RAJ REPORT

Could the Fiscal Imbalance in AUSTRALIA be fixed by Turning GST revenues over to each individual STATE in exchange for lower STATE TAXES————– “Essentially, the fiscal imbalance is simple: at current tax rates, the federal government has more revenue than they need for their expenditures, and the provinces (as a group) have less revenue at their current tax rates than they need for their expenditures. “

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Essentially, the fiscal imbalance is simple: at current tax rates, the federal government has

more revenue than they need for their expenditures, and the provinces (as a group) have less

revenue at their current tax rates than they need for their expenditures.

Canada has closed the resulting gap by converting large amounts of federal revenues to

provincial revenues through intergovernmental transfers. The result has been considerable

peace on this issue since the federal government made much of the fact that it restored fiscal

balance in Budget 2007. If fiscal balance means that provinces and the federal government

have revenues – from whatever source – at least broadly consistent with their spending

responsibilities, then this claim is arguably justified. To quote just one source on the size of the

fiscal imbalance, Quebec’s Commission on Fiscal Imbalance claimed in 2002 that: “For

Canada as a whole, the need for resources that the Commission has quantified implies that the

provinces should receive an adjustment to their financial resources of at least $8 billion in the

short term.”2 Given that federal transfers for social programs (not including the federal

equalization program) increased from just over $19 billion in 2002-2003 to nearly $35 billion

in 2009-2010, this condition has clearly been satisfie

policyschool.ucalgary.ca/sites/default/files/research/gst-boessenkool-online3.pdf.

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