Fixing Fiscal Federalism to Improve Canada’s Productivity Performance

Canada’s current system of fiscal federalism, which results in very large transfers of resources from have provinces to have-not provinces, promotes consumption over investment and hence does not maximize our productivity potential. The author recommends reform of Employment Insurance towards a true insurance program with the elimination of the interprovincial social transfer aspects of the program, and a shift in the tax system from business income to consumption by reducing corporate taxes and raising the Goods and Services Tax.