Where Your Tax Dollar Goes
In 2003–04, Canada's federal government collected about $186 billion in taxes and other revenues. Here's a quick overview of where that money was spentâ€”and how it was raised.
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, 2003–04. It will be updated in fall 2005 when final results for the 2004–05 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 paymentsâ€”to institutions and individuals who hold federal bonds, Treasury bills and other forms of the debtâ€”cost $35.8 billion, or about 19 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. Overall, these three categories of transfers combined to make up just over half of all federal spendingâ€”$94 billion, or almost 51 cents of each tax dollar.
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.
- These transfers included payments to eligible elderly Canadians through Old Age Security payments, the Guaranteed Income Supplement and the Allowance for spouses. After interest on the federal debt, this support for seniors was the second largest spending item in the federal budgetâ€”$27 billion, or over 14 cents of your tax dollar.
- The other major transfer to people was employment insurance (EI) benefits to eligible unemployed workers (including periods of unemployment due to sickness, pregnancy, parental leave and caring for gravely ill or dying family members). In addition, funding also went to programs that assist people to prepare for, find and maintain jobs. Altogether, EI payments cost about $15 billion, or 8 cents of every tax dollar.
More About Support for Families and Children
The federal government also provided $11 billion in direct cash payments to low- and modest-income familiesâ€”especially those with childrenâ€”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 paymentsâ€”almost $30 billionâ€”went to provinces and territories to help fund health care, post-secondary education and other important social services.
- The largest share ($20.3 billion) went to the Canada Health and Social Transfer (CHST). This amounted to almost 11 cents of each tax dollar.
- Then there was $9.3 billion in funding under the equalization and Territorial Formula Financing programs, for about 5 cents of every tax dollar. These are payments from Ottawa to less-affluent provinces and to the territories to help them provide public services reasonably comparable to those that richer provinces can deliver.
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 2003–04, 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 creditsâ€”which reduce the amount of taxes paidâ€”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 groupsâ€”including businessâ€”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:
- about $9 billion in support for First Nations and Aboriginal peoples;
- about $4 billion in assistance to farmers and other food producers;
- some $3 billion in foreign aid and other international assistance; and
- almost $3 billion in support for research and development, infrastructure, regional development and assistance to businesses.
Other grants and contributions went to student assistance programs; health research and promotion; and the arts, multiculturalism and bilingualism.
3. Other Program Expenses
After transfers, the bulk of federal tax dollarsâ€”$47 billionâ€”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.
But nearly half of this spending ($22 billion, or over 12 cents of each tax dollar) went to just three organizations.
First, spending by the Department of National Defence on Canada's military forces was $12.9 billion, or about 6Â½ cents of each taxpayer dollar.
Next, operating costs of the Department of Public Safety and Emergency Preparedness were $4.6 billion, or 2Â½ cents of your tax dollar. 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 about $5.3 billion, or 3 cents of each tax dollar.
A further $18.8 billion was spent on the operations of all other federal departments and agenciesâ€”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 itselfâ€”the House of Commons, the Senate and the parliamentary library.
In 2003–04, 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.
The last portion of Other Program Expensesâ€”$5.4 billionâ€”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:
- the Canada Mortgage and Housing Corporation, which helps support home ownership and affordable housing, received $2.1 billion; and
- the Canadian Broadcasting Corporationâ€”our national television and radio networksâ€”received $1.1 billion.
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.
4. Budgetary Surplus (Debt Reduction)
The remaining $9.1 billion (or 5 cents of the tax dollar) was the budgetary surplusâ€”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 largeâ€”over $500 billion. This is why interest payments on the debt continue to be the federal government's biggest expense.
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.
- Personal income tax is the biggest revenue source. In 2003–04, it provided almost $84.9 billion in federal funding. That's more than 45 per cent of all federal revenues.
- Revenues from the goods and services tax provided $28.3 billion, just over 15 per cent of revenues.
- Corporate income tax raised over $27.4 billion, or almost 15 per cent of federal finances.
- A number of other taxesâ€”such as non-resident taxes, customs import duties, energy taxes and excise taxes on alcohol and tobaccoâ€”made up $16.2 billion, or nearly 9 per cent of revenues.
- As well, employment insurance premiums, which are treated as part of general revenues, contributed $17.5 billion to federal finances, or more than 9 per cent of the total.
- And other revenuesâ€”such as earnings by Crown corporations and the sale of goods and services-provided the remaining $11.8 billion, or 6Â½ per cent of total revenues.
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 at http://www.fin.gc.ca/toce/2004/afr_e.html.
- The Fiscal Monitor
Produced by Finance Canada, this monthly newsletter highlights the most recent financial results of the Government. It is available at the Finance Canada website at http://www.fin.gc.ca/serialse/2005/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. Because departmental spending is reported on a cash accounting basis, some figures differ from the Annual Financial Report. It is available through the Public Works and Government Services 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 at http://www.fin.gc.ca/access/budinfoe.html.
The Government prepares Estimatesâ€”including individual departmental spending plans for the coming fiscal yearâ€”for presentation to Parliament in support of appropriation legislation. These are available at 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 at the Finance Canada website at http://www.fin.gc.ca/toce/2004/dmr04_e.html.