SIPP Public Policy Papers 06

Abstract

It is becoming increasingly evident that the fiscal structures of the federal government and of provincial-territorial governments combined are not moving in parallel directions. While provincial and territorial governments must be vigilant in order to avoid budget deficits, the federal government enjoys surpluses that will increase in magnitude over time. This situation indicates that the Canadian federation is entering the new millennium with a fiscal structure that has a built-in tendency to generate vertical fiscal imbalances (VFI).