Canada

Abstract

Abstract Canada has evolved into one of the most fiscally decentralized federations in the world. Provinces enjoy considerable autonomy and play a central role in designing and implementing economic and social policies. This chapter outlines key features of Canadian fiscal federalism, especially the extensive decentralization of legislative responsibilities and taxation powers to provincial governments, the wide-ranging intergovernmental transfer system designed to maintain fiscal balance between orders of governments and among provinces, as well as the mechanisms in place to promote some harmonization of policies and cooperation among provinces. Current challenges to Canadian fiscal federalism are outlined including pressures on horizontal and vertical fiscal balance associated with demographic changes, rapidly increasing costs in the public health care system which have been intensified by the Covid-19 pandemic, persistent tensions associated with the geographic concentration of natural resources, as well as pressures on municipal finance resulting from ongoing urbanization and growing infrastructure needs, among others.