3.6 !3.6 !4.2 2005 ...... 1.5 !3.3 !6.7 !3.3 !3.3 !3.0 !4.4 !3.6 2006 ...... 1.6 !2.2 !1.6 !2.7 !1.5 !2.3 !3.3 !2.0 2007 ...... 1.6 !2.9 !2.5 !2.7 !0.2 !2.7 !1.5 !2.2 2008 ...... 0.1 !5.9 !2.7 !5.5 !0.1 !3.4 !2.7 !4.1 Source: Department of Finance, Fiscal Reference Tables, October 2009. xxxxxxxxx Appendix C Financial Results for Selected Municipalities

This appendix provides 2007 revenue and expenditure data for several large Canadian municipalities that are not readily available in any other single source. The caveat in chapter 1 must be repeated here: because the role of local government varies considerably from province to province, caution must be exercised when comparing interprovincial figures. Reporting requirements also differ among provinces, further reducing comparability. Each municipality shown in the accompanying tables has an accounting system that is unique to its own needs. There is no simple surplus or deficit statement, partly because of the treatment of capital expenditures and partly because of the extent to which separate entities are used for transit, cemeteries, parks, recreational facilities, etc. There are, however, two main formats used by municipalities to report financial transactions for the year. One approach uses a statement of the sources of funds (revenue, debt, and transfers from funds) and a statement of the application of funds (expenditures and transfers to funds). The second approach uses statements of revenue and expenditure plus a statement of changes in financial position or a statement of changes in fund balances. Every municipality also prepares a balance sheet. Even though municipalities operate under a balanced budget constraint, revenues rarely equal expenditures in a given year. The balanced budget is met through transfers to and from a municipality’s various funds. For the purposes of these tables, transfers from funds as revenues and transfers to funds as expenditures have been eliminated wherever possible in order to provide a clearer picture of each municipality’s dealings with the outside world.

MONTREAL On January 1, 2002, the city of Montreal and its 28 surrounding municipalities were amalgamated, bringing to an end more than 30 years of regional government by the Montreal Urban Community. The new city signed a contract with the Quebec government in January 2003 that set out a framework for relations between the province and its largest city and includes approximately $1.3 billion of new financial commitments by both parties. The Montreal Urban Agglomeration Council came into being on January 1, 2006. The new organization has authority throughout the island of Montreal to adopt bylaws, authorize expenditures, and levy taxes. The recon- stituted municipalities are represented at the council, and their vote is proportionate to their population. As the central city within the agglomeration, C:2 FINANCES OF THE NATION 2009

Montreal is responsible for common services such as police, fire, water management, transit, municipal courts, and property assessment. Tables C.1 and C.2 summarize the revenue and expenditure of the amalgamated city of Montreal for 2007.

TORONTO Effective January 1, 1998, the municipality of Metropolitan Toronto and its six constituent municipalities were amalgamated into a single city, Toronto. The city is organized into 28 wards, each with two councillors. The amalgamation made Toronto North America’s fifth largest city by population. Toronto carries out responsibilities common to the entire area such as public transit, police protection, regional roads and expressways, solid waste disposal, water supply, ambulance services, social services, homes for the aged, assisted housing, children’s services, and regional parks. The amalgamated city is also responsible for those services formerly undertaken by individual area municipalities, such as fire protection; local sewers and water distribution; garbage collection; property tax collection; maintenance of local streets, parks, and parking lots; and the administration of civic elections. Revenue and expenditure of Toronto for 2007 are shown in tables C.3 and C.4.

OTHER MUNICIPALITIES Tables C.5 to C.24 present revenue and expenditure data for the cities of St. John’s, Newfoundland and Labrador; Halifax Regional Municipality, Nova Scotia; Saint John, New Brunswick; Quebec City, Quebec; Winnipeg, Manitoba; Regina, Saskatchewan; Calgary, Alberta; and Vancouver, British Columbia, as well as the Capital Regional District and one of its area municipalities, the city of Victoria, British Columbia.

Table C.1 City of Montreal, 2007, Consolidated Revenue thousands of dollars Taxes...... 2,597,439 Payments in lieu of taxes...... 242,893 Other revenues from local sources ...... 1,304,211 Transfers...... 780,803 Total...... 4,925,346

Table C.2 City of Montreal, 2007, Consolidated Expenditure thousands of dollars General administration...... 504,913 Public safety ...... 865,685 Transportation...... 1,571,092 Environmental health...... 457,991 Health and welfare...... 152,201 Urban planning and development...... 214,636 Recreation and culture...... 504,007 Financing expenses ...... 427,837 Total...... 4,698,362 FINANCIAL RESULTS FOR SELECTED MUNICIPALITIES C:3

Table C.3 City of Toronto, 2007, Consolidateda Revenue thousands of dollars Taxes Residential and commercial taxation ...... 3,186,766 Taxation from other governments ...... 99,181 3,285,947 User charges Transit fares ...... 784,394 Sale of water...... 618,565 Fees and service charges ...... 321,114 Licences and permits ...... 101,767 Fines ...... 141,050 1,966,890 Transfers from other governments ...... 1,940,866 Net government business enterprise earnings ...... 95,105 Other ...... 1,536,472 Total...... 8,825,280 a Includes the funds of the city, community centres, business improvement areas, arenas, waterworks system, parking authority, board of health, public library board, historical boards, Toronto Hydro Corp., Toronto Economic Development Corporation, St. Lawrence Centre for the Arts, the North York Performing Arts Centre, Board of Management of the Toronto Zoo, Hummingbird Centre for the Performing Arts, Yonge-Dundas Square, Exhibition Place, Toronto Transit Commission, Toronto Licensing Commission, Toronto Police Services Board, and Toronto Community Housing Corporation.

Table C.4 City of Toronto, 2007, Consolidateda Expenditure thousands of dollars General government ...... 573,416 Protection of persons and property...... 1,466,430 Transportation...... 2,395,965 Environmental services ...... 1,056,280 Health services ...... 351,409 Social and family services...... 1,773,621 Social housing ...... 803,784 Recreation and cultural services...... 841,320 Planning and development...... 106,394 Total...... 9,368,619 a Includes the funds of the city, community centres, business improvement areas, arenas, waterworks system, parking authority, board of health, public library board, historical boards, Toronto Hydro Corp., Toronto Economic Development Corporation, St. Lawrence Centre for the Arts, the North York Performing Arts Centre, Board of Management of the Toronto Zoo, Hummingbird Centre for the Performing Arts, Yonge-Dundas Square, Exhibition Place, Toronto Transit Commission, Toronto Licensing Commission, Toronto Police Services Board, and Toronto Community Housing Corporation. C:4 FINANCES OF THE NATION 2009

Table C.5 City of St. John’s, 2007, Consolidateda Revenue thousands of dollars Taxes Real property ...... 78,220 Business ...... 20,463 Utility ...... 6,547 Other...... 1,796 107,027 Grants from government of Newfoundland and Labrador and its agencies ...... 26,646 Other grants and transfers ...... 25,051 51,697 Sales of goods and services Water tax and sales ...... 22,572 Recreation and culture...... 1,202 Parking meters and permits...... 1,475 Other...... 12,678 37,927 Other revenue from own sources Interest on tax arrears...... 1,648 Other...... 11,250 12,898 Grants in lieu of taxes ...... 2,985 St. John’s Transportation Commission ...... 5,461 St. John’s Sports and Entertainment Ltd...... 7,129 Total...... 225,124 a Includes all fund accounts of the city, the St. John’s Transportation Commission, and the Civic Centre Corporation. FINANCIAL RESULTS FOR SELECTED MUNICIPALITIES C:5

Table C.6 City of St. John’s, 2007, Consolidateda Expenditure thousands of dollars General government ...... 32,440 Fiscal services Debenture debt charges...... 14,243 Other...... 1,185 15,428 Transportation services Snow clearing...... 10,973 Streets, roads, and sidewalks...... 3,353 Street lighting...... 3,533 Other...... 6,336 24,195 Protection services Fire protection ...... 19,125 Protective inspections ...... 2,800 Other...... 2,884 24,809 Environmental health services Water supply and distribution ...... 11,717 Garbage/waste collection and disposal ...... 5,161 Sewerage collection and disposal...... 6,025 22,903 Recreation and culture Parks and open spaces ...... 5,956 Recreation...... 5,471 Other...... 2,356 13,783 Environmental development services Planning and zoning...... 962 Other...... 3,712 4,674 St. John’s Transportation Commission ...... 12,239 St. John’s Sports and Entertainment Ltd...... 10,513 Other ...... 20,867 Total...... 181,851 a Includes all fund accounts of the city, the St. John’s Transportation Commission, and the Civic Centre Corporation.

Table C.7 Halifax Regional Municipality, Consolidated Revenue for Fiscal Year Ended March 31, 2007 thousands of dollars Taxation...... 476,339 Less amounts received for school board ...... !103,866 372,473 Taxation from other governments ...... 25,370 User fees and charges...... 110,268 Government grants...... 48,276 Development levies ...... 44,965 Investment income...... 12,847 Penalties, fines, and interest ...... 2,785 Sale of properties ...... 13,284 Grants in lieu of tax ...... 3,490 Total...... 633,758 C:6 FINANCES OF THE NATION 2009

Table C.8 Halifax Regional Municipality, Consolidated Expenditure for Fiscal Year Ended March 31, 2007 thousands of dollars General government ...... 81,773 Protective services ...... 155,465 Transportation...... 144,836 Environmental services ...... 161,146 Social housing ...... 2,450 Recreation and culture...... 66,060 Planning and development...... 38,992 Total...... 650,722

Table C.9 City of Saint John, 2007, Operating Fund Revenue thousands of dollars Own-source revenue Property taxes...... 84,247 Sales of goods and services ...... 989 Other revenue from own sources ...... 5,733 90,969 Province of New Brunswick unconditional grant ...... 19,117 Conditional grants from other governments ...... 315 Miscellaneous revenue...... 1,137 Total...... 111,539

Table C.10 City of Saint John, 2007, General Fund Expenditure thousands of dollars General government ...... 10,069 Protection Police...... 18,975 Fire...... 19,907 Other ...... 3,329 42,211 Transportation Roads...... 14,743 Public transit...... 4,088 Other ...... 3,171 22,002 Environmental health services ...... 3,151 Environmental development services...... 9,096 Recreational and cultural services ...... 7,341 Fiscal services Interest on long-term debt ...... 2,533 Principal instalments ...... 8,178 Other ...... 6,963 17,674 Other ...... 66 Total...... 111,607 FINANCIAL RESULTS FOR SELECTED MUNICIPALITIES C:7

Table C.11 Quebec City,a 2007, General Fund Revenue thousands of dollars Taxes...... 666,318 Payments in lieu of taxes...... 99,976 Other own-source revenue...... 188,287 Transfers...... 155,989 Total...... 1,110,570 a Since January 1, 2002, Quebec City includes the 13 member municipalities of the Quebec Metropolitan Community.

Table C.12 Quebec City,a 2007, General Fund Expenditure thousands of dollars General administration...... 144,592 Public security ...... 160,805 Transportation...... 363,198 Environmental health...... 194,854 Health and welfare...... 7,219 Planning and development...... 66,620 Recreation and culture...... 158,355 Debt-servicing charges ...... 87,098 Total...... 1,182,741 a Since January 1, 2002, Quebec City includes the 13 member municipalities of the Quebec Metropolitan Community.

Table C.13 City of Winnipeg, 2007, Consolidateda Revenue thousands of dollars Taxes Municipal and school property taxes ...... 820,635 Payments in lieu of property taxes and business taxes ...... 39,376 Less payments to province and school divisions ...... !452,937 407,074 Business taxes and licences in lieu of business taxes ...... 56,057 Other ...... 52,066 Regulatory fees and sales of services Water sales and sewage services...... 186,559 Other ...... 194,714 381,273 Province of Manitoba grants...... 117,166 Government of Canada grants...... 29 Interest...... 50,118 Land sales and other revenue ...... 35,025 Total...... 1,098,808 a Includes the funds, stabilization reserves, and special revenue reserves of the city; business improvement zones; public library board; hydro electric system; transit system; waterworks system; sewage disposal; solid waste disposal; ambulance department; Convention Centre; Winnipeg Public Library Board; Destination Winnipeg; Winnipeg Enterprises Corp.; Winnipeg Housing Rehabilitation Corp.; and CentreVenture Development Corp. C:8 FINANCES OF THE NATION 2009

Table C.14 City of Winnipeg, 2007, Consolidateda Expenditure thousands of dollars Utility operations ...... 242,797 Protection and community services ...... 336,743 General government ...... 33,403 Property and development...... 90,001 Public works...... 249,323 Finance and administration ...... 56,262 Civic corporations ...... 25,000 Total...... 1,033,529 a Includes the funds, stabilization reserves, and special revenue reserves of the city; business improvement zones; public library board; hydro electric system; transit system; waterworks system; sewage disposal; solid waste disposal; ambulance department; Convention Centre; Winnipeg Public Library Board; Destination Winnipeg; Winnipeg Enterprises Corp.; Winnipeg Housing Rehabilitation Corp.; and CentreVenture Development Corp.

Table C.15 City of Regina, 2007, Consolidateda Revenue thousands of dollars Taxes General municipal ...... 114,620 Grants in lieu...... 7,895 Supplementary business ...... 881 Other ...... 15,867 139,263 Government transfers...... 55,369 Fees and charges...... 96,643 Surcharge on electricity and gas...... 33,827 Licences, fines, and other revenue ...... 8,441 Other ...... 17,010 Total...... 350,553 a Includes the general and utility operating funds and the general and utility capital funds.

Table C.16 City of Regina, 2007, Consolidateda Expenditure thousands of dollars Parks, recreation, and community services ...... 76,924 Police...... 48,492 Water, wastewater, and drainage...... 39,415 Legislative and administration services...... 44,104 Roads and traffic...... 40,976 Fire...... 26,905 Transit...... 24,602 Waste collection and disposal...... 11,998 Planning and development...... 5,863 Grants ...... 4,404 Total...... 323,683 a Includes the general and utility operating funds and the general and utility capital funds. FINANCIAL RESULTS FOR SELECTED MUNICIPALITIES C:9

Table C.17 City of Calgary, 2007, Consolidateda Revenue thousands of dollars Taxes Property and business...... 1,490,726 Revenue in lieu of property taxes...... 207,787 Local improvement levies and special taxes ...... 9,680 Less education requisitions...... !499,928 1,208,265 Sales of goods and services ...... 740,543 Government transfers and revenue-sharing agreements Federal...... 59,345 Provincial ...... 423,505 Developer contributions...... 134,618 617,468 Income from subsidiary operation (electricity)...... 125,812 Investment income...... 56,474 Fines and penalties ...... 53,571 Licences, permits, and fees ...... 74,238 Other ...... 20,034 Total...... 2,896,405 a Includes tax-supported services, utilities, Calgary Convention Centre, internal services, Calgary Parking Authority, and social housing.

Table C.18 City of Calgary, 2007, Consolidateda Expenditure thousands of dollars General government ...... 164,374 Protection Police...... 272,445 Fire...... 164,218 Other protection services...... 53,516 490,179 Public transit...... 335,649 Streets, traffic, and parking...... 477,924 Environmental protection ...... 572,165 Parks and recreation facilities ...... 198,400 Social development ...... 120,397 Public works and real estate services ...... 208,526 Interest and financing fees...... 92,705 Other ...... 103,676 Total...... 2,763,995 a Includes tax-supported services, utilities, Calgary Convention Centre, internal services, Calgary Parking Authority, and social housing. C:10 FINANCES OF THE NATION 2009

Table C.19 City of Vancouver, 2007, Consolidated Revenue thousands of dollars Property taxes, penalties, and interest ...... 533,377 Water fees...... 73,950 Solid waste fees ...... 40,388 Sewer fees...... 35,505 Other fees, rates, and cost recoveries ...... 308,145 Revenue sharing, grants, and contributions...... 28,332 Investment income...... 33,062 Rental and lease income...... 44,654 Sale of property ...... 38,976 ...... Total...... 1,136,389

Table C.20 City of Vancouver, 2007, Consolidated Expenditure thousands of dollars General government ...... 128,654 Protection Police...... 189,268 Fire...... 96,465 Engineering...... 158,368 Water...... 70,418 Sewers and solid waste ...... 118,546 Planning and development...... 57,993 Recreation and parks ...... 164,887 Community and cultural services ...... 151,364 Total...... 1,135,963

Table C.21 Capital Regional District,a 2007, General Revenue Fund and Consolidatedb Revenue Revenue fund Consolidated thousands of dollars Grants in lieu of taxes ...... 1,127 1,947 Transfers from governments Local government transfersc ...... 63,439 Provincial government grants ...... 3,223 45,105 66,662 Sales of services...... 20,606 49,854 Other revenues ...... 11,524 29,930 Total...... 78,363 148,393 a Composed of 12 municipalities covering the southern end of Vancouver Island and adjacent islands. Includes the Victoria, BC metropolitan area and the Saanich Peninsula. b Includes revenue and capital funds for general services, sewer, and water; reserve funds; and the water trust fund. c Includes tax levies collected by the province and municipalities on behalf of the district. FINANCIAL RESULTS FOR SELECTED MUNICIPALITIES C:11

Table C.22 Capital Regional District,a 2007, General Revenue Fund and Consolidatedb Expenditure Revenue fund Consolidated thousands of dollars General government ...... 7,857 8,063 Protection ...... 9,464 9,458 Sewer, water, and garbage services ...... 14,349 148,865 Planning and development...... 2,210 2,766 Recreation and culture...... 18,525 19,686 Other fiscal services...... 15,263 17,979 Total...... 67,668 206,817 a Composed of 12 municipalities covering the southern end of Vancouver Island and adjacent islands. Includes the Victoria, BC metropolitan area and the Saanich Peninsula. b Includes revenue and capital funds for general services, sewer, and water; reserve funds; and the water trust fund.

Table C.23 City of Victoria, 2007, Consolidateda Revenue thousands of dollars Taxes Property and business...... 79,967 Utility tax ...... 1,164 Special assessments ...... 2,578 Hotel tax ...... 2,920 86,629 Grants in lieu of taxes Federal government ...... 2,186 Provincial government agencies ...... 4,193 6,379 Sales of goods and services ...... 31,467 Sale of water...... 11,559 43,026 Other revenue from own sources Licences and permits ...... 5,233 Fines ...... 4,581 Rentals and leases...... 1,050 Interest and penalties ...... 3,984 14,848 Unconditional transfers from provincial government ...... 2,576 Conditional transfers from other governments ...... 4,225 Miscellaneous...... 10,914 Taxes levied on behalf of other governments Provincial school tax ...... 48,122 Capital Regional District...... 9,007 Capital Regional Hospital District ...... 3,904 BC Transit Authority ...... 4,035 BC Assessment Authority ...... 1,490 Municipal Finance Authority ...... 4 Business Improvement Association ...... 824 68,285 Total...... 236,882 a Includes activities carried out through the general operating and capital funds and reserve funds. C:12 FINANCES OF THE NATION 2009

Table C.24 City of Victoria, 2007, Consolidateda Expenditure thousands of dollars General government ...... 22,049 Protection services...... 52,903 Transportation services ...... 21,558 Environmental and public health services ...... 8,456 Community planning ...... 1,830 Parks, recreation, and cultural services ...... 32,049 Water utility ...... 10,396 Sewer utility ...... 3,641 Transmission of taxes levied for other governments ...... 68,285 Total...... 221,167 a Includes activities carried out through the operating and capital funds and reserve funds. Index

AMT, see Alternative minimum tax Amusement taxes (AMT) local tax, 5:17-18 Active families benefit provincial tax, 5:17 personal income tax benefit, Saskatchewan, Apprenticeship training tax credit 3:24 personal income tax credit Administration of justice, 12:7 Manitoba, 3:22 federal protection of persons and property Ontario, 3:20 Commissioner for Federal Judicial Atlantic Canada Opportunities Agency Affairs, 12:7 federal development agency, Atlantic Offices of the Information and Privacy region, 13:14 Commissioners of Canada, 12:7 Atomic Energy of Canada Limited Alberta federal expenditure, research activity, 2009 provincial budget, 2:21-22 13:16 financial highlights, table 2.11, 2:22 tax changes, 2:21-22 British Columbia child tax benefit program, 8:10 2009 provincial budget, 2:22-24 corporate tax system, 4:11 financial highlights, table 2.12, 2:23 debt, public accounts basis, 15:16-17 tax changes, 2:23-24 education system, 9:13-15 British Columbia Hydro and Power health-care system, 10:10 Authority, provincial Crown corporation, health insurance premiums, 3:28-29 16:10 housing initiatives, 14:9-10 capital tax, 4:16 local government, structure of, 1:10-11 child tax benefit program, 8:8-9, 10 pari-mutuel betting tax, 5:17 corporate tax system, 4:9 protection of persons and property, 12:17-19 debt, public accounts basis, 15:17 provincial income tax system, 3:24 education system, 9:15-17 real property taxes, 6:4 health care assessment, 6:9, 10 financing, 10:5 business taxes, 6:20 system, 10:10-11 exemptions, 6:10-11, 12 health insurance premiums, 3:28-29 property tax relief, 6:16, 18 housing initiatives, 14:10 rates, 6:15 Insurance Corporation of British Columbia, tax base, 6:6 provincial Crown corporation, 16:10 transportation systems, 11:8-9 land transfer tax, 5:12 Treasury Branches Deposits Fund, local government, structure of, 1:11-12 provincial Crown corporation, 16:10 pari-mutuel betting tax, 5:17 water distribution, sewage treatment, and protection of persons and property, 12:19-20 waste disposal, 13:12 provincial income tax system, 3:24-26 Alcohol real property taxes, 6:4 excise taxes and duties, 5:14-15 assessment, 6:9, 10 federal, 5:14 business taxes, 6:20 provincial, 5:14-15 exemptions, 6:10-11, 12 alcoholic beverages, 5:14 property tax relief, 6:16, 18 liquor authorities, 5:15 rates, 6:15 liquor control, revenue, table 5.9, tax base, 6:6 5:15 transportation systems, 11:9-11 revenue, FMS basis motor vehicle gasoline tax, 2009, table federal, A:2 11.4, 11:10 provincial/territorial-local, A:2 welfare reform, 8:16 Allowance Budget, federal, 2009, 2:1-6 federal income security program, 8:7 federal financial position, 2:1-6 Alternative minimum tax (AMT) revenues and expenditures, 2007-8 to federal tax on personal income, 3:10 2013-14, table 2.2, 2:2-3 I:2 INDEX

Budget, federal, 2009 (continued) before and after excluding intergovern- summary, 2007-8 to 2013-14, table 2.1, mental grants, table B.3, B:4-5 2:1 tax revenue, table B.4, 4:7-8 tax changes, 2:1, 4-6 revenue and expenditure, 8:21-22 Budgets, provincial/territorial, 2009, see national accounts basis also individual provinces/territories before and after excluding intergov- review, by province/territory, 2:6-26 ernmental grants, table B.3, B:4-5 Building Canada excluding and including intergovern- federal transportation infrastructure mental grants, table B.2, B:3 program, 11:17-18 excluding intergovernmental grants, table B.1, B:2 Business tax property-based, 6:19-20 Canada Small Business Financing Act federal, industrial assistance, 13:15 Canada social transfer (CST), 7:1, 5, CCTB, see Canada child tax benefit 10-11; 10:3 (CCTB) social welfare, 8:11 CHST, see Canada health and social transfer (CHST) Canada student grants federal education program, 9:21 CHT, see Canada health transfer (CHT) Canada student loans CPP, see Canada Pension Plan (CPP) federal education program, 9:20-21 CST, see Canada social transfer (CST) Canadian Air Transport Security Calgary Authority consolidated expenditure, 2007, table C.18, federal C:9 protection of persons and property, consolidated revenue, 2007, table C.17, C:9 12:8 Canada Border Services Agency transportation program, 11:14 federal protection of persons and property, Canadian governments, structure of, 12:2 1:1-14 Canada child tax benefit (CCTB) organization, 1:1, 3-14 federal income security program, 8:8 federal, 1:1, 3 Canada Council for the Arts local, 1:4-14 recreation and culture, 14:14 provincial/territorial, 1:3-4 Canada education savings grant Canadian heritage program federal education program, 9:22 recreation and culture, 14:13-14 Canada Health Act, 10:13-15 Canadian Institutes of Health Research hospital and medical care, 10:14-15 federal health program, 10:13 Canada health and social transfer (CHST) hospital and medical care, 10:14 federal specific purpose cash transfer, 7:1, Canadian International Development 10 Agency Canada health transfer (CHT), 7:1, 5, federal assistance to developing countries, 10-11; 10:2-4 13:15, 14:2-3 Canada learning bond Canadian Radio-Television Telecom- federal education program, 9:22 munications Commission Canada Mortgage and Housing federal regulator, telecommunications Corporation systems, 11:19-20 federal Crown corporation, housing Canadian Space Agency initiatives, 14:11-12 federal expenditure, research activity, 13:16 mortgage loan insurance, 14:11 Capital regional district social housing programs, 14:12 general revenue fund and consolidated Canada Pension Plan (CPP), 8:20-22 expenditure, 2007, table C.22, C:11 benefits, 8: general revenue fund and consolidated table 8.7, 8:21 revenue, 2007, table C.21, C:10 contributions, 8:20 Capital taxes table 8.7, 8:21 elimination of provincial, 4:2 overview, 8:20 federal, 4:12 revenue, national accounts basis provincial/territorial, 4:12, 15-16 INDEX I:3

rates enterprise Crown corporations, table corporate, top rates, table 4.4, 4:13 15.7, 15:8 small business, table 4.5, 4:14 Marine Atlantic Inc., 11:16 Child care other corporate interests, 16:7 federal income security program, 8:7 overview, 16:1-2 Child tax benefit proprietary corporations, 16:4 federal tax credit, 3:9-10 Crown corporations, provincial, 16:7-11 Citizenship and immigration British Columbia Hydro and Power Citizenship and Immigration, Dept. of, 14:5 Authority, 16:10 federal expenditures, 14:3-5 Caisse de depot et placement du Québec, table 14.1, 14:2 16:9 Immigration and Refugee Board of Canada, Crown Investments Corporation of 14:5 Saskatchewan, 16:10 provincial/territorial expenditures, table financial summary, 15:11 14.2, 14:4 financial statistics, table 16.4, 16:12 shared federal-provincial/territorial Greater Toronto Transit Authority, 16:9 responsibility, 14:3-5 Hydro-Quebec, 16:9 Citizenship and Immigration, Dept. of Insurance Corporation of British Columbia, federal immigration policy, 14:5 16:10-11 Manitoba Public Insurance Corporation, Communications, 11:19-20 16:9 Community enterprise tax credit New Brunswick Power Corporation, 16:8-9 personal income tax credit, Manitoba, 3:21 Newfoundland and Labrador Hydro, 16:8 Contributions to authorized Quebec Nova Scotia Business Incorporated, 16:8 political parties, tax credit for Saskatchewan Power Corporation, 16:10 personal income tax credit, Quebec, 3:18 SaskTel, 16:10 Cooperative education tax credit Service New Brunswick, provincial property personal income tax credit assessor, 6:10 Manitoba, 3:22 Treasury Branches Deposits Fund, 16:10 Ontario, 3:20 Defence, 12:21-24 Correctional Service of Canada armed forces, role of, 12:21-22 federal protection of persons and property, assistance to civil authorities, 12:23-24 12:3 collective defence, 12:23 Cost-of-living tax credit international policy statement, 12:22-23 personal income tax credit National Defence, Dept. of, 12:24 Northwest Territories, 3:26 capital expenditures, 12:24 Nunavut, 3:26 national search and rescue program, 12:24 Court systems peacekeeping, 12:23 Federal Court, 12:6 protection of Canadian sovereignty, 12:23 overview, 12:5-6 Direct equity tax credit Supreme Court of Canada, 12:6 personal income tax credit, Newfoundland Tax Court of Canada, 12:6-7 and Labrador, 3:11 Crown corporations, federal, 16:1-7 Dividend tax credit agency corporations, 16:3-4 federal tax credit, 3: 9 Canada Mortgage and Housing Corporation, 14:11 EI, see Employment insurance (EI) departmental corporations, 16:7 program employment in and federal budgetary EPF, see Established programs financing funding for, table 16.3, 16:6 (EPF) exempt corporations, 16:4 financial implications, 16:4 Expert Panel, see Expert Panel on loans to and investments in, table 16.1, Equalization and Territorial Formula 16:5 Financing (Expert Panel) return on loans to and investment in, Economic Development Agency: Quebec table 16.2, 16:5 federal, economic development, 13:14-15 joint enterprises, 16:7 Education liabilities, 15:7-8 federal programs, 9:19-23 I:4 INDEX

Education (continued) Expert Panel, 7:6-7 Canada learning bond, 9:22 Equity tax credit Indians and Inuit, 9:22-23 personal income tax credit official languages, 9:23 Manitoba, 3:21 Social Sciences and Research Council, Nova Scotia, 3:15 9:23 Established programs financing (EPF), federal-provincial programs 7:1 assistance to students, 9:19-20 Canada education savings grant, 9:22 Excise taxes and duties Canada student grants, 9:21 federal Canada student loans, 9:20-21 excise duties, table 5.5, 5:11 provincial/territorial education systems, rates, table 5.4, 5:10 9:1-19 local, 5:13-14 expenditures, table 9.1, 9:2 overview, 5:9-10 overview, 9:1-2 provincial Employee share ownership plan gasoline, 5:12-13 personal income tax credit, British tobacco taxes, 5:12 Columbia, 3:26 cigarette tax rates, table 5.7, 5:12 Employee venture capital corporation tax Expenditure, consolidated federal- credit provincial/territorial-local personal income tax credit, British FMS basis, table A.4, A:6 Columbia, 3:26 industrial development, table 13.2, 13:2 resource conservation, table 13.2, 13:2 Employees’ tool tax credit table 1.2, 2:2 personal income tax credit, Saskatchewan, Expenditure, consolidated 3:23 provincial/territorial-local Employment insurance (EI) program, environment, table 13.5, 13:9 8:1-5 FMS basis, table A.3, A:5 benefits, 8:2-4 health, table 10.2, 10:3 fishers’ benefits, 8:3 housing, table 14.4, 14:8 general benefits, 8:2 industrial assistance, table 13.2, 13:2 Quebec parental insurance plan, 8:4 protection of persons and property, table special benefits, 8:3-4 12.3, 12:9 table 8.2, 8:3 recreation and culture, table 14.6, 14:13 entrance requirements, 8:5 resource conservation, table 13.2, 13:2 operations of EI account, table 8.4, 8:5 social services, table 8.1, 8:2 rates, 8:4-5 contributions and insurable earnings, Expenditure, federal table 8.3, 8:3 2007-8 to 2013-14, table 2.2, 1:2-3 agriculture, table 13.4, 13:4 Energy and mineral resources defence, capital expenditures, 12;24 National Energy Board, 13:6 education, 9:19-23 Enterprise Cape Breton Corporation EI program, 8:1-5 federal, financial assistance, 13:14 benefits paid, table 8.2, 8:3 Environment, 13:8-12 operations of EI account, table 8.4, 8:5 climate change for Canada, federal program, environment, table 13.2, 13:2 13:8-10 FMS basis Environmental Protection Act, federal summary, table A.5, A:7 framework, 13:10-11 table A.3, A:5 expenditures health care consolidated provincial/territorial-local, Canadian Institutes of Health Research, table 13.5, 13:9 10:13 federal, table 13.2, 13:2 CHT, 10:2-4 local, table 13.7, 13:10 Indian and Northern Health Services, provincial/territorial, table 13.6, 13:9 10:12-13 water distribution, sewage treatment, and income security programs, 8:5-10 waste disposal, 13:11-12f allowance, 8:7 Equalization, 7:3-4 CCTB, 8:8 federal general purpose cash transfer, 7:4-7 child care, 8:7 INDEX I:5

GIS, 8:7 social welfare, 8:17-18 national child benefit system, 8:8-10 transportation and communications, table old age pensions, 8:6-7 11.3, 11:3 industrial assistance,13:13-15 Expenditure, provincial/territorial table 13.1, 13:2 2007-8 to 2013-14, table 2.2, 1:2-3 national accounts basis agriculture, table 13.4, 13:4 before and after excluding intergovern- education, 9:1-19 mental grants, table B.3, B:4-5 table 9.1, 9:2 excluding and including intergovern- environment, table 13.6, 13:9 mental grants, table B.2, B:3 FMS basis excluding intergovernmental grants, 2000-1, table A.6, A:9 table B.1, B:2 2008-9, table A.7, A:10 other expenditures, 14:1-15 health, 10:4-12 foreign affairs and international assist- table 10.1, 10:2 ance, citizenship and immigration, national accounts basis labour and employment, housing, and before and after excluding intergovern- recreation and culture, table 14.1, 14:2 mental grants, table B.3, B:4-5 protection, table 12.1, 12:1 excluding and including intergovern- research establishments, 13:15-16 mental grants, table B.2, B:3 resource conservation, table 13.1, 13:2 excluding intergovernmental grants, social services, 8:1, 18-19 table B.1, B:2 Indians and Inuit, 8:19 other, recreation and culture, labour, veterans’ affairs, 8:19 employment, and immigration, and trade, industrial and regional development, housing, table 14.2, 14:4 and tourism, 13:13 protection of persons and property, table transfers to provincial, territorial, and local 12.2, 12:9 governments, 7:1-12 social welfare, 8:11-18 estimated, 2009-10, table 7.1, 7:2 assistance available, table 8.6, 8:11 summary, 1999-2000 to 2009-10, table trade, industrial and regional development, 7.2, 7:2 and tourism, 13:13 transfers to local governments, table 7.4, transfers to local governments, 7:12 7:13 table 7.4, 7:13 transfers to provinces/territories as per- transportation and communications, table centage of provincial/territorial revenue, 11.2, 11:2 table 7.3, 7:3 Expert Panel on Equalization and Terri- transportation, table 11.5, 11:14 torial Formula Financing (Expert transportation and communications, table Panel), 7:4 11.1, 11:2 federal transfers welfare reform, 8;12 equalization, 7:6-7 Expenditure, local territorial governments, 7:9-10 environment, table 13.7, 13:10 FMS basis FMS, see Financial management system 2000, table A.8, A:11 (FMS) 2008, table A.9, A:12 Family employment tax credit health, table 10.3, 10:3 personal income tax credit, Alberta, 3:24 housing, table 14.3, 14:8 industrial assistance, table 13.3, 13:3 Farm and small business capital gains tax national accounts basis credit before and after excluding intergovern- personal income tax credit, Saskatchewan, mental grants, table B.3, B:4-5 3:23 excluding and including intergovern- Federal-provincial fiscal arrangements, mental grants, table B.2, B:3 7:3 excluding intergovernmental grants, corporation taxes, 4:2 table B.1, B:2 Ferry services protection of persons and property, table federal water transportation system, 11:16 12.4, 12:10 Financial management system (FMS) recreation and culture, table 14.5, 14:13 all governments, revenue and expenditure resource conservation, table 13.3, 13:3 data, A:1-12 I:6 INDEX

Financial management system (FMS) social services, federal program, 8:19 (continued) First Nations income tax credit consolidated public debt, FMS basis, 15:1-3 personal income tax credit, Yukon, 3:27 general government balance sheet, table social services, federal, 8:19 15.2, 15:3 Fisheries and oceans gross and net debt charges, table 15.4, federal and provincial/territorial 15:5 responsibilities, 13:6-7 provincial/territorial-local Foreign affairs and international general government balance sheet, assistance, 14:1-3 table 15.3, 15:4 Canadian interests abroad, 14:1-2 table 15.1, 15:2 United Nations, 14:2 expenditure functions, all government levels, A:3 Foreign Affairs and International Trade, federal government debt, 15:12-13 Dept. of balance sheet, table 15.12, 15:14 federal expenditures, 14:1-3 gross and net debt charges, table 15.13, foreign aid, 14:2-3 15:14 foreign policy, 14:1-2 local government, assets and liabilities, table table 14.1, 14:2 15.17, 15:20 Forestry nine-year review federal and provincial/territorial federal, A:3, 5 responsibilities, 13:7-8 all levels, consolidated, table A.2, forest development agreements, federal A:4 program, 13:7-8 table A.3, A:3 Fuels for use off public roads local, A:8 provincial tax, 5:16 expenditure and revenue, summaries, tables A.8 and A.9, A:11, 12 GIS, see Guaranteed income supplement provincial/territorial, A:5, 7-8 (GIS) expenditure and revenue, summaries, GST, see Goods and services tax (GST) tables A.6 and A.7, A:9, 10 own-source revenue, all governments Gasoline revenue sources, A:1-3 fuel tax rates, table 5.8, 5:13 table A.1, A:2 revenue, FMS basis provincial/territorial government debt, federal, A:2 15:17-18 provincial/territorial-local, A:2 consolidated provincial/territorial-local General purpose tax transfers, federal, balance sheet, FMS, table 15.15, 15:19 7:4-10 Financial results, selected municipalities, equalization, 7:4-7 see also specific municipalities grants in lieu of property taxes, 7:8-9 accounting systems used, C:1 reciprocal taxation, 7:8 Montreal, C:1-2 revenue guarantee payments, 7:7-8 consolidated expenditure, 2007, table stabilization, 7:7 C.1, C:2 statutory subsidies, 7:7 consolidated revenue, 2007, table C.2, transfers to territorial governments, 7:9-10 C:2 Expert Panel, 7:9-10 selected municipalities, C:2 General sales tax Toronto, C:2 all governments, FMS basis, A:2 consolidated expenditure, 2007, table Goods and services tax (GST) C.4, C:3 exempt goods, 5:3 consolidated revenue, 2007, table C.3, gross and net collections, table 5.1, 5:2 C:3 low-income tax relief, 5:4 First Nations overview, 5:1 education, federal programs, 9:22-23 rebates, 5:3-4 Indian and Northern Health Services, federal zero-rated goods, 5:2 health program, 10:12-13 Graduate retention tax credit personal income tax credit, Yukon, 3:27 personal income tax credit, Saskatchewan, real property taxes, 6:4 3:23 INDEX I:7

Graduate tax credit provincial/territorial expenditures, table personal income tax credit, Nova Scotia, 14.2, 14:4 3:15-16 shared federal-provincial/territorial Grants in lieu of property taxes responsibility, 14:7-11 federal general purpose cash transfer, 7:8-9 Growing forward policy Immigration and Refugee Board of joint federal-provincial/territorial Canada responsibility, 13:1-4 federal, refugee claims, 14:5 agri stability, agri business, agri recovery, and agri insurance, 13:2-3 Income security programs, 8:5-10 Canadian Food Inspection Agency, 13:4 allowance, 8:7 CCTB, 8:8 Guaranteed income supplement (GIS) GIS, 8:7 federal income security program, 8:7 national child benefit system, 8:8-10 old age pensions, 8:6-7 Halifax regional municipality Income tax, corporate, 4:1-12 consolidated expenditure, 2007, table C.8, federal system, 4:3 C:6 credits, 4:3 consolidated revenue, 2007, table C.7, C:5 rates, table 4.1, 4:4 Harmonized sales tax credit integration, with personal tax, 4:1-2 personal income tax credit, Newfoundland overview, 4:1-2 and Labrador, 3:12 provincial/territorial systems, 4:3-12 Health, 10:1-15 agreeing provinces, 4:6-10 Canada Health Act, 10:13-14 Alberta, 4:11 consolidated provincial/territorial-local Quebec, 4:10-11 expenditure, table 10.2, 10:3 rates federal health programs, 10:12-13 large businesses, table 4.3, 4:5 federal-provincial/territorial responsibility, small businesses, table 4.2, 4:5 10:1-2 Income tax, personal, 3:1-28 financing health care base, reforms to, 7:4 federal, 10:2-4 combined federal and provincial/territorial federal-provincial/territorial, 10:4 income and marginal rates, table 3.5, 3:7 provincial/territorial, 10:4-12 tax rates, 3:27-28 local expenditure, table 10.3, 10:3 comparison of federal and provincial/ local responsibility, 10:2 territorial provincial/territorial expenditure, table 10.1, married taxpayer, spouse and two 10:2 dependent children, table 3.12, Health insurance premiums 3:33 Alberta, 3:28-29 single senior, no dependents, British Columbia, 3:28-29 table 3.10, 3:31 Ontario, 3:29 single taxpayer no dependents, table 3.9, 3:30 Health reform transfer one dependent, table 3.11, 3:32 federal specific purpose cash transfer, two-income family, two 7:11 dependent children, table 3.13, Healthy living tax credit 3:34 personal income tax credit, Nova Scotia, federal 3:15 AMT, 3:10 Home heating rebate number of taxpayers, 3:1 personal income tax credit, Newfoundland table 3.1, 3:2 and Labrador, 3:14 payable Housing by income class, table 3.2, 3:2 consolidated provincial/territorial-local by province and territory, table 3.3, expenditure, table 14.4, 14:8 3:3 federal expenditures, 14:7-12 rates, 3:6-7 table 14.1, 14:2 and income brackets, table 3.4, 3:6 local expenditure, table 14.3, 14:8 tax credits and deductions, 3:7-10 I:8 INDEX

Income tax, personal (continued) Nova Scotia, 3:15 credits, table 3.6, 3:8 Saskatchewan, 3:23 taxes paid, 3:1 Land transfer taxes table 3.2, 3:2 local tax, 5:17 types of income, 3:4-6 provincial tax, 5:16-17 business and property, 3:4-5 Local government enterprises, 16:11 deferred, 3:5-6 financial statistics, table 16.4, 16:12 employment, 3:4 income and expenses, by industry, table other, 3:5 16.5, 16:13 provincial/territorial Low-income climate action tax credit basic and surtax rates and brackets, table personal income tax credit, British 3.7, 3:12 Columbia, 3:24-25 credits, table 3.8, 3:12 systems, by province/territory, 3:11-27 Low-income seniors’ benefit personal income tax credit, Newfoundland Indians and Inuit, see First Nations and Labrador, 3:13 Industrial assistance, 13:12-15 development agencies, 13:14-15 expenditures, federal, provincial/territorial, Manitoba and local, 13:12-13 2009 provincial budget, 2:18-20 consolidated provincial/territorial and financial highlights, table 2.9, 2:18 local, table 13.2, 13:2 tax changes, 2:18-20 federal, table 13.1, 13:2 amusement tax, local government tax, 5:17, local, table 13.3, 13:3 18 other, 13:15 capital tax, 4:16 trade, industrial and regional development, child tax benefit program, 8:10 and tourism, 13:13-14 corporate tax system, 4:8 Industry Canada debt, public accounts basis, 15:16 federal expenditure, trade, industrial and education system, 9:10-11 regional development, and tourism, health-care system, 10:9 13:13-14 housing initiatives, 14:9 land transfer tax, local government tax, Infrastructure stimulus fund 5:17 federal transportation infrastructure local government, structure of, 1:9-10 program, 11:18-19 Manitoba Public Insurance Corporation, International Development Research provincial Crown corporation, 16:9 Centre pari-mutuel betting tax, 5:17 federal research for developing countries, payroll tax, 4:17 14:3 protection of persons and property, 12:16 International Joint Commission provincial income tax system, 3:20-22 federal, Canada-US border disputes, 14:3 real property taxes, 6:4 assessment, 6:8, 10 Labour and employment business taxes, 6:20 employment benefits and support measures, exemptions, 6:10-11, 12 14:6-7 property tax relief, 6:16, 17 federal expenditures, 14:6-7 rates, 6:14-15 table 14.1, 14:2 tax base, 6:6 provincial/territorial expenditures, table transportation systems, 11:6-7 14.2, 14:4 water distribution, sewage treatment, and Labour-sponsored fund, tax credit for waste disposal, 13:12 personal income tax credit welfare reform, 8:14-15 Manitoba, 3:21 Marine Atlantic Inc. Quebec, 3:18 federal Crown corporation, 11:16 Labour-sponsored investment funds Market regulation and safety standards personal income tax credit, Ontario, 3:19-20 federal protection of persons and property, Labour-sponsored venture capital tax 12:7-8 credit Canadian Food Inspection Agency, 12:7 personal income tax credit Canadian Nuclear Safety Commission, New Brunswick, 3:16 12:8 INDEX I:9

Industry Canada, 12:7-8 National child benefit system Office of the Superintendent of Financial federal income security system, 8:8-10 Institutions, 12:8 National Energy Board Privy Council, 12:8 energy resources, responsibilities for, 13:6 Transport, Dept. of, 12:8 National Film Board Canadian Air Transport Security recreation and culture, 14:14 Authority, 12:8 provincial/territorial-local protection National Parole Board systems, 12:21 federal protection of persons and property, consolidated provincial/territorial-local 12:3 expenditure, table 12.3, 12:9 National ports system provincial/territorial expenditure, table federal water transportation system, 12.2, 12:9 11:15-16 Mineral exploration tax credit National Research Council personal income tax credit federal, research activity, industrial and British Columbia, 3:25 technical assistance, 13:15, 15-16 Manitoba, 3:21 Natural Sciences and Engineering Saskatchewan, 3:23-24 Research Council Mining flowthrough share tax credit federal expenditure, research activity, 13:16 personal income tax credit New Brunswick British Columbia, 3:24 2009 provincial budget, 2:10-11 Ontario, 3:19 financial highlights, table 2.6, 2:11 Montreal, C:1-2 tax changes, 2:10-11 consolidated expenditure, 2007, table C.1, amusement tax, 5:17 C:2 capital tax, 4:16 consolidated revenue, 2007, table C.2, C:2 child tax benefit program, 8:8-9 corporate tax system, 4:7 National accounts, economic perspective, debt, public accounts basis, 15:15 B:1-15 education system, 9:5-7 international comparisons, B:6 health-care system, 10:7-8 receipts, outlays, and financial balances, local government, structure of, 1:7 table B.9, B:15 New Brunswick Power Corporation, nation as a whole, B:2-3, 6 provincial Crown corporation, 16:8-9 expenditure before and after excluding pari-mutuel betting tax, 5:17 grants, table B.5, B:9-10 protection of persons and property, 12:12-13 revenue provincial income tax system, 3:16-17 before and after excluding grants, real property taxes table B.3, B:4-5 assessment, 6:8, 10 table B.4, B:7-8 exemptions, 6:10-11 revenue and expenditure, all levels of property tax relief, 6:16, 17 government rates, 6:13-14 excluding and including intergovern- tax base, 6:5 mental grants, table B.2, B:3 transportation systems, 11:4 excluding intergovernmental grants, water distribution, sewage treatment, and table B.1, B:2 waste disposal, 13:11 surpluses or deficits, table B.6, welfare reform, 8:13 B:11-12 Newfoundland and Labrador national accounts budget 2009 provincial budget, 2:6-7 organization of, B:1-2 financial highlights, table 2.3, 2:7 scope of, B:1-2 tax changes, 2:6-7 provincial comparisons, B:6 capital tax, 4:15 revenue and expenditure, all levels of child tax benefit program, 8:8-9 government, excluding grants corporate tax system, 4:6 as percentage of gross domestic debt, public accounts basis, 15:14 provincial product, table B.8, B:8 education system, 9:3 by province, table B.7, B:13 health-care system, 10:6 National airports system housing initiatives, 14:8-9 federal air transportation system, 11:14-15 local government, structure of, 1:5-6 I:10 INDEX

Newfoundland and Labrador (continued) local government, structure of, 1:6 Newfoundland and Labrador Hydro, Nova Scotia Business Incorporated, provincial Crown corporation, 16:8 provincial Crown corporation, 16:8 pari-mutuel betting tax, 5:17 pari-mutuel betting tax, 5:17 payroll tax, health and education, 4:16 protection of persons and property, 12:11-12 protection of persons and property, 12:9-11 provincial income tax system, 3:14-16 provincial income tax system, 3:11-14 real property taxes, 6:3 real property taxes, 6:3 assessment, 6:7, 10 assessment, 6:7, 10 business taxes, 6:19 business taxes, 6:19 exemptions, 6:10-11 exemptions, 6:10-11 property tax relief, 6:16 property tax relief, 6:16 rates, 6:13 rates, 6:13 tax base, 6:5 tax base, 6:5 transportation systems, 11:4 transportation systems, 11:1-3 water distribution, sewage treatment, and water distribution, sewage treatment, and waste disposal, 13:11 waste disposal, 13:11 welfare reform, 8:12-13 welfare reform, 8:12 Nunavut Non-resident taxes 2009 provincial budget, 2:25-26 capital taxes, 4:12, 15-16 financial highlights, table 2.14, 2:26 corporations and individuals, 4:12 child tax benefit program, 8:8-9, 10 Northwest Territories corporate tax system, 4:9-10 2009 provincial budget, 2:25 debt, public accounts basis, 15:1 financial highlights, table 2.13, 2:25 education system, 9:18 tax changes, 2:25 health-care system, 10:11 child tax benefit program, 8:8-9, 10 housing initiatives, 14:10-11 corporate tax system, 4:9 local government, structure of, 1:13-14 debt, public accounts basis, 15:17 payroll tax, 4:17 education system, 9:17 protection of persons and property, 12:20 health-care system, 10:11 provincial income tax system, 3:26-27 housing initiatives, 14:10 real property taxes, 6:4 local government, structure of, 1:12-13 assessment, 6:9 payroll tax, 4:17 exemptions, 6:10-11, 12 protection of persons and property, 12:20 property tax relief, 6:16, 19 provincial income tax system, 3:26 tax base, 6:6 real property taxes transportation systems, 11:12-13 assessment, 6:9-10 welfare reform, 8:16 exemptions, 6:10-11, 12 property tax relief, 6:16, 18 Odour control tax credit rates, 6:15-16 personal income tax credit, Manitoba, 3:22 tax base, 6:6 Official languages transportation systems, 11:11-12 federal education program, 9:23 water distribution, sewage treatment, and Old age pensions waste disposal, 13:12 federal income security program, 8:6-7 welfare reform, 8:16 eligibility, 8:6-7 Nova Scotia Ontario 2009 provincial budget, 2:8-10 2009 provincial budget, 2:14-18 financial highlights, table 2.5, 2:9 financial highlights, table 2.8, 2:15 tax changes, 2:9-10 tax changes, 2:15-18 amusement tax, 5:17 amusement tax, 5:17 capital tax, 4:16 capital tax, 4:16 child tax benefit program, 8:8-9 child tax benefit program, 8:8-9, 9-10 corporate tax system, 4:6-7 corporate tax system, 4:6 debt, public accounts basis, 15:15 debt, public accounts basis, 15:16 education system, 9:4-5 education system, 9:8-10 health-care system, 10:7 Greater Toronto Transit Authority, housing initiatives, 14:9 provincial Crown corporation, 16:9 land transfer tax, local government tax, 5:17 health care, 10:8-9 INDEX I:11

financing, 10:4-5 tax changes, 2:8 health insurance premiums, 3:29 amusement tax, 5:17 housing initiatives, 14:9 capital tax, 4:16 land transfer tax, local government tax, 5:17 corporate tax system, 4:6 local government, structure of, 1:8-9 debt, public accounts basis, 15:14-15 pari-mutuel betting tax, 5:17 education system, 9:3-4 payroll tax, health, 4:17 health-care system, 10:6 protection of persons and property, 12:14-15 housing initiatives, 14:9 provincial income tax system, 3:19-20 local government, structure of, 1:6 real property taxes, 6:4 pari-mutuel betting tax, 5:17 assessment, 6:8, 10 protection of persons and property, 12:11 business taxes, 6:19 provincial income tax system, 3:14 exemptions, 6:10-11 real property taxes property tax relief, 6:16, 17 assessment, 6:7, 10 rates, 6:14 business taxes, 6:19 tax base, 6:5-6 exemptions, 6:10-11 sales tax, 2009 budget proposals, 5:5 property tax relief, 6:16 transportation systems, 11:5-6 rates, 6:13 water distribution, sewage treatment, and tax base, 6:5 waste disposal, 13:12 transportation systems, 11:3-4 welfare reform, 8:13-14 welfare reform, 8:12 Opting-out arrangements Property-based taxes, 6:1-20 federal specific purpose cash transfer, business taxes, 6:19-20 7:11-12 real property taxes, 6:1-19 revenue, provincial/territorial-local, FMS Parental benefits basis, A:3 personal income tax credit special assessment levies, 6:20 New Brunswick, 3:17 Property tax credit Newfoundland and Labrador, 3:13 personal income tax credit, Ontario, 3:19 Nova Scotia, 3:15 Property tax refund Prince Edward Island, 3:14 personal income tax credit, Quebec, 3:18 Pari-mutuel betting tax Protection of persons and property, provincial tax, 5:17 12:1-21 Parks Canada federal expenditure, 12:1-2 recreation and culture, 14:14-15 table 12.1, 12:1 Payroll taxes, 4:2, 16-17 federal programs, 12:2-8 Pilotage authorities administration of justice and court federal water transportation system, 11:16 system, 12:5-8 Political contribution tax credit public safety and emergency personal income tax credit preparedness, 12:2-5 Alberta, 3:24 local expenditures, table 12.4, 12:10 British Columbia, 3:25 provincial/territorial-local protection Manitoba, 3:20 systems, 12:8-21 New Brunswick, 3:16 Public accounts, debt Newfoundland and Labrador, 3:11 federal government debt, 15:3, 6-12 Northwest Territories, 3:26 assets and liabilities, 15:3, 6-7 Nova Scotia, 3:15 contingent liabilities, 15:6-7 Nunavut, 3:27 summary, table 15.6, 15:7 Ontario, 3:19 liabilities of Crown corporations, Prince Edward Island, 3:14 table 15.7, 15:8 Saskatchewan, 3:23 summary, table 15.5, 15:5-6 Yukon, 3:27 debt, 15:8-10 Primary caregiver tax credit gross public debt, assets, and net personal income tax credit, Manitoba, 3:21 debt, table 15.8, 15:9 Prince Edward Island miscellaneous, 15:10 2009 provincial budget, 2:7-8 specified purpose accounts, 15:8-9 financial highlights, table 2.4, 2:8 unmatured debt, 15:8 I:12 INDEX

Public accounts, debt (continued) provincial/territorial government debt, debt charges, 15:10 15:13-18 interest and other debt charges, table FMS basis, 15:17-18 15.9, 15:11 public accounts basis, 15:13-17 as percentage of economic and debt, table 15.14, 15:15 fiscal indicators, table 15.10, Public sector 15:12 international comparisons, B:6 table 15.11, 15:13 receipts, outlays, and financial balances, provincial/territorial government debt, table B.9, B:15 15:13-17 national accounts basis consolidated provincial/territorial-local before and after excluding grants balance sheet, FMS basis, table 15.15, expenditure, table B.5, B:9-10 15:19 surpluses or deficits, table B.6, table 15.14, 15:15 B:11-12 Public and community health expenditure, before and after excluding federal grants, table B.5, B:9-10 extended care, 10:15 revenue public health, 10:15 before and after excluding grants, provincial, 10:15 table B.3, B:4-5 tax revenue, table B.4, B:7-8 Public debt, 15:1-20 revenue and expenditure consolidated, FMS basis, 15:1-3 by province, table B.7, B:13 provincial/territorial-local excluding and including intergovern- general government mental grants, table B.2, B:3 balance sheet, table 15.3, 15:4 excluding intergovernmental grants, gross and net debt charges, table table B.1, B:2 15.4, 15:5 provincial comparisons, B:6 net debt, table 15.1, 15:2 revenue and expenditure, all levels of consolidated general government balance government, excluding grants sheet, table 15.2, 15:3 as percentage of gross domestic federal government debt, 15:3, 6-13 provincial product, table B.8, B:8 FMS basis, 15:12-13 by province, table B.7, B:13 debt charges, 15:13 balance sheet, table 15:12, 15:14 gross and net debt charges, table Quebec 15.13, 15:14 2009 provincial budget, 2:12-14 public accounts basis, 15:3, 6-12 financial highlights, table 2.7, 2:12 summary tax changes, 2:12-14 as percentage of economic and amusement tax, local government tax, 5:17 fiscal indicators, table 15.10, Caisse de dépôt et placement du Québec, 15:12 provincial Crown corporation, 16:9 assets and liabilities, table 15.5, capital tax, 4:16 15:5-6 child tax benefit program, 8:9 contingent liabilities, federal, corporate tax system, 4:10-11 table 15.6, 15:7 debt, public accounts basis, 15:15-16 interest and other debt charges, education system, 9:7-8 table 15.9, 15:11 EI program net public debt charges, table contributions, 8:5 15.11, 15:13 parental insurance plan, 8:4 public debt, recorded assets, and health-care system, 10:8 net debt, table 15.8, 15:9 housing initiatives, 14:9 local government debt, 15:18-20 Hydro-Quebec, provincial Crown consolidated provincial/territorial-local corporation, 16:9 general government balance sheet, local government, structure of, 1:7-8 table 15.15, 15:19 pari-mutuel betting tax, 5:17 summary of financial assets and payroll tax, health, 4:16-17 liabilities, table 15.16, 15:19 protection of persons and property, FMS basis, table 15.17, 15:20 12:13-14 overview, 15:1 provincial income tax system, 3:17-18 INDEX I:13

refundable and non-refundable tax agriculture, joint federal-provincial/ credits, 3:18 territorial responsibility, 13:1-6 real property taxes, 6:3 Canadian Dairy Commission, 13:5 assessment, 6:8, 10 federal and provincial expenditures, business taxes, 6:19 table 13.4, 13:4 exemptions, 6:10-11 growing forward policy, 13:1-4 property tax relief, 6:16, 17 other agriculture programs, 13:4-5 rates, 6:14 energy and mineral resources, 13:5-7 tax base, 6:5 environment, 13:8-12 succession duties and gift taxes, 3:28 expenditures transportation systems, 11:5 consolidated provincial/territorial- water distribution, sewage treatment, and local, table 13.5, 13:9 waste disposal, 13:11-12 provincial/territorial, table 13.6, 13:5 welfare reform, 8:13 expenditures Quebec City federal, table 13.1, 13:2 general fund expenditure, 2007, table C.12, consolidated provincial/territorial-local, C:7 table 13.2, 13:2 general fund revenue, 2007, table C.11, C:7 local, table 13.3, 13:3 fisheries and oceans, 13:6-7 forestry, 13:7-8 RCMP, see Royal Canadian Mounted Police (RCMP) Revenue, consolidated federal-provincial/ territorial-local Real property taxes, 6:1-19 FMS basis, table A.2, A:4 assessment, 6:6-10 own-source, table 1.1, 1:2 assessment function, 6:10 base, 6:4-6 Revenue, consolidated provincial/ estimated property taxes, table 6.3, 6:3 territorial-local exemptions, 6:10-12 own-source revenue, FMS basis, table A.1, rates, 6:13-16 A:2 relief from, 6:16-19 property-related tax, revenue from, table 6.2, revenue from 6:2 consolidated provincial/territorial-local, Revenue, federal table 6.2, 6:2 excise taxes and duties, alcohol and tobacco, table 6.1, 6:2 table 5.6, 5:11 Reciprocal taxation FMS basis, table A.5, A:7 federal general purpose cash transfer, 7:7 national accounts basis before and after excluding intergovern- Recreation and culture mental grants, table B.3, B:4-5 consolidated provincial/territorial-local excluding and including intergovern- expenditure, table 14.6, 14:13 mental grants, table B.2, B:3 federal expenditures, 14:12-15 excluding intergovernmental grants, table 14.1, 14:2 table B.1, B:2 local expenditure, table 14.5, 14:13 tax revenue, table B.4, 4:7-8 provincial/territorial expenditures, table own-source revenue, FMS basis, table A.1, 14.2, 14:4 A:2 Regina Revenue, local consolidated expenditure, 2007, table C.16, access to provincial sales tax, 5:8-9 C:8 FMS basis consolidated revenue, 2007, table C.15, C:8 2000, table A.8, A:11 Research and development tax credit 2008, table A.9, A:12 personal income tax credit, Yukon, 3:27 national accounts basis Research establishments before and after excluding intergovern- federal expenditure, 13:15-16 mental grants, table B.3, B:4-5 Atomic Energy of Canada Limited, 13:16 excluding and including intergovern- Canadian Space Agency, 13:16 mental grants, table B.2, B:3 National Research Council, 13:15-16 excluding intergovernmental grants, Natural Sciences and Engineering table B.1, B:2 Research Council, 13:16 tax revenue, table B.4, B:7-8 Resource conservation, 13:1-12 property-based taxes, 6:1-20 I:14 INDEX

Revenue, local (continued) federal-provincial sales tax harmonization, revenue from, table 6.1, 6:2 5:9 Revenue, other, 3:29 retail sales taxes, 5:4-8 all levels of government, table 3.14, 3:35 exempt goods, 5:6-8 federal government, table 3.15, 3:35 consumer goods, 5:6-7 local, table 3.17, 3:36 prepared meals, 5:7-8 provincial/territorial, table 3.16, 3:35 production goods, 5:7 Revenue, provincial/territorial municipal access to sales taxes, 5:8 consumption tax, 5:4-9 rates, by province, 5:4 2004-5 to 2008-9, table 5.3, 5:6 services and utilities, 5:8 2008-9, table 5.2, 5:5 Saskatchewan excise, liquor administration, table 5.9, 5:15 2009 provincial budget, 2:20-21 FMS basis financial highlights, table 2.10, 2:21 2000-1, table A.6, A:9 tax changes, 2:20-21 2008-9, table A.7, A:10 amusement tax national accounts basis local, 5:17, 18 before and after excluding intergovern- provincial, 5:17 mental grants, table B.3, B:4-5 capital tax, 4:16 excluding and including intergovern- child tax benefit program, 8:10 mental grants, table B.2, B:3 corporate tax system, 4:8-9 excluding intergovernmental grants, Crown Investments Corporation of table B.1, B:2 Saskatchewan, provincial Crown tax revenue, table B.4, B:7-8 corporation, 16:10 Revenue guarantee payment debt, public accounts basis, 15:16 federal general purpose cash transfer, 7:7-8 education system, 9:11-13 Royal Canadian Mounted Police (RCMP) health-care system, 10:10 federal protection of persons and property, local government, structure of, 1:10 12:4-5 pari-mutuel betting tax, 5:17 RCMP External Review Committee, protection of persons and property, 12:16-17 12:4 provincial income tax system, 3:22-24 RCMP Public Complaints Commission, real property taxes, 6:4 12:4-5 assessment, 6:9, 10-11, 12 exemptions, 6:10-11 property tax relief, 6:16, 17-18 Saint John rates, 6:15 general fund expenditure, 2007, table C.10, tax base, 6:6 C:6 Saskatchewan Power Corporation, operating fund revenue, 2007, table C.9, C:6 provincial Crown corporation, 16:10 St. John’s Sasktel, 16:10 consolidated expenditure, 2007, table C.4, transportation systems, 11:7-8 C:5 water distribution, sewage treatment, and consolidated revenue, 2007, table C.5, C:4 waste disposal, 13:12 Sales tax credit welfare reform, 8:15-16 personal income tax credit Share purchase tax credit British Columbia, 3:25 personal income tax credit, Prince Edward federal, 3:9 Island, 3:14 Ontario, 3:19 Quebec, 3:17-18 Small business investment tax credit Saskatchewan, 3:23 personal income tax credit, Yukon, 3:27 Sales taxes, federal Small business investor tax credit federal-provincial sales tax harmonization, personal income tax credit, New Brunswick, 5:9 3:16 GST, 5:1-4 Social Sciences and Research Council gross and net collections, table 5.1, 5:2 federal expenditure on education, 9:23 Sales taxes, provincial/territorial Social services, 8:1-22 consumption tax revenue CPP, 8:20-22 2004-5 to 2008-9, table 5.3, 5:6 EI program, 8:1-5 2008-9, table 5.2, 5:5 federal expenditures, table 8.1, 8:2 INDEX I:15 income security programs, 8:5-10 excise taxes and duties other social service programs, 8:18-19 alcohol, 5:14 social welfare, 8:11-18 alcohol and tobacco revenue, table 5.6, Social welfare 5:11 CST, 8:11 excise duties, table 5.5, 5:11 eligibility requirements, 8:18 gasoline, 5:12 labour market agreements for persons with rates, table 5.4, 5:10 disabilities, 8:17 tobacco, 5:10 local government responsibilities, 8:17-18 cigarette taxes, table 5.7, 5:12 minimum wage rates, 8:17 gift, 3:28 provincial responsibility, 8:11-17 GST, 5:1-4 welfare reform, 8:11-17 gross and net collections, table 5.1, 5:2 available social assistance, table 8.6, other, 5:16 8:11 tariffs, 5:16 Special assessment levies personal income tax, 3:1, 4-11 property-based, 6:20 AMT, 3:10 amount paid Specialized labour tax credit table 3.1, 3:2 personal income tax credit, Prince Edward table 3.2, 3:2 Island, 3:14 credits and deductions, 3:7-10 Specific purpose cash transfers, federal, credits, table 3.6, 3:8-9 7:10-12 income brackets and rates, table 3.4, CHT, 7:10-11 3:6 CST, 7:10-11 indexation, 3:10-11 health reform transfer, 7:11 number of taxpayers opting-out arrangements, 7:11-12 table 3.1, 3:2 other specific purpose cash transfers, 7:12 table 3.2, 3:2 wait times reduction transfer, 7:11 succession duties, 3:28 Stabilization Taxes, local federal general purpose cash transfer, 7:7 amusement tax, 5:17-18 Statutory subsidies business tax, property-based, 6:19-20 federal general purpose cash transfer, 7:7 excise taxes and duties, 5:13-14 Student benefits land transfer tax, 5:17 personal income tax credit, New Brunswick, real property tax, 6:1-19 3:17 consolidated provincial/territorial-local Surpluses or deficits revenue, table 6.2, 6:2 national accounts basis, by province, table estimated property taxes, selected cities, B.6, B:11-12 table 6.3, 6:3 revenue from, table 6.1, 6:2 special assessment levies, 6:20 Tariffs Taxes, provincial/territorial federal tax, 5:16 amusement tax, 5:17 Taxes, combined federal-provincial/ capital taxes, 4:12, 15-16 territorial marginal tax rates and income, table 3.5, corporate income tax rates, table 4.6, 4:15 3:7 Taxes, federal tax rates, personal income tax, 3:27-28 capital taxes, 4:12 corporate, 4:3-11 corporate top rates, table 4.4, 4:13 combined federal-provincial/territorial, small business rates, table 4.5, 4:14 4:12, 13-15 combined federal-provincial/territorial other taxes, table 4.7, 4:15 income tax rates marginal tax rates and income, table 3.5, large businesses, table 4.3, 4:5 3:7 small businesses, table 4.2, 4:5 tax rates, personal income tax, 3:27-28 excise taxes and duties corporate tax alcohol, 5:14-15 credits, 4:3 gasoline, 5:12-13 rates, 4:3 tobacco, 5:12 table 4.1, 4:4 fuels for use off public roads, 5:16 I:16 INDEX

Taxes, provincial/territorial (continued) Transfer payments gasoline federal, 7:1-12 BC motor vehicle gasoline taxes, table to municipalities, table 7.4, 7:13 11.4, 11:10 to provinces, territories, and rates, table 5.8, 5:13 municipalities health insurance premiums, 3:28-29 estimated, 2009-10, table 7.1, 7:2 land transfer tax, 5:16-17 summary, 1999-2000 to 2009-2010, pari-mutuel betting tax, 5:17 table 7.2, 7:2 payroll taxes, 4:2, 16-17 total, as percentage of provincial/ personal income tax, 3:11-28 territorial revenue, table 7.3, 7:3 combined federal-provincial/territorial provincial, 7:12 marginal tax rates, table 3.5, 3:7 to municipalities, table 7.4, 7:13 tax rates, 3:27-28 Transfers to local governments marginal tax rates and income brackets, federal and provincial transfers to local table 3.4, 3:6 governments, 7:12 payable, table 3.3, 3:3 table 7.4, 7:13 provincial/territorial Transfers to territorial governments brackets and rates, table 3.7, 3:12 federal general purpose cash transfer, 7:7 credits, table 3.8, 3:13 Expert Panel, 7:9-10 systems, by province/territory, Transportation and communications, 3:11-27 11:1-20 sales taxes, 5:4-8 federal, provincial/territorial, and local consumption tax revenue, table 5.3, responsibility, 11:1 5:6 federal and consolidated estimated collections, table 5.2, 5:5 provincial/territorial-local succession duties, 3:28 expenditures, table 11.1, 11:2 Taxes on business, 4:1-17 local expenditures, table 11.3, 11:3 corporate income tax, 4:1-12 provincial/territorial expenditures, table combined federal-provincial/territorial, 11.2, 11:2 4:12 Transportation systems, federal, 11:13-19 rates, table 4.6, 4:15 air, 11:14-15 small business rates, table 4.5, 4:14 expenditures on transportation, table 11.5, top corporate rates, table 4.4, 4:13 11:14 non-resident tax, 4:12 infrastructure programs, 11:17-19 other, rates, table 4.7, 4:15 rail, 11:16-17 Taxes on individuals roads, 11:17 non-residents, 4:12 water, 11:15-16 Telefilm Canada Transportation systems, provincial/ recreation and culture, 14:14 territorial, 11:1-13 Tobacco Tuition fee income tax rebate excise taxes and duties, 5:10-11 personal income tax credit, Manitoba, 3:21 federal, 5:10 federal and provincial cigarette taxes, table 5.7, 5:12 United Nations revenue, FMS basis Canadian interests abroad, federal foreign federal, A:2 policy, 14:2 provincial/territorial-local, A:2 Toronto, C:2 Vancouver consolidated expenditure, 2007, table C.4, consolidated expenditure, 2007, table C.20, C:3 C:10 consolidated revenue, 2007, table C.3, C:3 consolidated revenue, 2007, table C.19, Trade, industrial and regional C:10 development, and tourism, 13:13-15 Venture capital tax credit Industry Canada, 13:13-14 personal income tax credit, British Training tax credit Columbia, 3:25 personal income tax credit, British Veterans affairs Columbia, 3:25 federal social services, 8:19 INDEX I:17

Victoria Yukon consolidated expenditure, 2007, table C.24, 2009 provincial budget, 2:26 C:12 financial highlights, table 2.15, 2:26 consolidated revenue, 2007, table C.23, C:11 child tax benefit program, 8:8-9 Volunteer firefighters’ tax credit corporate tax system, 4:10 personal income tax credit, Nova Scotia, debt, public accounts basis, 15:17 3:16 education system, 9:18-19 health-care system, 10:11-12 Wait times reduction transfer housing initiatives, 14:11 federal specific purpose cash transfer, 7:11 local government, structure of, 1:14 Western Economic Diversification protection of persons and property, 12:21 federal, western provinces, financial provincial income tax system, 3:27 assistance and diversification, 13:14 real property taxes, 6:4 assessment, 6:10 Winnipeg exemptions, 6:10-11, 12 consolidated expenditure, 2007, table C.14, property tax relief, 6:16, 19 C:8 rates, 6:16 consolidated revenue, 2007, table C.13, C:7 tax base, 6:6 Withholding taxes transportation systems, 11:13 non-resident taxes, 4:12 water distribution, sewage treatment, and waste disposal, 13:12 welfare reform, 8:17 xxxxxxxxxx