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Should the Canadian Federation be Rebalanced?

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Abstract

Recent changes in the federal-provincial transfer system have left the Canadian federation in a state of vertical fiscal imbalance. Given the tax room occupied by the federal government and the provinces, the magnitude of transfers is insufficient to sustain the relative levels of expenditure responsibilities into the future. Sooner or later some choice must be made between ceding further tax room to the provinces and increasing transfers. In this paper, we outline the cases for each of these two courses of action, and argue that federal tax room should be jealously guarded and the imbalance addressed by increasing transfers to the provinces. The argument is based on tax harmonization considerations and on the importance of federal transfers as a means of accomplishing national efficiency and equity objectives.

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File URL: http://economics.uwo.ca/epri/workingpapers_docs/wp2004/Boadway01.pdf
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Bibliographic Info

Paper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20041.

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Date of creation: 2004
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Handle: RePEc:uwo:epuwoc:20041

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Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html

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Keywords: federal-provincial transfers; fiscal imbalance; fiscal gap;

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Cited by:
  1. Sharma, Chanchal Kumar, 2010. "Beyond Gaps and Imbalances: Re-Structuring the Debate on Intergovernmental Fiscal Relations," MPRA Paper 32145, University Library of Munich, Germany.
  2. Antonio Zabalza, 2008. "Dynamic Horizontal and Vertical Equity in Intergovernmental Transfers," Working Papers 0801, International Economics Institute, University of Valencia.

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