Archived - Where your Tax Dollar goes
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A multimedia presentation illustrating how federal revenues were spent in the most recent fiscal year available (2007-2008), as well as the main sources of government revenue. (requires a Flash plug-in)
For the fiscal year ending March 31, 2008, Canada’s federal government recorded $242.4 billion in taxes and other revenues. That represents close to 16 per cent of our country’s over $1.5 trillion economy.
Here’s a quick overview of where that money went—and how it was raised.
More about these numbers
The federal government calculates its financial results 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, 2007–08. 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. Public debt charges
The largest single federal spending item was interest charges on Canada’s public debt (that is, money borrowed by the federal 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 $33.3 billion. That’s almost 14 cents of every tax dollar.
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 54 cents of each tax dollar ($131.3 billion).
Transfers to persons
The biggest transfer category was Major Transfers to Persons. These payments to people cost about 24 cents of every tax dollar ($58.1 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 $32.0 billion, or just over 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 just under 6 cents of every tax dollar ($14.3 billion). For information on EI premiums, see the section entitled “Where the money comes from” below.
- The federal government also provided $11.9 billion in transfers to eligible families to help with the cost of raising children, through the Canada Child Tax Benefit and the Universal Child Care Benefit. These payments cost nearly 5 cents of every tax dollar.
More about 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 ($3.5 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.
Transfers to other levels of government
The federal government also funds several Major Transfers to Other Levels of Government. These payments—totalling about $46.2 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 9 cents of each tax dollar ($21.5 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 4 cents of each federal tax dollar ($9.9 billion).
Further major transfers, including the Equalization and Territorial Formula Financing programs, totalled 6 cents of every tax dollar ($14.6 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 in other provinces, at reasonably comparable levels of taxation.
There were also a variety of other large federal transfers, such as the $1.0-billion Community Development Trust to help provinces and territories assist communities and workers suffering economic hardship caused by the current volatility in global financial and commodities markets; $0.8 billion in gas tax transfers to cities and communities for environmentally sustainable municipal infrastructure; $0.5 billion for public transit; and $0.4 billion for police officer recruitment. Together, these helped boost transfer funding by over 1 cent of each tax dollar ($3.0 billion).
- 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 taxes 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 financial results 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.
2 More about federal 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 2007–08, these “tax points” added some $21.6 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 roughly $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 $27.0 billion, or over 11 cents of each tax dollar. This included:
- over $6.5 billion in transfers for First Nations and Aboriginal peoples;
- about $2.2 billion in assistance to farmers and other food producers;
- roughly $3.5 billion in foreign aid and other international assistance; and
- over $5.5 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.
3. 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 just over 28 cents of each tax dollar ($68.2 billion).
A large share of this spending—close to 13½ cents of each tax dollar—went to just three organizations.
First, spending last year by National Defence on Canada’s military forces made up over 7 cents of each taxpayer dollar ($17.3 billion).
Next, operating costs of Public Safety and Emergency Preparedness were just over 3 cents of your tax dollar ($7.9 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 3 cents of each tax dollar ($7.4 billion).
A further $28.2 billion—roughly 11½ 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 Skills 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.
2 More about 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 $526 million.
That’s less than one-quarter of a cent of every tax dollar.
The last portion of Other Program Expenses were those incurred by Crown corporations (organizations owned directly or indirectly by the Government). This cost $7.3 billion, or a bit over 3 cents of your tax dollar. But the bulk of this spending was by just three organizations:
- Canada Mortgage and Housing Corporation, which helps support home ownership and affordable housing, cost $2.2 billion;
- the Canadian Broadcasting Corporation, our national television and radio networks, cost $1.7 billion; and
- Atomic Energy of Canada Limited cost $1.2 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 4 cents of the tax dollar was the $9.6-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 generated $113.1 billion. That’s almost 47 per cent of all federal revenues.
- Revenues from the goods and services tax totalled $29.9 billion, or 12 per cent of total federal revenues.
- Corporate income tax raised about $40.6 billion, or close to 17 per cent of federal finances.
- 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 $20.0 billion, or 8 per cent of revenues.
- As well, Employment Insurance premiums, which are treated as part of general revenues, contributed $16.6 billion to federal finances, or just under 7 per cent of the total.
- And other revenues—such as earnings by Crown corporations and proceeds from the sale of goods and services—provided the remaining $22.3 billion, or 9 per cent of total revenues.
So that’s the story of where your federal tax dollar goes, and how it is raised. If you want more detailed information, we’ve provided a series of useful links—just click the icon at the top of your screen.
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 and Reports at http://www.fin.gc.ca/toc/2008/afr2008_-eng.asp.
- 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 and Reports at http://www.fin.gc.ca/toc/2008/frt08_-eng.asp.
- 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 and Reports at http://www.fin.gc.ca/pub/fm-rf-index-eng.asp.
- 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.tpsgc-pwgsc.gc.ca/recgen/txt/72-eng.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 Budgets and Fiscal Updates at http://www.fin.gc.ca/access/budinfo-eng.asp.
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 and Reports at http://www.fin.gc.ca/dtman/2007-2008/dmr08-eng.asp.
- Canada Revenue Agency
While Finance Canada 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/gncy/nnnl/2006-2007/menu-eng.html.