Federal-Provincial Fiscal Arrangements Regulations, 2007

21 (1) For the purpose of clause 19(1)(a)(i)(A), the simulated yield of the average provincial and territorial personal income tax for the territory 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 territory, of provincial and territorial personal income tax that would be derived by the territory from those individuals in the taxation year under each of the personal income tax systems of the 10 provinces and the three territories as if those personal income tax systems applied to the individuals in the territory;

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

• (c) with respect to each tax system, dividing each amount simulated under paragraph (a) for the territory by the amount simulated, on the basis of the corresponding province’s or territory’s tax system, under paragraph (b) for all 10 provinces and three territories;

• (d) calculating a weight for the tax system of each of the 10 provinces and three territories equal to a fraction

  • (i) whose numerator is the revenue for the fiscal year, as set out in the certificate, from the taxes imposed by a province or territory on the income of individuals, as described in subparagraph 18(a)(i), that is derived by the province or the territory under the tax system for which the weight is being calculated, and

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

• (e) multiplying each amount calculated under paragraph (c) by the respective weight calculated under paragraph (d); and

• (f) calculating the aggregate of the 13 products calculated under paragraph (e).

(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 territory 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 and territorial personal income tax

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

• (a) after taking into account all provincial or territorial tax credits that can be simulated for all 10 provinces and 3 territories 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 et territorial sur le revenue des particuliers)