Where Your Tax Dollar Goes


Introduction

In 200304, Canada's federal government collected about $186 billion in taxes and other revenues. Here's a quick overview of where that money was spent—and how it was raised.

$186 billion collected in taxes and revenues

More About These Numbers

The federal government calculates its finances over a 12-month "fiscal year" that ends every March 31. This presentation is based on the Annual Financial Report of the Government of Canada for the most recent, complete fiscal year, 200304. It will be updated in fall 2005 when final results for the 200405 fiscal year are available.

 

1. Interest Payments

The largest single spending item was interest payments on Canada's federal debt (money borrowed by previous federal governments which has not been repaid). These payments—to institutions and individuals who hold federal bonds, Treasury bills and other forms of the debt—cost $35.8 billion, or about 19 cents of every tax dollar.

Interest payments - $35.8 billion or 19 cents

2. Transfer Payments

Cash payments that go directly to individuals, to provincial and territorial governments, and to other organizations are called transfers. Overall, these three categories of transfers combined to make up just over half of all federal spending—$94 billion, or almost 51 cents of each tax dollar.

Transfers total - $94 billion or about 51 cents

Transfers to People

The biggest transfer category was Major Transfers to Persons. Altogether, these payments cost $42 billion, or almost 23 cents of every tax dollar.

Transfers to people - Old Age Security - $27 billion or about 14 cents

Transfers to people - Employment Insurance - $15 billion or about 8 cents

More About Support for Families and Children

The federal government also provided $11 billion in direct cash payments to low- and modest-income families—especially those with children—through the Canada Child Tax Benefit ($8 billion) and the goods and services tax (GST) credit ($3 billion).

Since these payments are subtracted from ("netted against") personal income tax and GST revenues, they are not included in the spending calculations presented to Parliament in each year's federal budget.

Funding for Provinces

The federal government also provided Major Transfers to Other Levels of Government. These payments—almost $30 billion—went to provinces and territories to help fund health care, post-secondary education and other important social services.

Funding for provinces - CHST - $20.3 billion or about 11 cents

Funding for provinces - Equalization - $9.3 billion or about 5 cents

 

More About Federal Support for Health Care 

Federal support for health care goes beyond cash payments to provinces under the Canada Health and Social Transfer and equalization funding. 

In 1977, the federal government agreed to let the provinces take over a share of its taxes to supplement direct cash transfers. In 200304, these "tax points" added about $15.8 billion to provincial finances for programs such as health care. 

For more information, consult Tax Point Transfers on the Finance Canada website at http://www.fin.gc.ca/transfers/taxpoint/taxpoint_e.html

There is also direct health-related spending by the Government itself, which contributed a further $5 billion last year. This included funding for First Nations health services; health care for veterans; and programs for health protection, disease prevention, health information and health-related research. 

As well, the federal government provides further support worth about $1 billion each year through the income tax system. This includes tax credits—which reduce the amount of taxes paid—for people with heavy medical expenses or severe disabilities, and for people taking care of ailing or infirm relatives. 

For more information, consult Federal Support for Health Care: The Facts on the Finance Canada website at http://www.fin.gc.ca/facts/fshc6_e.html.

Other Grants and Contributions 

Other transfer programs by various federal departments provide funds to a wide range of individuals, governments, and other organizations and groups—including business—for specific public policy purposes. 

Spending on these federal grants, contributions and subsidies added up to $23 billion, or another 12 cents of each tax dollar. This included: 

Other grants and contributions went to student assistance programs; health research and promotion; and the arts, multiculturalism and bilingualism.

Other grants and contributions - $23 billion or about 12 cents

3. Other Program Expenses 

After transfers, the bulk of federal tax dollars—$47 billion—went mostly to cover the operating costs of government itself: the 115 departments, agencies and Crown corporations that provide programs and services for Canadians and administer the transfer programs. These activities range from peacekeeping missions by our military; through diplomatic services and foreign aid planning; food and drug safety; maintaining a secure banking system for consumers and business; managing federal parks and ports; to veterans' services. 

Altogether, these operating costs (such as salaries and benefits, facilities and equipment, and supplies and travel) made up 25 cents of each tax dollar. 

Other program expenses - $47 billion or about 25 cents

But nearly half of this spending ($22 billion, or over 12 cents of each tax dollar) went to just three organizations.

Defence 

First, spending by the Department of National Defence on Canada's military forces was $12.9 billion, or about 6½ cents of each taxpayer dollar. 

Defence - $12.9 billion or about 6 1\2 cents

Public Security 

Next, operating costs of the Department of Public Safety and Emergency Preparedness were $4.6 billion, or 2½ cents of your tax dollar. This includes funding for the Royal Canadian Mounted Police, the federal prison system, and border traffic and security operations.

 Public Security - $4.6 billion or about 2 1\2 cents

Canada Revenue Agency 

And third, there was funding for the Canada Revenue Agency, which administers the federal tax system (and also collects personal income taxes for all provinces except Quebec). Its operations cost about $5.3 billion, or 3 cents of each tax dollar. 

Canada Revenue Agency - $5.3 billion or about 3 cents

Other Operations 

A further $18.8 billion was spent on the operations of all other federal departments and agencies—or 10 cents of each tax dollar. 

These included major departments such as: Environment; Fisheries and Oceans; Health; Human Resources Development; Industry; Justice; Natural Resources; Public Works; Transport; and Veterans Affairs. 

As well, funding went to federal agencies such as the Canadian Food Inspection Agency; Parks Canada; and the Canadian International Development Agency. 

And a small slice of federal spending goes to the operations of Parliament itself—the House of Commons, the Senate and the parliamentary library. 

In 200304, the combination of salaries and benefits for members of Parliament, senators and parliamentary staff, and spending on facilities and services, totalled about $433 million. That's about one-fifth of a cent of every tax dollar.

 Other operations - $18.8 billion or about 10 cents

Crown Corporations 

The last portion of Other Program Expenses—$5.4 billion—went to Crown corporations (organizations owned directly or indirectly by the Government). This funding was equal to about 3 cents of your tax dollar. But over half went to just two organizations: 

Funding was also provided to cultural institutions and agencies including the National Gallery of Canada, the Canadian Museum of Civilization, and the Canada Council for the Arts; and to enterprises like Atomic Energy of Canada Limited, VIA Rail, and the Canadian Tourism Commission.

Crown Corporations - $5.4 billion or about 3 cents

 4. Budgetary Surplus (Debt Reduction) 

The remaining $9.1 billion (or 5 cents of the tax dollar) was the budgetary surplus—how much money was left after paying for all federal programs, operations and interest on the debt. 

This surplus was not money available for future spending. Government accounting principles mean that any surplus at year-end automatically goes to help reduce the federal debt. 

Although surpluses have helped reduce the debt by more than $61 billion over the last seven years, it is still large—over $500 billion. This is why interest payments on the debt continue to be the federal government's biggest expense.

Budgetary surplus (debt reduction) - $9.1 billion or about 5 cents

 

Improving Accountability 

With $186 billion at work, the federal government owes it to Canadians to deliver full value for their hard-earned tax dollars. 

This is why, early in 2004, the Government put in place a concrete plan to improve dollars-and-cents accountability. It includes re-establishing the Office of the Comptroller General and phasing in electronic disclosure of government contracts (with limited exceptions, such as for national security).

Further information is available from the Office of the Prime Minister website at http://pm.gc.ca/eng/news.asp?id=67 .

Where the Money Comes From 

The federal government's budgetary revenues came from a variety of taxes and other sources.

Personnal income Tax - $84.9 billion or about 45 per cent

Goods and services tax (GST) - $28.3 billion or about 15 per cent

Corporate income tax - $27.4 billion or about 15 per cent

Other taxes - $16.2 billion or about 9 per cent

Employment insurance premiums - $17.5 billion or about 9 per cent

Other revenues - $11.8 billion or about 6 1\2 per cent

Useful Links 

More information on Government of Canada finances is available from these sources: