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39 Tax Memo 1 (1966)

handle is hein.journals/taxmmo39 and id is 1 raw text is: TAX MEMO No.39 February, 1966 PROVINCIAL FINANCES 1965-66 This report is intended to fill the gap between the biennial issues of Provincial Finances. It updates the 1965 edition by adding the Estimates for the current year (1965-66) and replacing the Estimates figures for the previous year with preliminary ones. Since this summary of last year's budgets is pub- lished only a few weeks before the provinces will start bringing down their 1966 budgets, a word of explana- tion is in order. This timing results from the necessity of basing our analyses of provincial finances on the Dominion Bureau of Statistics' compilation of provin- cial figures in order to ensure interprovincial compara- bility. The Bureau's 1965-66 totals were not issued until January of this year, the delay being largely due to the heavy demands placed on it by the Tax Structure Committee in 1965. The Bureau combines current and capital figures and makes other adjustments according to concepts and definitions worked out at federal-provincial confer- ences. For this reason its results for individual prov- inces may differ from the budgetary outcome given in the provincial treasurers' statements. Estimates for the 1965-66 fiscal year show that overall provincial expenditure is expected to be greater than combined revenue by $468 million. According to the Bureau's compilation, only two provinces, British Columbia and Saskatchewan, planned to end the year with more revenue than expenditure. However six pro- vincial treasurers forecast higher revenue than expendi- ture in their 1965 budget speeches, but in many cases they were referring only to current account data. About two-thirds of the provinces' revenue in the current year will come from taxes. Taxes are expected to produce $408 million more than in 1964-65, largely because of a 47% increase in receipts from the personal income tax. The extra abatements to Quebec for opting out are partly responsible for this increase. Privileges, licences and permits are estimated to bring in $742 million, or about 16% of all revenue, and federal pay- ments will amount to about $475 million (10% of total provincial revenue). This figure includes extra amounts which the federal government is paying to Quebec in compensation for that province's withdrawal from cer- tain joint programs. Remaining income is made up of liquor revenue (5% of the total) and miscellaneous non-tax receipts. Education will continue to take the largest slice of the provincial expenditure pie. At an estimated cost of almost $1.5 billion, education is expected to consti- tute 28% of all provincial expenditure. Hospital care and other health functions are anticipated to account for almost 21% of total costs, with social welfare add- ing another 8%, at an estimated total cost of $1.5 bil- lion for health and welfare together. Transportation and communications expenditure of $940 million will probably claim 18% of total expenses. Total direct debt for all provinces amounted to $4.8 billion at March 31, 1964 (an increase of $2.4 billion over the figure for 1955) and indirect debt, to $5.5 billion (an increase of almost $4 billion over 1955). Preliminary figures for March 31, 1965 indi- cate that direct funded debt had further increased by almost $300 million and guaranteed bonds and deben- tures by $587 million over 1964. During the past ten years current and capital expenditure (exclusive of debt retirement) of all pro- vincial governments has risen by 229%-from almost $1.6 billion in fiscal 1956 to an anticipated $5.2 billion in fiscal 1966. Total revenue during the same period has increased by only 192%-from $1.6 billion to an estimated $4.7 billion. In 1956 revenue was $38 mil- lion higher than expenditure but the 1966 figures indi- cate that expenditure will be higher than revenue by an estimated $468 million. A more detailed analysis follows. Additional copies of the Memo may be obtained at a price of 25¢. © 1966, Canadian Tax Foundation FOUNDATION CANADIAN T AX

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