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Contracting for Tax Room: The Law and Political Economy of Tax-Point Transfers

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  • Rory Gillis

    (University of Toronto Faculty of Law)

Abstract

Tax-point transfers are potentially a foundational tool for changing the allocation of tax room between governments, but they have fallen into disuse in Canadian fiscal federalism. This article argues that the infrequent use of tax-point transfers can be explained, in part, by impediments to the enforcement of intergovernmental contracts. The problem is twofold: (1) tax-point transfers typically consist of long-term non-sequential transactions, in which governments perform their obligations at substantially different points in time; and (2) the common mechanisms for assuring performance in long-term non-sequential transactions are either unavailable or of only modest force in tax-point transfer agreements. The primary implication is that these contractual impediments may discourage governments from using tax-point transfers to achieve an optimal allocation of tax room.

Suggested Citation

  • Rory Gillis, 2019. "Contracting for Tax Room: The Law and Political Economy of Tax-Point Transfers," Canadian Tax Journal, Canadian Tax Foundation, vol. 67(4), pages 903-945.
    • Handle: RePEc:ctf:journl:v:67:y:2019:i:4:p:903
    DOI: https://doi.org/10.32721/ctj.2019.67.4.gillis
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