Latest Developments in the Canadian Economic Accounts
Deriving revenue, expenditure and budgetary balance of the government sector by province and territory

Release date: May 16, 2016

Introduction

The Provincial and Territorial Economic Accounts (PTEA) provide annual estimates of macroeconomic variables for each province and territory back to 1981. Historically in addition to components of gross domestic product, the PTEA included detailed estimates of revenues and expenditures for the federal, provincial-territorial, local, and Social Security Funds (Canada Pension Plan and Quebec Pension Plan) sub-sectors of government for each province and territory. However, at the time of the historical revision of the Canadian System of Macroeconomic Accounts (CSMA) in 2012, the publication of the detailed estimates of government sector revenues and expenditures by province and territory was suspended.

As part of the 2015 comprehensive revision of the PTEA and with the integration of the Canadian Government Finance Statistics (CGFS), the CSMA can now reintroduce detailed estimates for all government sub-sectors. The structure of the new tables follow the budgetary balance approach found in the National Income and Expenditure Accounts, with revenues, expenditures, surplus/deficit, and net lending all presented in one table for each government sub-sector, and each province and territory. The estimates range from 2007 to 2014, and will be updated annually.

The general approach to constructing the new tables

The revenue, expenditure and budgetary balance tables for the government sector include estimates of revenue, expenditure and budgetary balances for each province and territory for each of the following:

Compiling detailed budgetary balance tables for each province and territory is relatively simple for the provincial-territorial, local, and Quebec Pension Plan sub-sectors, as each of the governments exist and operate within the boundaries of their respective provinces and territories, and their related source data are available accordingly from the CGFS. In the case of the Aboriginal General Government sub-sector, each of those governments also exists and operates within the boundaries of their respective provinces and territories. The data used to compile the detailed budgetary balance table for the Aboriginal General Government sub-sector come from the Public Accounts of Canada, federal government taxation files, and from their own financial statements on the website of the Department of Indigenous and Northern Affairs Canada, which are also used to establish the provincial and territorial distribution for this sub-sector.

The compilation of similarly detailed tables for the federal and CPP sub-sectors is more challenging because these governments exist and operate in more than one province or territory, meaning their revenues, expenditures and budgetary balances need to be allocated across the provinces and territories.
As a standard practice to compile the detailed tables for these sub-sectors, the CSMA primarily follows three criteria to determine their provincial/territorial distribution:

  1. the geographic location of the economic activity;
  2. the geographic location of the counterparty involved and;
  3. the point of final consumption of goods and services by the government.

In instances where the geographic location associated with the three primary criteria is unclear, other distribution criteria are used.

Users should take note of the differing criteria used and the difficulties inherent in the geographic distribution of these data when performing their analysis, especially for residual aggregates such as surplus/deficit, and net lending/borrowing.

Overview of the provincial-territorial distribution of the federal government sub-sector

Federal government revenues are generally distributed to the province or territory from which the revenues arise, and the distributors are often available directly from federal government taxation data or the Public Accounts of Canada. Revenue items found in the federal government sub-sector table are distributed as follows:

Federal government expenditures are generally distributed to the province or territory in which the expenditures were made, or in which the federal government consumed the goods and services. As with the distribution of federal government revenues, some of the data are distributed using federal government data such as the Public Accounts of Canada, while other items are distributed using more indirect information. The estimates of the specific items in the federal government sub-sector table are distributed as follows:

Overview of the provincial-territorial distribution of the Canada Pension Plan sub-sector

The Canada Pension Plan (CPP) sub-sector contains only two revenue streams and they are distributed as follows:

Expenditures of the CPP sub-sector are distributed as follows:

Conclusion

The re-introduction of detailed estimates of the government sector by province and territory was greatly facilitated by the newly incorporated CGFS framework into the CSMA, and by the wealth of other data that pre-existed in the CSMA. While measuring the provincial and territorial distributions is relatively straightforward for certain sub-sectors of government, the distribution of the Federal General Government and the CPP sub-sectors is less clear-cut. To complete the task of distributing the estimates for the Federal General Government and CPP sub-sectors, the CSMA has followed three general criteria: (1) the geographic location of the economic activity; (2) the geographic location of the counterparty involved; (3) the point of final consumption of goods and services by the government.

While these criteria are reasonable for national accounting purposes, other criteria could have been used which would have resulted in different allocations. Users should be aware of how different criteria can affect analysis and interpretation of the resulting estimates. For instance, allocating federal government final expenditure on goods and services by point of use/consumption is consistent with the national accounting principle of valuing government production at the cost of its inputs. This methodology does not reflect which province’s or territory’s residents benefit by selling those inputs to the federal government nor does it begin to measure the value of federal government production consumed by Canadians in different provinces and territories.Note 5

Notes

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