Finances of the Nation: The Impact of Covid-19 on Provincial and Local Government Finances

Abstract

For almost 60 years, the Canadian Tax Foundation published an annual monograph, Finances
of the Nation, and its predecessor, The National Finances. In a change of format, the 2014 Canadian Tax Journal introduced a new “Finances of the Nation” feature, which presents annual surveys of provincial and territorial budgets and topical articles on taxation and public expenditures in Canada. In this article, Ayaka Behro and Michael Smart explore the impact of COVID-19 on provincial government finances. While spending rose in all provinces in the 2020-21 fiscal year, so did revenues in many provinces, cushioning the impact on deficits. While grants and income tax revenues rose in many provinces, largely owing to federal policies, consumption tax and natural resource revenues fell sharply. Comparing provinces, higher COVID-19 caseloads were associated with higher health spending and lower consumption tax revenues. These findings suggest that COVID-19 has had a more damaging impact on provincial finances than initial forecasts had suggested. The underlying data for this and other articles in the Finances of the Nation series are available from https://financesofthenation.ca.

Keywords: Fiscal Policy, Government Finance, Public Finance, Provincial Taxes, Spending, Health Care Expenditures