Where Your Tax Dollar Goes

For the fiscal year ending March 31, 2007, Canada's federal government collected $236.0 billion in taxes and other revenues. That represents a bit over 16 per cent of our country's over $1.4 trillion economy.

Here's a quick overview of where that money went and how it was raised. 

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 completed fiscal year, 2006–07. Where Your Tax Dollar Goes is updated annually, after the Government's final financial results become available. Please note that numbers may not total 100 per cent due to rounding.

1. Interest Payments

The largest single federal spending item was interest payments on Canada's public debt (that is, money borrowed by the central government over the years, which has not yet been repaid to the lenders). These payments—to institutions and people who hold federal bonds, treasury bills and other forms of the debt—cost $33.9 billion. That's almost 14½ cents of every tax dollar

2. Transfer Payments

Cash payments that go directly to individuals, to provincial and territorial governments, and to other organizations are called "transfers." There are three major categories of transfers. Combined, they make up more than half of all federal spending—about 53 cents of each tax dollar ($124.9 billion).

Transfers to Persons

The biggest transfer category was Major Transfers to Persons. These direct payments to people cost about 23½ cents of every tax dollar ($55.6 billion).

• This included payments to eligible elderly Canadians through Old Age Security payments, the Guaranteed Income Supplement and the Allowance for spouses. Total elderly benefits cost about $30.3 billion, or nearly 13 cents of your tax dollar.  

• The other major transfer to people was Employment Insurance (EI) benefits to eligible unemployed workers (including for periods of unemployment due to sickness, pregnancy, parental leave and caring for gravely ill or dying family members). And funding also went to programs that assist people to prepare for, find and maintain jobs. Altogether, EI payments cost about 6 cents of every tax dollar ($14.1 billion). 

• The federal government also provided $11.2 billion in direct cash payments to eligible families to help with the cost of raising children under age 18 through the Canada Child Tax Benefit. These payments cost nearly 5 cents of every tax dollar. 

Support for Families and Children The federal government also provides assistance to low- and modest-income families—especially those with children—through the goods and services tax (GST) credit ($3.6 billion). Since these payments are subtracted from ("netted against") 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 funds several Major Transfers to Other Levels of Government. These payments—totalling about $42.5 billion last year—help provinces and territories pay for health care, post-secondary education and other programs for Canadians.

Between 1996 and 2004, much of this support came through a single program, the Canada Health and Social Transfer. However, to improve the transparency and accountability of federal support for health, the federal government created two separate programs starting in 2004.

• The Canada Health Transfer (CHT) last year provided provinces and territories with cash support for health programs equal to about 8½ cents of each tax dollar ($20.1 billion).

• The Canada Social Transfer (CST)—to support post-secondary education, social programs, and programs for children—gave provinces and territories cash funding representing over 3½ cents of each federal tax dollar ($8.5 billion). 

Further major transfers, including the Equalization and Territorial Formula Financing programs, equal 5½ cents of every tax dollar ($13.1 billion). These are payments from Ottawa to less prosperous provinces, and to the three territories, to help them provide public services that are reasonably comparable to those that more prosperous provinces can deliver.

There were also a variety of other federal transfers, such as $0.6 billion in gas tax transfers to cities and communities for purposes of environmentally sustainable municipal infrastructure, $0.7 billion for early learning and child care, and $2.7 billion in targeted support to provinces and territories for health care, post-secondary education, labour market training and the environment. Together, these helped boost transfer funding by almost 2 cents of each tax dollar ($4.0 billion).

As a result of long-standing fiscal arrangements with the provinces, these total transfers exceed $42 billion.

Alternative Payments for Standing Programs and the Quebec Abatement  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.   Under these arrangements, the Government of Canada reduced—or "abated"—personal income tax while Quebec increased its personal income taxes by an equivalent amount. The Quebec Abatement represents 16.5 percentage points of federal personal income taxes: 13.5 percentage points (Alternative Payments for Standing Programs) are related to health and social programs and 3 percentage points (Youth Allowances Recovery) are related to changes to the federal family allowance programs in 1972.   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 federal program spending.

 

Support for Health Care Federal support for health care goes beyond cash payments under the Canada Health Transfer and the Equalization program. For example, in 1977 the federal and provincial governments agreed to have provinces take over a share of federal taxes to supplement direct cash transfers. In 2006–07, these "tax points" added some $20.5 billion to provincial finances for programs such as health care as well as post-secondary education and social assistance and social services. There is also direct health-related spending by the federal government itself, which contributed over $6 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.

Other Grants and Contributions

Other transfer programs by various federal departments provide funds to individuals, governments and other organizations and groups for specific public policy purposes.

Last year, spending on these federal grants, contributions and subsidies added up to $26.8 billion, or over 11 cents of each tax dollar. This included:

• over $6.3 billion in transfers for First Nations and Aboriginal peoples;
• about $3.1 billion in assistance to farmers and other food producers;
• over $4.0 billion in foreign aid and other international assistance; and
• about $5.1 billion in support for research and development, infrastructure, regional development and assistance to businesses.
  

Other funding went to student assistance programs, health research and promotion, the arts, amateur sports, and multiculturalism and bilingualism.

Other Program Expenses

After transfers, the bulk of federal tax dollars went to cover the operating costs of government itself: the more than 130 departments, agencies, Crown corporations and other federal bodies that provide programs and services for Canadians.

Last year, these operating costs (such as salaries and benefits, facilities and equipment, and supplies and travel) made up almost 27 cents of each tax dollar ($63.3 billion).

A large share of this spending—close to 13 cents of each tax dollar—went to just three organizations.

Defence

First, spending last year by the Department of National Defence on Canada's military forces made up almost 7 cents of each taxpayer dollar ($15.7 billion).

Public Safety

Next, operating costs of Public Safety Canada were just over 3 cents of your tax dollar ($7.4 billion). This includes funding for the Royal Canadian Mounted Police, the federal prison system, and border traffic and security operations.

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 close to 3 cents of each tax dollar ($6.8 billion).

Other Operations

A further $26.3 billion—just over 11 cents of each tax dollar—was spent on the operations of the other federal departments and agencies.

These included major departments such as: Environment; Fisheries and Oceans; Health; Human Resources and Social 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.

Paying for Parliament One of the smallest slices of federal operating spending goes to Parliament itself—the House of Commons, the Senate and the Library of Parliament. Last year, the combination of salaries and benefits for Members of Parliament, Senators and parliamentary staff, and spending on facilities and services, totalled about $510 million. That's less than one-quarter of a cent of every tax dollar.

Crown Corporations

The last portion of Other Program Expenses were those incurred by Crown corporations (organizations owned directly or indirectly by the Government). This cost $7.2 billion, or a bit over 3 cents of your tax dollar. But the bulk of this spending was by just three organizations:

• the Canada Mortgage and Housing Corporation, which helps support home ownership and affordable housing, cost $2.1 billion;
• the Canadian Broadcasting Corporation, our national television and radio networks, cost $1.7 billion; and
• Atomic Energy of Canada Limited cost $0.9 billion.

Funding was also provided to cultural organizations (including the National Gallery of Canada, the Canadian Museum of Civilization and the Canada Council for the Arts), to enterprises like VIA Rail, and to the Canadian Tourism Commission.

4. Budgetary Surplus
(Debt Reduction)

The remaining 6 cents of the tax dollar was the $13.8-billion 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 reduces the federal debt.

That's our brief summary of the investments and operations where Canadians' federal tax dollars go. But before finishing, let's look at how these funds are raised.

Where the Money Comes From

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

• Personal income tax is the biggest revenue source. Last year, it provided $110.5 billion in federal funding. That's almost 47 per cent of all federal revenues. 

• Corporate income tax raised about $37.7 billion, about 16 per cent of federal finances. 

• Revenues from the goods and services tax provided $31.3 billion, or 13 per cent of total federal funds. 

• A number of other taxes—such as non-resident withholding taxes, customs import duties, energy taxes and excise taxes and duties on alcohol and tobacco—made up $18.9 billion, or 8 per cent of revenues. 

• As well, Employment Insurance premiums, which are treated as part of general revenues, contributed $16.8 billion to federal finances, or just over 7 per cent of the total. 

• And other revenues—such as earnings by Crown corporations and the sale of goods and services—provided the remaining $20.8 billion, or close to 9 per cent of total revenues. 

So that's the story of where your federal tax dollar goes, and how it was raised.

Useful links 

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

• Annual Financial Report 
  The Annual Financial Report of the Government of Canada provides overall financial data on federal revenues and spending on a full accrual accounting basis for the most recent complete fiscal year. It is available through the Finance Canada website under Publications at http://www.fin.gc.ca/toce/2007/afr_e.html.
• Fiscal Reference Tables 
  Along with the Annual Financial Report, Finance Canada also publishes its annual Fiscal Reference Tables. Financial information on the provinces and territories is also included. The tables are available through the Finance Canada website under Publications at http://www.fin.gc.ca/toce/2007/frt_e.html. 
• The Fiscal Monitor 
  Produced by Finance Canada, this monthly newsletter highlights the most recent financial results of the Government. It is available on the Finance Canada website under Publications at http://www.fin.gc.ca/serialse/2007/fiscmon-e.html.
• Public Accounts 
  The Public Accounts of Canada contain the Government's audited financial statements for the most recent fiscal year, and details of financial operations by each ministry. It is available through the Public Works and Government Services Canada website at  http://www.pwgsc.gc.ca/recgen/text/pub-acc-e.html. 
• Federal Budget 
  Usually introduced in February or March, the federal budget presents the Government's fiscal plan for the coming year, introducing new spending initiatives and any proposals for changes in taxation. Information on recent budgets is available from the Finance Canada website under Budget Info at http://www.fin.gc.ca/access/budinfoe.html.
• Estimates 
  The Government prepares Estimates—including individual departmental spending plans for the coming fiscal year—for presentation to Parliament in support of appropriation legislation. These are available on the Treasury Board of Canada Secretariat website at http://www.tbs-sct.gc.ca/est-pre/estime.asp.
• Debt Management Report 
  The annual Debt Management Report covers key elements of the federal debt strategy, and strategic and operational aspects of the Government's debt program and cash management activities over the past year. It is available on the Finance Canada website under Publications at http://www.fin.gc.ca/toce/2007/dmr07_e.html.
• Canada Revenue Agency 
  While the Department of Finance is responsible for setting federal tax policy, it is the Canada Revenue Agency (CRA) that manages the actual revenue collection for the federal government. A quick overview of CRA operations (and access to the agency's annual operating report and Internet home page) is available at http://www.cra-arc.gc.ca/menu-e.html

How Can I Get More Information?

A multimedia version of this document—which also includes direct links to other online material on federal finances—is available on the Internet at www.fin.gc.ca.

General information on the Government of Canada and its operations is available by phoning:

1 800 O-Canada (1 800 622-6232)
1 800 926-9105
(TTY for the speech and hearing impaired)