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![Money Transfers to Provinces and Territories](/web/20061130014441im_/http://www.fin.gc.ca/images/trans_sme.gif)
Federal Transfers
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Alternative Payments for Standing Programs and the
Quebec Abatement
What are the Alternative Payments for Standing Programs?
- Alternative payments for standing programs represent recoveries from
Quebec of an additional tax point transfer above and beyond the tax
point transfer under the Canada Health Transfer (CHT) and the Canada
Social Transfer (CST).
- During the 1960s, the Government of Canada offered provinces
opting-out arrangements for certain federal-provincial programs, such
as hospital care and social welfare. Only Quebec chose to use these
arrangements.
- Quebec continues to receive the value of these extra tax points
through its own income tax system, in lieu of cash, while other
provinces receive the corresponding amounts in cash.
- Transfers to Quebec for the CHT/CST and Equalization are shown in
the budget on the same basis as transfers to other provinces. However,
since part of the Quebec transfer is made through lower federal taxes,
it is necessary to net this amount out of transfer program spending.
- This arrangement has no net impact on federal transfers, Quebec
receipts or other provinces’ receipts.
What is the Quebec Abatement?
- The Quebec Abatement consists of a reduction of 16.5 percentage points
of federal personal income tax for all tax filers in Quebec,
representing approximately $3.5 billion in 2006-07.
- The 16.5 percentage points are the total of both the 13.5 percentage
points ($2.9 billion) of federal income tax abated under the
Alternative Payments for Standing Programs, referred to above, plus an
additional 3 percentage points ($630 million) abated for the
discontinued Youth Allowance Program.
- Similarly to the adjustments made for the Alternative Payments for
Standing Programs, the value of the Youth Allowance abatement is
recovered to put Quebec on the same net basis as other provinces.
- The Quebec abatement is distinct from the tax point transfers under
the CHT/CST in that the federal BFT reduction of 16.5 tax points is
explicitly
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