Regulations Amending the Federal-Provincial Fiscal Arrangements Regulations, 2007: SOR/2018-131

Canada Gazette, Part II, Volume 152, Number 14

Registration

June 22, 2018

FEDERAL-PROVINCIAL FISCAL ARRANGEMENTS ACT

P.C. 2018-847 June 21, 2018

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 40^{footnote a} of the Federal-Provincial Fiscal Arrangements Act^{footnote b}, makes the annexed Regulations Amending the Federal-Provincial Fiscal Arrangements Regulations, 2007.

Regulations Amending the Federal-Provincial Fiscal Arrangements Regulations, 2007

Amendments

1 (1) The definitions housing expenditure category and public or non-profit entity category in subsection 1(1) of the Federal-Provincial Fiscal Arrangements Regulations, 2007^{footnote 1} are repealed.

(2) The definitions Government Finance Statistics and taxes on products in subsection 1(1) of the Regulations are replaced by the following:

Government Finance Statistics means the Canadian Government Finance Statistics used by Statistics Canada. (statistiques de finances publiques)

taxes on products means the amount determined by Statistics Canada, for the purpose of its System of Macroeconomic Accounts, that corresponds to the sum of taxes on products, whether imposed by a provincial, territorial, local or Aboriginal government, and the federal goods and services tax. (taxes sur les produits)

2 Section 2.1 of the Regulations is replaced by the following:

2.1 Despite any other provision of these Regulations, for the purpose of determining a revenue source or a revenue base under Part 1 or 1.1, there shall be excluded from the revenue of Ontario any amount obtained through a debt retirement charge levied under Part V.1 of the Electricity Act, 1998, S.O. 1998, c. 15, Sched. A, and from the revenue of Nova Scotia any amount levied on electricity consumption exclusively for the purpose of repaying the debt managed by the Nova Scotia Power Finance Corporation.

3 (1) Paragraphs (e.1) to (f) of the definition electricity enterprise in section 3 of the Regulations are replaced by the following:

• (e.1) NB Power;
• (f) Nalcor Energy;

(2) Paragraph (h) of the definition electricity enterprise in section 3 of the Regulations is replaced by the following:

• (h) SaskPower. (société d’électricité)

4 (1) The definition non-business sector industry in section 3.1 of the Regulations is repealed.

(2) The definition intermediate input commodity in section 3.1 of the English version of the Regulations is repealed.

(3) The definitions business sector industry and intermediate input expenditures in section 3.1 of the Regulations are replaced by the following:

business sector industry means any of the business sector industries as defined by Statistics Canada

• (a) with respect to capital expenditures, for the purpose of its Provincial Supply and Use Tables’ detailed level final demand matrix; and
• (b) with respect to intermediate input expenditures, for the purpose of its Provincial Supply and Use Tables’ summary level intermediate input matrix. (industrie du secteur des entreprises)

intermediate input expenditures means expenditures on intermediate inputs, as determined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ summary level intermediate input matrix, net of any taxes on products, also as determined by Statistics Canada. (dépenses en intrants intermédiaires)

(4) The definition intrant intermédiaire in section 3.1 of the French version of the Regulations is replaced by the following:

intrant intermédiaire Tout intrant intermédiaire défini par Statistique Canada pour sa matrice d’intrant intermédiaire au niveau sommaire de ses tableaux des ressources et des emplois provinciaux. (intermediate input)

(5) Paragraph (a) of the definition housing expenditures in section 3.1 of the Regulations is replaced by the following:

• (a) residential housing, including the land, as determined by Statistics Canada for
  • (i) new singles,
  • (ii) new doubles,
  • (iii) new rows,
  • (iv) new apartments,
  • (v) conversions,
  • (vi) cottages, and
  • (vii) mobile homes and other movable dwellings;

(6) Section 3.1 of the Regulations is amended by adding the following in alphabetical order:

capital expenditures means expenditures on commodities, as determined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ summary level final demand matrix, net of any taxes on products, also as determined by Statistics Canada. (dépenses en capital fixe)

commodity means any of the commodities as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ summary level final demand matrix. (produit de base)

housing expenditure category means any of the following expenditure categories used by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts:

• (a) expenditures, as determined by Statistics Canada, for residential housing, including the land, for
  • (i) new singles,
  • (ii) new doubles,
  • (iii) new rows,
  • (iv) new apartments,
  • (v) conversions,
  • (vi) cottages, and
  • (vii) mobile homes and other movable dwellings;
• (b) expenditures for residential renovation; and
• (c) expenditures for residential housing transfer. (catégorie de dépenses de logement)

post-secondary education or non-profit industry means either of the following industries as defined by Statistics Canada:

• (a) for the purpose of its Provincial Supply and Use Tables’ detailed level intermediate input matrix, with respect to the post-secondary educational services industry; or
• (b) for the purpose of its Provincial Supply and Use Tables’ summary level intermediate input matrix, with respect to the non-profit institutions serving households industry. (industrie de l’éducation postsecondaire ou à but non lucratif)

post-secondary educational services means universities, colleges and C.E.G.E.P.s as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ detailed level intermediate input matrix. (services d’enseignement postsecondaire)

public education or non-profit entity category means either of the following categories, used by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts:

• (a) government education services; or
• (b) non-profit organizations. (catégorie des services gouvernementaux d’enseignement ou des organismes à but non lucratif)

(7) Section 3.1 of the English version of the Regulations is amended by adding the following in alphabetical order:

intermediate input means any of the intermediate inputs as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ summary level intermediate input matrix. (intrant intermédiaire)

5 (1) Subparagraph 4(1)(a)(iii) of the Regulations is replaced by the following:

• (iii) revenues derived from levies or premiums imposed by a province specifically for the purpose of financing hospitalization insurance, medical care insurance or drug insurance, other than contributions to the Nova Scotia Seniors’ Pharmacare Program or the Alberta supplementary health benefits plans;

(2) Subparagraph 4(1)(b)(ii) of the Regulations is amended by adding the following after clause (A):

• (A.1) a cannabis board, commission or authority of the province,

(3) Subparagraph 4(1)(c)(xiv) of the Regulations is replaced by the following:

• (xiv) the province’s share of revenue from any revenue that is shared by Canada and the province, other than the revenues referred to in subparagraphs (xvi) and (e)(vii) and (viii),

(4) Paragraph 4(1)(c) of the Regulations is amended by adding “and” at the end of subparagraph (xv) and by adding the following after subparagraph (xv):

• (xvi) revenues derived by a province from
  • (A) remittances, to the provincial government by a cannabis board, commission or authority of the province, of profits arising from sales of cannabis products,
  • (B) a specific sales tax imposed by the province on cannabis products by a cannabis board, commission or authority of the province,
  • (C) a specific sales tax imposed by the federal government on cannabis products that is shared with the province, and
  • (D) fees for licences and permits for the privilege of making, purchasing, distributing or selling cannabis products;

6 (1) Clause 5(b)(ii)(A) of the Regulations is amended by adding the following after subclause (I):

• (I.1) of a cannabis board, commission or authority,

(2) Subclause 5(b)(ii)(A)(V) of the Regulations is replaced by the following:

• (V) of the Ontario Electricity Financial Corporation and the Nova Scotia Power Finance Corporation, and

(3) The descriptions of A to J in paragraph 5(c) of the Regulations are replaced by the following:

• A is the aggregate, over all household final consumption expenditure categories, of the household final consumption expenditures in the province for each category multiplied by a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures for that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces,
• B is the aggregate, over all housing expenditure categories, of the housing expenditures in the province for each category multiplied by a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures for that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces,
• C is the aggregate, over all business sector industries and all commodities, of the capital expenditures for machinery and equipment in the province, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces,
• D is the aggregate, over all business sector industries and all commodities, of the capital expenditures for non-residential structures in the province, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures, by that industry for that commodity, in all provinces that levy a general sales tax and whose denominator is the total of those expenditures, by that industry for that commodity, in all of those provinces,
• E is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for machinery and equipment in the province by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces,
• F is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for non-residential structures in the province by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces,
• G is the aggregate, over all post-secondary education or non-profit industries and all intermediate inputs, of the intermediate input expenditures in the province by each industry for each intermediate input multiplied by
  • (a) in the case of the post-secondary educational services industry, a fraction, whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces, multiplied by 50 per cent, and
  • (b) in the case of the non-profit institutions serving households industry, a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces,
• H is the aggregate, over all business sector industries and all intermediate inputs, of the intermediate input expenditures in the province by each industry for each intermediate input, multiplied by a fraction whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces,
• I is the aggregate, over all business sector industries and all commodities, of capital expenditures for intellectual property products in the province by each industry for each commodity multiplied by a fraction, whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces, and
• J is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for intellectual property products in the province by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial sales tax revenues derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial sales tax revenue derived from those expenditures by that category in all provinces that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces; and

7 (1) The definitions business sector industry, intermediate input commodity and intermediate input expenditures in section 6 of the Regulations are replaced by the following:

business sector industry means any of the business sector industries as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ level intermediate input matrix. (industrie du secteur des entreprises)

intermediate input commodity means one of the intermediate input commodities that constitute part of the intermediate input matrix as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ detailed level intermediate input matrix. (intrant intermédiaire)

intermediate input expenditures means expenditures on intermediate input commodities, as determined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ detailed level intermediate input matrix, net of any federal or provincial general sales taxes, also as determined by Statistics Canada. (dépenses en intrants intermédiaires)

(2) The portion of the definition non-business sector industry in section 6 of the Regulations before paragraph (a) is replaced by the following:

non-business sector industry means any of the following industries as defined by Statistics Canada for the purpose of its Provincial Supply and Use Tables’ detailed level intermediate input matrix:

(3) Section 6 of the Regulations is amended by adding the following in alphabetical order:

housing expenditure category means any of the following expenditure categories used by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts:

• (a) new residential housing expenditures;
• (b) residential renovation expenditures; and
• (c) residential housing transfer expenditures. (catégorie de dépenses de logement)

public or non-profit entity category means any of the following categories of entities, other than those in the business sector:

• (a) hospitals;
• (b) universities, colleges, C.E.G.E.P.s, elementary and secondary schools and other educational institutions;
• (c) nursing and residential care facilities;
• (d) non-profit organizations; and
• (e) municipal governments, excluding any portions that are described in paragraphs (a) to (c). (catégorie d’entités publiques ou à but non lucratif)

8 (1) Subparagraph 7(1)(b)(ii) of the Regulations is amended by adding the following after clause (A):

• (A.1) a cannabis board, commission or authority of the province,

(2) Paragraph 7(1)(d) of the Regulations is amended by striking out “and” at the end of subparagraph (i), by adding “and” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

• (iv) revenues derived by a province from
  • (A) remittances, to the provincial government by a cannabis board, commission or authority of the province, of profits arising from sale of cannabis products,
  • (B) a specific sales tax imposed by the province on cannabis products by a cannabis board, commission or authority of the province,
  • (C) a specific sales tax imposed by the federal government on cannabis products that is shared with the province, and
  • (D) fees for licences and permits for the privilege of making, purchasing, distributing or selling cannabis products;

9 Subclause 8(1)(b)(ii)(A)(IV) of the Regulations is replaced by the following:

• (IV) of the Ontario Electricity Financial Corporation and the Nova Scotia Power Finance Corporation, and

10 Section 9.1 of the Regulations is amended by adding the following after subsection (5):

(6) In determining the revenues described in paragraph 7(1)(b) in respect of a province for a fiscal year, the Minister may

• (a) deduct from the amount set out in the certificate the amount of any rebate, credit or tax reduction in relation to that revenue, or its components, that the province, or a local government, granted in favour of a taxpayer for the fiscal year, as determined by Statistics Canada, or, if Statistics Canada does not make the determination, as determined by the Minister, up to a maximum that reduces to zero the amount of the taxpayer’s tax that is included in the revenue source; or
• (b) if the province or a local government applies a rebate, credit or tax reduction against the actual or estimated liability of the taxpayer for another tax that it imposes, deduct the amount of that rebate, credit or tax reduction, up to a maximum that reduces the taxpayer’s liability for that other tax to zero, from the amount that would otherwise be determined for the revenue source that includes that other tax.

11 Subparagraph (b)(i) of the definition personal taxes in subsection 10(1) of the Regulations is replaced by the following:

• (i) clause 5(a)(i)(A), levies or premiums imposed by a province on individuals specifically for the purpose of financing hospital insurance, medical care insurance or drug insurance, other than contributions to the Nova Scotia Seniors’ Pharmacare Program or the Alberta supplementary health benefits plans, or

12 (1) Paragraph 14.1(2)(c) of the French version of the Regulations before clause (i)(A) is replaced by the following:

• c) dans le cas où l’information nécessaire à la détermination pour un exercice de l’assiette visée à l’alinéa 5c) relative aux taxes sur les produits, autres que les taxes de vente fédérales et provinciales générales, devant être soustraites des dépenses de consommation finale des ménages, des dépenses en capital fixe pour les produits de propriété intellectuelle, des dépenses en capital fixe pour machines et matériel et des dépenses en capital fixe pour les ouvrages non résidentiels dans une province n’est pas disponible auprès de Statistique Canada, en utilisant, au lieu de cette information les montants correspondant aux résultats suivants :
  • (i) à l’égard des dépenses de consommation finale des ménages, le produit de ces dépenses pour chaque catégorie de dépenses de consommation finale des ménages dans la province pour l’exercice, déduction faite des taxes de vente fédérales et provinciales générales, par une fraction dont :

(2) The portion of subparagraph 14.1(2)(c)(ii) of the Regulations before clause (A) is replaced by the following:

• (ii) in respect of each type of capital expenditure, the product, for each public education or non-profit entity category, of those expenditures in the province for the fiscal year, net of federal and provincial general sales taxes, and a fraction

(3) Subsection 14.1(2) of the Regulations is amended by adding the following after paragraph (c):

• (c.1) if, when determining a revenue base referred to in paragraph 5(c) for a fiscal year, the expenditure and tax information required to calculate C, D and I for a province for a calendar year is missing from the certificate, the Minister may use in place of C, D, and I, respectively,
  • (i) the product of C as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the C as calculated under these Regulations as they read on December 31, 2017 for the calendar year for which the information required to calculate C is missing from the certificate, and
    • (B) whose denominator is the C as calculated under these Regulations as they read on December 31, 2017 for the most recent calendar year for which the information required to calculate C is provided in the certificate,
  • (ii) the product of D as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the D as calculated under these Regulations as they read on December 31, 2017 for the calendar year for which the information required to calculate D is missing from the certificate, and
    • (B) whose denominator is the D as calculated under these Regulations as they read on December 31, 2017 for the most recent calendar year for which the information required to calculate D is provided in the certificate, and
  • (iii) the product of I as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the I as calculated under these Regulations as they read on December 31, 2017 for the calendar year for which the information required to calculate I is missing from the certificate, and
    • (B) whose denominator is the I as calculated under these Regulations as they read on December 31, 2017 for the most recent calendar year for which the information required to calculate I is provided in the certificate;
• (c.2) if, when determining a revenue base referred to in paragraph 5(c) for a fiscal year, the expenditure and tax information required to calculate G for a province for a calendar year is missing from the certificate, the Minister may use in place of G
  • (i) for the earliest of the calendar years for which the information necessary to calculate G is missing from the certificate, the product of G as calculated for that province for the most recent calendar year for which information is provided in the certificate multiplied by one plus the average of the annual rates of growth of the provincial government’s current expenditures and non-profit institutions serving households’ final consumption expenditures, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, for the calendar year for which the information required to calculate G is missing from the certificate, and
  • (ii) for any other calendar year for which the information required to calculate G is missing from the certificate, the result obtained under subparagraph (i) multiplied by one plus the sum of the annual averages of the annual rates of growth of the provincial government’s current expenditures and non-profit institutions serving households’ final consumption expenditures, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, as determined for all calendar years for which the information required to calculate G is missing from the certificate;
• (c.3) if, when determining a revenue base referred to in paragraph 5(c) for a fiscal year, the expenditure and tax information required to calculate H for a province for a calendar year is missing from the certificate, the Minister may use in place of H the product of H as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction
  • (i) whose numerator is the current dollar provincial gross domestic product at market prices for that province, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts for the calendar year for which the information required to calculate H is missing from the certificate, and
  • (ii) whose denominator is the current dollar provincial gross domestic product at market prices for that province, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts for the most recent calendar year for which the information required to calculate H is provided in the certificate;

(4) The portion of paragraph 14.1(2)(d) of the Regulations before clause (i)(A) is replaced by the following:

• (d) if, when determining a revenue base referred to in paragraph 8(1)(d) for a fiscal year, the expenditure and tax information required to calculate G and H for a province for a calendar year is missing from the certificate, the Minister may use in place of G and H, respectively,
  • (i) the product of G as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction

(5) The portion of subparagraph 14.1(2)(d)(ii) of the Regulations before clause (A) is replaced by the following:

• (ii) the product of H as calculated for that province for the most recent calendar year for which information is provided in the certificate and a fraction

13 (1) The definition non-business sector industry in section 17 of the Regulations is repealed.

(2) The definition intermediate input commodity in section 17 of the English version of the Regulations is repealed.

(3) The definitions business sector industry and intermediate input expenditures in section 17 of the Regulations are replaced by the following:

business sector industry means any of the business sector industries as defined by Statistics Canada

• (a) with respect to capital expenditures, for the purpose of its Provincial and Territorial Supply and Use Tables’ detailed level final demand matrix; and
• (b) with respect to intermediate input expenditures, for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level intermediate input matrix. (industrie du secteur des entreprises)

intermediate input expenditures means expenditures on intermediate inputs, as determined by Statistics Canada for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level intermediate input matrix, net of any taxes on products, also as determined by Statistics Canada. (dépenses en intrants intermédiaires)

(4) The definition intrant intermédiaire in section 17 of the French version of the Regulations is replaced by the following:

intrant intermédiaire Tout intrant intermédiaire défini par Statistique Canada pour sa matrice d’intrant intermédiaire au niveau sommaire de ses tableaux des ressources et des emplois provinciaux et territoriaux. (intermediate input)

(5) Paragraph (a) of the definition housing expenditures in section 17 of the Regulations is replaced by the following:

• (a) residential housing, including the land, as determined by Statistics Canada for
  • (i) new singles,
  • (ii) new doubles,
  • (iii) new rows,
  • (iv) new apartments,
  • (v) conversions,
  • (vi) cottages, and
  • (vii) mobile homes and other movable dwellings;

(6) Section 17 of the Regulations is amended by adding the following in alphabetical order:

capital expenditures means expenditures on commodities, as determined by Statistics Canada for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level final demand matrix, net of any taxes on products, also as determined by Statistics Canada. (dépenses en capital fixe)

commodity means any of the commodities as defined by Statistics Canada for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level final demand matrix. (produit de base)

housing expenditure category means any of the following expenditure categories used by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts:

• (a) expenditures, as determined by Statistics Canada, for residential housing, including the land, for
  • (i) new singles,
  • (ii) new doubles,
  • (iii) new rows,
  • (iv) new apartments,
  • (v) conversions,
  • (vi) cottages, and
  • (vii) mobile homes and other movable dwellings;
• (b) expenditures for residential renovation; and
• (c) expenditures for residential housing transfer. (catégorie de dépenses de logement)

post-secondary education or non-profit industry means either of the following industries as defined by Statistics Canada:

• (a) for the purpose of its Provincial and Territorial Supply and Use Tables’ detailed level intermediate input matrix, with respect to the post-secondary educational services industry; or
• (b) for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level intermediate input matrix, with respect to the non-profit institutions serving households industry. (industrie de l’éducation postsecondaire ou à but non lucratif)

post-secondary educational services means universities, colleges and C.E.G.E.P.s as defined by Statistics Canada for the purpose of its Provincial and Territorial Supply and Use Tables’ detailed level intermediate input matrix. (services d’enseignement postsecondaire)

public education or non-profit entity category means either of the following categories used by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts:

• (a) government education services; or
• (b) non-profit organizations. (catégorie des services gouvernementaux d’enseignement ou des organismes à but non lucratif)

(7) Section 17 of the English version of the Regulations is amended by adding the following in alphabetical order:

intermediate input means any of the intermediate inputs as defined by Statistics Canada for the purpose of its Provincial and Territorial Supply and Use Tables’ summary level intermediate input matrix. (intrant intermédiaire)

14 (1) Subparagraph 18(1)(a)(ii) of the Regulations is replaced by the following:

• (ii) revenues derived from levies or premiums imposed by a province or territory specifically for the purpose of financing hospitalization insurance, medical care insurance or drug insurance, other than contributions to the Nova Scotia Seniors’ Pharmacare Program or the Alberta supplementary health benefits plans;

(2) Subparagraph 18(1)(b)(ii) of the Regulations is amended by adding the following after clause (A):

• (A.1) a cannabis board, commission or authority of the province or territory,

(3) Subparagraph 18(1)(i)(xi) of the Regulations is replaced by the following:

• (xi) the province or territory’s share of revenue from any revenue that is shared by Canada and the province or territory, other than the revenues referred to in subparagraph (i)(xiii),

(4) Paragraph 18(1)(i) of the Regulations is amended by adding “and” at the end of paragraph (xii) and by adding the following after subparagraph (xii):

• (xiii) revenues derived by a province or territory from
  • (A) remittances, to the provincial or territorial government, by a cannabis board, commission or authority of the province or territory, of profits arising from the sale of cannabis products,
  • (B) a specific sales tax imposed by the province or territory on cannabis products by a cannabis board, commission or authority of the province or territory,
  • (C) a specific sales tax imposed by the federal government on cannabis products that is shared with the province or territory, and
  • (D) fees for licences and permits for the privilege of making, purchasing, distributing or selling cannabis products.

15 (1) Clause 19(1)(b)(ii)(A) of the Regulations is amended by adding the following after subclause (I):

• (I.1) a cannabis board, commission or authority,

(2) Subclause 19(1)(b)(ii)(A)(IV) of the Regulations is replaced by the following:

• (IV) the Ontario Electricity Financial Corporation and the Nova Scotia Power Finance Corporation, and

(3) The descriptions of A to J in paragraph 19(1)(i) of the Regulations are replaced by the following:

• A is the aggregate, over all household final consumption expenditure categories, of the household final consumption expenditures in the province or territory for each category multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures for that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces and territories,
• B is the aggregate, over all housing expenditure categories, of the housing expenditures in the province or territory for each category multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures for that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures for that category in all of those provinces and territories,
• C is the aggregate, over all business sector industries and all commodities, of the capital expenditures for machinery and equipment in the province or territory, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces and territories,
• D is the aggregate, over all business sector industries and all commodities, of the capital expenditures for non-residential structures in the province or territory, by each industry for each commodity, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures, by that industry for that commodity, in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures, by that industry for that commodity, in all of those provinces and territories,
• E is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for machinery and equipment in the province or territory by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces or territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories,
• F is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for non-residential structures in the province or territory by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories,
• G is the aggregate, over all post-secondary education or non-profit industries and all intermediate inputs, of the intermediate input expenditures in the province or territory by each industry for each intermediate input multiplied by
  • (a) in the case of the post-secondary educational services industry, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories, multiplied by 50 per cent and
  • (b) in the case of the non-profit institutions serving households industry, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories,
• H is the aggregate, over all business sector industries and all intermediate inputs, of the intermediate input expenditures in the province or territory by each industry for each intermediate input, multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that intermediate input in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that intermediate input in all of those provinces and territories,
• I is the aggregate, over all business sector industries and all commodities, of capital expenditures for intellectual property products in the province or territory by each industry for each commodity multiplied by a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that industry for that commodity in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that industry for that commodity in all of those provinces and territories, and
• J is the aggregate, over all public education or non-profit entity categories, of the capital expenditures for intellectual property products in the province or territory by each category multiplied by
  • (a) in the case of the public education services category, a fraction, whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories, multiplied by 25 per cent, and
  • (b) in the case of the non-profit entity category, a fraction whose numerator is the total of the net provincial and territorial sales tax revenues derived from those expenditures by that category in all provinces and territories that levy a general sales tax and whose denominator is the total of those expenditures by that category in all of those provinces and territories.

16 Paragraph (b) of the definition personal taxes in subsection 21(1) of the Regulations is replaced by the following:

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

17 (1) Paragraph 30(2)(e) of the Regulations is replaced by the following:

• (e) if, when determining a revenue base referred to in paragraph 19(1)(i) for a fiscal year, the expenditure and tax information required to calculate C, D and I for a province or territory for a calendar year is missing from the certificate, the Minister may use in place of C, D and I, respectively,
  • (i) the product of C as calculated for that province or territory for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the C as calculated under these Regulations as they read on December 31, 2017 for the calendar year for which the information required to calculate C is missing from the certificate, and
    • (B) whose denominator is the C as calculated under these Regulations as they read on December 31, 2017 for the most recent calendar year for which the information required to calculate C is provided in the certificate;
  • (ii) the product of D as calculated for that province or territory for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the D as calculated under these Regulations as they read on December 31, 2017, for the calendar year for which the information required to calculate D is missing from the certificate, and
    • (B) whose denominator is the D as calculated under these Regulations as they read on December 31, 2017, for the most recent calendar year for which the information required to calculate D is provided in the certificate,
  • (iii) the product of I as calculated for that province or territory for the most recent calendar year for which information is provided in the certificate and a fraction
    • (A) whose numerator is the I as calculated under these Regulations as they read on December 31, 2017 for the calendar year for which the information required to calculate I is missing from the certificate, and
    • (B) whose denominator is the I as calculated under these Regulations as they read on December 31, 2017 for the most recent calendar year for which the information required to calculate I is provided in the certificate, and;
• (e.1) if, when determining a revenue base referred to in paragraph 19(1)(i) for a fiscal year, the expenditure and tax information required to calculate G for a province or territory for a calendar year is missing from the certificate, the Minister may use in place of G
  • (i) for the earliest of the calendar years for which the information necessary to calculate G is missing from the certificate, the product of G as calculated for that province or territory for the most recent calendar year for which information is provided in the certificate multiplied by one plus the average of the annual rates of growth of the provincial or territorial government’s current expenditures and non-profit institutions serving households’ final consumption expenditures, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, for the calendar year for which the information required to calculate G is missing from the certificate, and
  • (ii) for any other calendar year for which the information required to calculate G is missing from the certificate, the result obtained under subparagraph (i) multiplied by one plus the sum of the annual averages of the annual rates of growth of the provincial or territorial government’s current expenditures and non-profit institutions serving households’ final consumption expenditures, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, as determined for all calendar years for which the information required to calculate G is missing from the certificate;
• (e.2) if, when determining a revenue base referred to in paragraph 19(1)(i) for a fiscal year, the expenditure and tax information required to calculate H for a province or territory for a calendar year is missing from the certificate, the Minister may use in place of H the product of H as calculated for that province or territory for the most recent calendar year for which information is provided in the certificate and a fraction
  • (i) whose numerator is the current dollar provincial or territorial gross domestic product at market prices for that province or territory, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, for the calendar year for which the information required to calculate H is missing from the certificate, and
  • (ii) whose denominator is the current dollar provincial gross domestic product at market prices for that province or territory, as determined by Statistics Canada for the purpose of its Provincial and Territorial Economic Accounts, for the most recent calendar year for which the information required to calculate H is provided in the certificate;

(2) The portion of subparagraph 30(2)(f) of the French version of the Regulations before Clause (i)(A) is replaced by the following:

• f) dans le cas où l’information nécessaire à la détermination pour un exercice de l’assiette visée à l’alinéa 19(1)i) relative aux taxes sur les produits, autres que les taxes de vente fédérales, provinciales et territoriales générales, devant être soustraite des dépenses de consommation finale des ménages, des dépenses en capital fixe pour les produits de propriété intellectuelle, des dépenses en capital fixe pour machines et matériel ou des dépenses en capital fixe pour les ouvrages non résidentiels dans une province ou un territoire n’est pas disponible auprès de Statistique Canada, en utilisant, au lieu de cette information les montants correspondant aux résultats suivants :
  • (i) à l’égard des dépenses de consommation finale des ménages, le produit de ces dépenses pour chaque catégorie de dépenses de consommation finale des ménages dans la province ou le territoire pour l’exercice, déduction faite des taxes de vente fédérales, provinciales et territoriales générales, par une fraction dont :

(3) The portion of subparagraph 30(2)(f)(ii) of the Regulations before clause (A) is replaced by the following:

• (ii) in respect of each type of capital expenditure, the product, for each public education or non-profit entity category, of those expenditures in the province or territory for the fiscal year, net of federal, provincial and territorial general sales taxes, and a fraction

18 Subsection 34(2) of the Regulations is replaced by the following:

(2) In computing the revenue derived by a province from a revenue source for a fiscal year, other than from the revenue sources referred to in paragraphs 7(1)(a) and (b), the Minister may deduct from that revenue source the amounts referred to in paragraph 9(1)(b), without taking into account the reference to subsection 3.5(1) of the Act in subsection 9(1).

19 The portion of subsection 41(1) of the Regulations before subparagraph (a)(i) is replaced by the following:

41 (1) The Minister shall, for each province in relation to each fiscal year in the period beginning on April 1, 2007 and ending on March 31, 2024, calculate the net aggregate of overpayments to be recovered from that province by adding

• (a) the net total of all underpayments and overpayments in relation to the following payments made under the Act or a tax collection agreement concluded under the Act, that are shown in that fiscal year to have been made in relation to each previous year within the period beginning on April 1, 1994 and ending on March 31, 2023:

20 The Regulations are amended by replacing “System of National Accounts” with “System of Macroeconomic Accounts” in the following provisions:

• (a) the definition business sector in subsection 1(1);
• (b) subsection 1(4);
• (c) the definitions capital expenditures for intellectual property products, capital expenditures for machinery and equipment and capital expenditures for non-residential structures in section 3.1;
• (d) the portion of subparagraph 5(b)(i) before clause (A);
• (e) the definitions capital expenditures for intellectual property products, capital expenditures for machinery and equipment and capital expenditures for non-residential structures in section 6;
• (f) the portion of subparagraph 8(1)(b)(i) before clause (A);
• (g) the descriptions of A and M in paragraph 8(1)(y);
• (h) paragraph 9(2)(a);
• (i) the definitions capital expenditures for intellectual property products, capital expenditures for machinery and equipment and capital expenditures for non-residential structures in section 17;
• (j) the portion of subparagraph 19(1)(b)(i) before clause A;
• (k) the descriptions of F and H in paragraph 19(1)(g); and
• (l) paragraph 20(2)(a).

21 The Regulations are amended by replacing “Input-Output Accounts” with “Supply and Use Tables” in the following provisions:

• (a) the description of F in paragraph 5(d);
• (b) the portion of the definition calculated net profits before paragraph (a) and the portion of the definition mining and quarrying industry before paragraph (a) in section 6; and
• (c) the description of F in paragraph 8(1)(z).

22 The Regulations are amended by replacing “CANSIM table 183-0006” with “CANSIM table 183-0024” in the following provisions:

• (a) subparagraphs 8(1)(j)(i) to (iii); and
• (b) subparagraphs 19(1)(f)(i) to (iii).

Coming into Force

23 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Minister of Finance’s authority to make Equalization and Territorial Formula Financing (TFF) payments under the Federal-Provincial Fiscal Arrangements Act expires on March 31, 2019. This authority is typically renewed every five years to ensure the Equalization and TFF programs are meeting their objectives and using the most up-to-date and accurate measures in the determination of provincial and territorial entitlements. In Budget 2018, the Government of Canada proposed to renew Equalization and TFF for a five-year period beginning April 1, 2019, with technical changes to improve the accuracy and efficiency of the calculation of entitlements. The Government of Canada introduced Bill C-74, Budget Implementation Act, 2018, No. 1, to renew the Equalization and TFF programs for a five-year period beginning on April 1, 2019, and ending on March 31, 2024. Regulatory amendments to the Federal-Provincial Fiscal Arrangements Regulations, 2007 are required to implement technical changes to improve the accuracy and efficiency of the calculation of entitlements.

Background

Equalization and TFF are unconditional transfers from the Government of Canada to provincial and territorial governments designed to reduce fiscal disparities among provinces and territories. Equalization enables provincial governments with lower fiscal capacity to provide reasonably comparable levels of public services at reasonably comparable levels of taxation. Similarly, TFF provides funding to enable territorial governments to provide a range of public services comparable to those offered by provincial governments at comparable levels of taxation, taking into account the higher cost of providing programs and services in the North.

The broad parameters of the formulae which determine Equalization and TFF entitlements are contained in the Federal-Provincial Fiscal Arrangements Act. The Federal-Provincial Fiscal Arrangements Regulations, 2007 contain the details of the calculations for each formula, such as which Statistics Canada data series are to be used in determining entitlements.

Equalization is based on fiscal capacity measured across the following five bases:

• (1) personal income taxes;
• (2) business income taxes;
• (3) consumption taxes;
• (4) property taxes; and
• (5) natural resources.

The Federal-Provincial Fiscal Arrangements Regulations, 2007 set out how fiscal capacity is measured for each of these five bases. In general, fiscal capacity is the measure of how much revenue a province could raise from a base if it were to apply the nationally representative tax rate. For a given base, the nationally representative tax rate is calculated by dividing total provincial tax revenues to be equalized on that base by total provincial taxable activity in that base.

A province’s fiscal capacity for a base will generally differ from the actual revenues it collects. For example, for a province which chooses to have a low tax rate for a certain tax base, the revenues it actually collects will be below its measured fiscal capacity (its ability to raise revenues at national representative tax rates) for that base.

Equalization payments fill the gap between a province’s fiscal capacity and the average fiscal capacity of all ten provinces, on a per capita basis. This means that, in general, provinces which have per capita fiscal capacities below the national average receive payments to raise their fiscal capacities to the national average. Provinces above the national average do not receive payments.

Since payments are measured on a per capita basis, the total amount received by a province also depends upon the size of its population. Equalization entitlements are adjusted downward or upward, equally per capita, to ensure that total Equalization payments grow in line with a three-year moving average of nominal GDP.

The TFF program uses a gap-filling formula to recognize the unique circumstances of the territories (i.e. the higher cost of providing programs and services in the North). Each territory’s payment is based on the difference between a proxy of its expenditure needs and a measure of its fiscal capacity. The fiscal capacity measure for TFF is similar to that of Equalization, but includes additional bases such as fuel and payroll taxes.

Objectives

• Support the legislative renewal of the Equalization and TFF programs.
• Implement technical changes to improve the accuracy and efficiency of the calculation of provincial and territorial entitlements under the Equalization and TFF programs.
• Ensure that the Statistics Canada data series used in the regulations remain current so that the Equalization and TFF formulae remain accurate.

Description

The following four technical changes are being made to the Equalization and TFF formulae:

• 1. Refundable business income tax credits — Currently, refundable tax credits are deducted from business income tax revenues in the Equalization and TFF formulae. Under this change, these refundable tax credits will stop being deducted from business income tax revenues.
• 2. Cannabis — This change will clarify that all cannabis revenues will be equalized on the consumption tax base, regardless of how they are collected (for example whether from the provincial-territorial share of tax revenues or from profits remitted by Crown corporations from the sale of cannabis).
• 3. Consumption tax base structure — This change would refine the structure of the consumption tax base by
  • excluding expenditures made by government-funded entities (e.g. municipalities, school boards, and hospitals) from the calculation of the consumption tax base;
  • using additional detail for housing and business investment in the calculation of the consumption tax base; and
  • stopping the netting of federal taxes (other than GST/HST) from the consumption tax base.
• 4. Personal income taxes — This change would exclude Alberta drug plan premium revenues from personal income tax revenues.

“One-for-One” Rule

The “One-for-One” Rule does not apply to these amendments, as there is no change in administrative costs to business.

Small business lens

The small business lens does not apply to these amendments, as there are no costs on small business.

Consultation

All provincial and territorial governments have been consulted in the development of the proposed regulatory changes over the past five years. Regular working level meetings were held to discuss renewal proposals with federal, provincial and territorial officials on Equalization and TFF since the last renewal in 2014. Ministerial level consultations on renewal proposals were held at the December 2017 Finance Ministers’ Meeting. To address territorial concerns about the potential impact of the technical changes on TFF, a legislative change proposed in Budget Implementation Act, 2018, No. 1 would authorize transition payments of $1.3 million to Yukon and $1.7 million to the Northwest Territories from 2019–2020 until 2023–2024 to offset projected negative impacts of the changes on TFF entitlements over the course of the renewal period.

Rationale

1. Align business income tax revenues with accounting standards by no longer deducting refundable tax credits.

This change would improve the accuracy of the Equalization and TFF formulae by aligning the definition of business income tax revenues with Statistics Canada’s Canadian Government Finance Statistics standard, which Equalization and TFF generally follow. Under this standard, the measurement of revenues does not deduct refundable credits; refundable tax credits are instead considered akin to program expenditures as they result in transfers to individuals and corporations. The change to measure business income tax revenues gross of refundable tax credits is consistent with a similar change made to the measurement of personal income tax revenues in the 2014 renewal.

2. Treat revenues related to the sale of cannabis similarly to revenues related to the sale of alcohol in Equalization.

This change will ensure that the treatment of cannabis revenues within the Equalization and TFF programs is policy-neutral and transparent. Without this change, the treatment of cannabis revenues within Equalization and TFF could vary depending on the instrument chosen to raise cannabis revenues. The treatment of cannabis revenues within Equalization and TFF will be made consistent with the treatment of other revenues related to the sale of excise goods in Equalization, notably alcohol.

3. Refine the structure of the consumption tax base to improve accuracy and ease of administration.

• I. Excluding expenditures made by government funded entities (e.g. municipalities, school boards, and hospitals) from the calculation of the consumption tax base will improve the accuracy of the consumption tax base.
  Since these organizations are funded by provincial and territorial governments, consumption taxes collected from them cannot increase fiscal capacity. Therefore, these expenditures should be excluded from the consumption tax base. This treatment would better align with the treatment of entities that are part of the provincial-territorial government sector in the other Equalization and TFF tax bases such as the payroll revenues, where an adjustment is made to exclude payroll taxes paid by government funded entities.
• II. Using additional detail for housing and business investment in the calculation of the consumption tax base will improve the accuracy of the consumption tax base.
  Since average consumption taxation rates differ by type of housing and business investment expenditures, including more subcategories in these two areas will allow for a more accurate measure of the fiscal capacity in the consumption tax base. For example, the formulae will now distinguish between spending on cottages (which attract higher taxes) from spending on other types of housing instead of assuming that all housing expenditures are taxed at the same rate.
• III. Stop netting federal taxes from the base (other than GST/HST).
  This will reduce the administrative burden in calculating the consumption tax base. Currently, Finance Canada officials must deduct all federal taxes (other than GST/HST) from expenditures in calculating the consumption tax base. This is an onerous administrative requirement because taxes first need to be imputed (across a large number of categories), and then removed. Since federal consumption taxes are the same in all provinces and territories, they are collected in equal proportion to consumption expenditures in each province across the country. Therefore, this adjustment has little impact on the accuracy of Equalization payment calculations.

4. Exclude Alberta drug plan premium revenues from personal income tax revenues as they are considered service fees (user fees) for the purpose of the transfers.

This change will improve the accuracy of the measurement of personal income tax revenues. Service fees are excluded from the measure of fiscal capacity in Equalization and TFF. Alberta’s drug plan premiums are more like service fees than taxes because they are voluntary fees for supplementary health coverage. As such, they should fall outside the scope of the Equalization and TFF programs. With the amendment, they will no longer be included in personal income tax revenues. This is consistent with a change made in the 2014 renewal to remove voluntary Nova Scotia Seniors’ Pharmacare premiums from the measure of personal income tax revenues.

Implementation, enforcement and service standards

These changes will be implemented in the calculation of Equalization and TFF payments for the 2019–2020 fiscal year and the following four fiscal years.

Contact

Suzanne Kennedy
Senior Director
Equalization and Territorial Formula Financing Policy
Department of Finance Canada
Telephone: 613-369-5640