Home The 2001 Pre-Budget Public Consultation 
Our Revenue Sources

Your Provincial Government has two main sources of revenue:

  1. federal-source revenues - This is money we receive from the federal government, mainly Equalization and the Canadian Health and Social Transfer (CHST), and,

  2. own-source revenues - These are Provincial taxes, such as the harmonized sales tax, income tax, gasoline tax and others, as well as revenue from various fees, licenses and fines.
Our Revenues
Source: 2000 Provincial Budget

Federal-Source Revenues

The federal government dealt with its deficit problem in part by reducing transfer payments to all provinces. Equalization payments (which are made to the seven provinces that have below average capacity to raise revenues from their own taxes) were not affected. But cash transfers for social programs were cut by $6.2 billion last year, and it will not be until 2001-02 that they are restored to their 1995-96 levels.

The CHST, the transfer to every province in support of social programs, suffered the reductions. For several years prior to 1996-97 federal support for social programs contributed over $400 million a year toward our public services. In 1996-97, the year before the cuts, our CHST was almost $350 million. In September 2000, the federal government announced increased CHST funding over the next several years. However, even though the cost of our social programs, particularly health care, has been rising steadily since 1996-97, we will be fortunate if our CHST funding just returns to its 1996-97 level in the foreseeable future.

Also, as part of the 1999 Equalization renewal the federal government made changes which constrain growth in our Equalization entitlements, including a lower maximum for the total annual entitlement, moving away from having all tax sources in the formula and delaying the impact of positive technical adjustments.

Own-Source Revenues

The issue of tax cuts has become prominent nationally, particularly in personal income tax. In February 2000 and October 2000 the federal government announced an extensive package of income tax cuts. Many provinces have already announced income tax cuts. Lower taxes nationally could widen the gap between this Province and the rest of the country, affecting our competitive position in attracting investment and jobs. To address this, Government announced a plan to reduce our personal income tax by $175 million over three years starting in January 2000. This follows other significant tax reductions we have undertaken.

The implementation of the Harmonized Sales Tax (HST) brought about a $100 million annual tax cut, the first major tax reduction in the Province since 1949. This tax reduction, which saw the provincial sales tax rate fall from 12% to 8% and made our businesses more competitive by effectively removing sales tax from business inputs, is boosting our economy and will improve our economic and fiscal situation over the longer term. Another priority area for action is the payroll tax, which has seen reductions in each of the past three years. We all would like to see taxes further reduced in this Province. While this must be balanced with other priorities like health care, Government is committed to do so when it is fiscally prudent.

A potential source of future revenues to fund further tax reductions and other initiatives is from natural resource development projects. However, while these projects are creating new employment and business opportunities throughout the Province, these projects will not yield substantial revenues for the Province in the next few years. Once capital costs are recovered, which can take several years, our resource royalties will take a greater share of project revenues. Our royalty regimes ensure we are internationally competitive in attracting investment.

Our Source Revenues
Source: 2000 Provincial Budget

 Back Next