Canada Health Transfer
Unlike Equalization payments, which can be spent however the receiving provinces sees fit, the funds received as part of the Canada Health Transfer must be used by provinces and territories for the purposes of "maintaining the national criteria" for publicly provided health care in Canada as set out in the Canada Health Act.
The CHT is made up of a cash transfer and tax transfer. In 2008-09, CHT cash transfer payments from the federal government to the provinces and territories were $22.6 billion and tax point transfers were worth $13.9 billion. Annual cash levels are set in legislation up to the 2013-14 fiscal year as a result of the September 2004 Health Accord between the federal government and the provinces/territories.
While the transfer is allocated on an equal per capita basis, the cash component is not because it takes into account the value of provincial/territorial tax points. The value of a tax point represents the amount of revenue that is generated by one percentage point of a particular tax (in the case of the CHT and the CST, the personal income tax or the corporate income tax). Since provinces do not have identical economies and, therefore, have unequal capacity to raise tax revenues, a tax point is worth more in a wealthy province than in a poorer province.
Currently Alberta and Ontario, the two provinces with the highest revenue raising ability, receive lower per capita CHT cash payments than the other provinces until recently where Ontario received $347 million in equalization payments. Also, Newfoundland, a province which has received payments since the program's creation, is now a so-called "have" province, and is now a net contributor and does not receive Equalization payments.
Read more about this topic: Canadian Transfer Payments
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