QUÉBEC MAY STILL HAVE TO ABSORB A CUT OF
$840 MILLION IN EQUALIZATION PAYMENTS

• For over 15 years now, Québec has requested that the values shown on municipal property assessment rolls be used to measure fiscal capacity with regard to the property tax base for equalization purposes.
• The federal government persists in using a complex, arbitrary mathematical formula, with no relation to municipal property assessment rolls.
• Deferring the impacts of the changes made by the federal government until 2003-2004 and averaging them over five years does nothing to resolve the problems associated with the current tax base; it simply postpones them.

Québec could lose $840 million because of the change announced by the federal government to the following formula1

1. See Federal Transfer Payment Update, page 10.

A FAIR WAY TO RECTIFY CCRA'S ERROR

• Since 1972, the federal government has made an error with regard to the personal income tax it collects for provinces other than Québec.
• Overpayments for the period from 1993 to 1999 amount to $3.3 billion. If the year 2000 is included, they could total $4.5 billion.
• Should the federal government decide to recover these amounts, Québec would have to repay $825 million for equalization for the period from 1993 to 2000. The amount could even reach $1 billion once the data for 1972 to 1992 are known.
• Rather than recovering from the provinces the overpayments made with regard to income taxes and equalization, Québec proposes that the federal government pay compensation to the provinces that would afford them the same benefit as that granted Ontario, i.e. $321 per capita.
• This compensation would amount to $4.4 billion for the provinces as a whole, $1.6 billion of which would go to Québec.