Article Summary
Dealing With the Fiscal Imbalances: Vertical, Horizontal and Structural
Working Paper by Bev DahlbyIn this Working Paper Bev Dahlby discusses fiscal imbalances on three levels: she defines vertical fiscal imbalances as those between two tiers of government; horizontal imbalances are those that exist across a single tier of government; structural imbalances occur in the tax and expenditure ‘mix.’ The author considers each of these issues in turn.
Dahlby suggests that it is inaccurate to use the term ‘vertical imbalance’ when describing the gap between a government’s revenues and spending responsibilities. She goes on to explain that this term would be better used to describe the difference in the marginal cost of raising tax revenue between levels of government. Dahlby does not find horizontal imbalances to be a problem in Canada because the federal equalization program addresses this issue. However, she finds structural fiscal imbalances to be a concern. In this context, she explains the key issue is excessive reliance on certain types of taxation. Dahlby believes a resolution to this problem would entail changing provincial sales taxes to value added taxes (VATs) with a base that would be similar to that of the GST (Goods and Services Tax); at the same time, Dahlby argues the federal government should reduce the GST by about two percentage points.
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Policy Publication Details
| Author(s): | Bev Dahlby; | ||
| Publisher: | C.D. Howe Institute [ Visit Website ] | ||
| Year Published: | 2005; | Publisher Type: | Research Institute |
| Publicly Available: | Yes | Research Focus: | National; Provincial; |
| Registration Required: | No | Language: | English |
| Payment Required: | No | Publication Format: | Adobe PDF |
Subjects / Categories:
Policy Articles / Fiscal & Budgetary / Reform
Policy Articles / Fiscal & Budgetary / Tax Policy
Policy Articles / Fiscal & Budgetary / Fiscal Federalism
Policy Articles / Fiscal & Budgetary / Fiscal Federalism / 2005
Policy Articles / Fiscal & Budgetary / Tax Policy / 2005
Policy Articles / Fiscal & Budgetary / Reform / 2005
Policy Articles / Fiscal & Budgetary
Keywords / Tags:
Canada; fiscal federalism; vertical fiscal imbalance; horizontal fiscal imbalance; structural fiscal imbalance; tax reform; raising revenue; provincial sales tax (PST) ; goods and services tax (GST); type of taxation.;