The current formula of Canada’s equalization transfer program includes a number of disincentives that result in inefficient levels of taxation and government spending. 


The equalization transfer program was first introduced in 1957 and was designed to reduce the differences in revenue generating capacity across the provinces by compensating provinces with weaker tax bases or resource endowments. 

At present, the equalization formula works by calculating each province’s ability to generate revenues on a per-capita basis with several exceptions that distort transfers such as under- reporting of revenues by crown corporations as well as excess government spending and employment. 

Our Recommendations

  1. Amend the equalization formula such that it equalizes for both fiscal capacity and government spending while also allowing provincial fiscal surpluses to be exempt from the transfer calculation. 
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If you have any questions, contact Dana Severson at or (780) 425-4180 ext. 2.