Fiscal Stabilization Program Amendments

Summary#

These are final regulations called Regulations Amending the Federal-Provincial Fiscal Arrangements Regulations, 2007 (SOR/2023-45). They update technical rules for the federal Fiscal Stabilization Program to clarify what revenue numbers are used, speed up final payments, and stop treating tax indexation as a “policy change.” The regulations were registered on March 9, 2023 and published on March 29, 2023; one timing change comes into force on December 1, 2023.

What it does#

• Aligns regulatory details with the law that modernized the Fiscal Stabilization Program (changes put in law by the Budget Implementation Act, 2021, No. 1).
• Defines exactly what counts as provincial personal and corporate income tax revenue for program claims, including:
  • taxes assessed or reassessed in a calendar year, net of certain credits and refunds;
  • a province’s share of unapplied payments under tax collection agreements; and
  • amounts deducted at source that haven’t been assessed yet (for provinces without tax collection agreements).
• Says the annual certificate that supports fiscal-stabilization calculations must be prepared by the Chief Statistician of Canada and include population, nominal GDP and specified provincial revenue data for recent years.
• Lets the Minister of Finance use alternative data sources if the prescribed data are missing or incorrect.
• Removes the rule that treated routine indexation of personal income tax thresholds as a province-made “policy change,” so indexing for inflation won’t automatically reduce a stabilization claim.
• Shortens the deadline for the Minister to make a final computation of a province’s claim from 32 months to 21 months after the end of the fiscal year (that specific change comes into force on December 1, 2023).
• Supports (but does not itself change) the modernized payment cap that was legislated to be indexed from the old $60 per person cap to about $170 per person for 2019–2020 and 2020–2021.

Who's affected#

• Provincial governments and their finance departments — they file claims and receive potential stabilization payments.
• Provinces that have tax collection agreements with the federal government — the rules treat some tax items differently depending on whether such an agreement exists.
• The Department of Finance Canada and the Minister of Finance, who administer the program and will use the new data and timing rules.
• Ordinary taxpayers are affected only indirectly (through provincial finances and services). If it’s unclear exactly how any single province’s payments will change, that depends on that province’s revenues and whether it indexes its tax system.

Why it matters#

• Payments arrive sooner: provinces that qualify can get final settlement roughly one year earlier (finalized in 21 months instead of 32 months), which helps budgeting after a sudden revenue drop.
• Indexation no longer hurts claims: provinces that index personal income tax for inflation are less likely to be penalized when measuring revenue drops.
• More predictable and transparent math: clearer rules and a required Statistics Canada certificate make the program’s calculations more consistent across provinces.
• The changes mostly tidy up how the modernized program is implemented; they are not expected to greatly alter overall program costs except in the event of a large downturn. The regulatory changes apply to claims for 2021–2022 and onward.