Fiscal Problems, Taxation Solutions: Options for Reforming Canada’s Tax and Transfer System

Produced by the Mowat Centre at the School of Public Policy and Governance, University of Toronto.In order to achieve long-term fiscal sustainability, provincial governments will need to increase revenues or reduce spending by an amount equal to 2.9 per cent of annual GDP. Put simply, the provinces will need to find an extra $49 billion a year to keep up with growing expenditure demands. The search for new revenue is on. Debate over the structure of the country’s tax system is inevitable in this context. It is unclear to what extent the country’s tax system can cope with the pressures on provincial government finances and rapidly changing domestic and global economies. Is the current taxation structure—and the corresponding size of intergovernmental transfers—appropriate? This paper examines some alternative arrangements that would provide provinces the resources they need in the short-term, while also ensuring long-term fiscal sustainability through an efficient tax system