Making Choices - The 1998 Pre-Budget Public Consultation
Our Revenue Sources
Your Provincial Government
has two main sources of revenue:
federal-source revenues - This is money we receive from the federal government, mainly Equalization and the Canadian Health and Social Transfer (CHST), and,
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.
Federal-Source Revenues
The federal government has dealt with its own deficit problem in recent years in part by reducing transfer payments to all provinces. While Equalization payments (which are made to the seven provinces that have below average capacity to raise revenues from their own taxes) have not been affected, cash transfers for social programs have been cut significantly.
The CHST, the transfer to every province in support of social programs, has been reduced. Our CHST will decline from almost $350 million in 1996-97 to about $275 million in 1998-99 and to about $260 million by 2000-01. For several years prior to 1996-97 this federal support for our social programs was over $400 million.
Own-Source Revenues
The implementation of the Harmonized Sales Tax (HST) this year brought about a $100 million tax cut, the first major tax reduction in the Province since 1949. Transitional assistance provided over four years by the federal government allows us to reduce taxes without increasing the deficit. This tax reduction is boosting our economy during a difficult period, and will improve our economic and fiscal situation over the longer term.
The issue of tax cuts has become prominent nationally, particularly in personal income tax. Some provinces have already announced income tax cuts. We all would like to see taxes further reduced in this Province. We have limited flexibility to pursue this at this time, however, because our deficit has not yet been eliminated and we already have implemented a substantial tax cut with the HST.
A potential source of future revenues to fund further tax reductions and other initiatives is from natural resource development projects. However, while petroleum and mining exploration and development are creating new employment and business opportunities throughout the Province, these projects will not yield substantial revenues for the Province in the next three years.
