Federal-Provincial Fiscal Arrangements Regulations, 2007

10 (1) For the purpose of clauses 5(a)(i)(A) and 8(1)(a)(i)(A), the simulated yield of the average provincial personal income tax for the province for a taxation year ending in a fiscal year shall be determined by means of the micro-simulation model by

• (a) simulating, in turn, the amounts, aggregated over all individuals in the province, of provincial personal income tax that would be derived by the province from those individuals in the taxation year under each of the personal income tax systems of the 10 provinces as if those personal income tax systems applied to the individuals in the province;

• (b) calculating a weight for the personal income tax system of each of the 10 provinces equal to a fraction

  • (i) whose numerator is the revenue for the fiscal year, as set out in the certificate, from the taxes described in subparagraph 4(1)(a)(i) or paragraph 7(1)(a), as the case may be, that is derived by the province with the personal income tax system for which the weight is being calculated, and

  • (ii) whose denominator is the aggregate, over the 10 provinces, of the revenue referred to in subparagraph (i);

• (c) multiplying each amount simulated under paragraph (a) by the respective weight calculated under paragraph (b); and

• (d) calculating the aggregate of the 10 products calculated under paragraph (c).

(2) The following definitions apply in this section.

current year’s adjusted federal income tax payable

current year’s adjusted federal income tax payable means, in relation to an individual in a province for a taxation year, the amount of “tax otherwise payable under this Part”, as defined in subsection 120(4) of the Income Tax Act, as computed in the following taxation year, excluding any amount related to trusts. (impôt fédéral sur le revenu rajusté à payer au cours de l’exercice)

provincial personal income tax

provincial personal income tax means, in relation to an individual for a taxation year, the provincial tax on the income of an individual calculated under a provincial income tax system as determined by the micro-simulation model

• (a) after taking into account all aspects of that income tax system, including tax credits, that can be simulated for all 10 provinces on the basis of information available within, or imputable from, the micro-simulation model; and

• (b) in the case of the income tax system of Quebec, by subtracting an amount equal to 16.5% of the current year’s adjusted federal income tax payable for that individual. (impôt provincial sur le revenue des particuliers)