What does fiscal equalization mean?

In Canada, the Government of Canada makes payments to less wealthy Canadian provinces to equalize the provinces’ “fiscal capacity”—their ability to generate tax revenues. The objective of the program is to ensure that all provinces have access to per capita revenues equal to the potential average of all ten provinces.

What is horizontal fiscal imbalance?

A horizontal fiscal imbalance describes a situation in which revenues do not match expenditures for different regions of the country. A horizontal fiscal imbalance occurs when sub-national governments do not have the same capabilities in terms of raising funds from their tax bases to provide public services.

What is equalisation government?

Table A – Equalization payments to Canadian provinces. Province. 2021–22. $M. 2020–21.

What is vertical fiscal imbalance and how does it impact on policy making?

Vertical fiscal imbalance means that the revenue-raising abilities of the governments do not coincide with their spending responsibilities. The result of the limitations on state taxing power is that the Commonwealth collects the money through taxes, and distributes that money to states.

What are Equalisation payments?

An equalisation payment occurs when you purchase a fund between the previous and next dividend payment date. When this occurs, part of the next dividend has already accrued in the price you paid for the units. As a result, when you bought the units you had in fact paid for part of the dividend.

What is the difference between vertical fiscal imbalance and horizontal fiscal imbalance?

According to Berhanu (2009), a vertical fiscal imbalance occurs when the own revenue and expenditure capacity of various levels of government within a federation are unequal. While horizontal imbalance occurs when the own fiscal abilities of various sub-national governments of the same level differ.

How do you fix fiscal imbalance?

Measures To Overcome Fiscal Imbalance In India – Fiscal Policy

1. Reduction in Interest Burden.
2. Reducing Subsidies.
3. Reduction in Government Overheads.
4. Closure of Sick Units.
5. Collection of user charges.
6. Improvement in Performance of PSUs.
7. Proper Mobilization of Tax Resources.
8. Market oriented development.

What is an Equalisation?

Equalisation is the method used by funds in order to ensure that every shareholder pays the same percentage of performance\incentive fee no matter when they subscribe to the fund. Equalisation is relevant to all funds in which an incentive fee is paid to an investment manager.

Why is vertical fiscal imbalance bad?

Among other things it creates inefficiencies, undermines accountability between different tiers of government, reduces fiscal transparency and can result in the misallocation of resources.

What is distribution Equalisation?

Distribution Equalisation in Unit Trust Funds (with Appendix) The issue: Unit trust funds account for Distribution Equalisation (“DE”) to safeguard the interest of existing unit holders in situation where new unit holders enter into the Fund and existing unit holders exiting the Fund at a later date.

Is Equalisation income or capital?

The equalisation payment is not treated as taxable income – it is a return of the investor’s capital and will reduce the amount invested for the purposes of capital gains tax (CGT).