Minister pleased solution reached on tax overpayments to provinces

Finance Minister and Treasury Board President Joan Marie Aylward responded today to the federal finance minister John Manley�s announcement of a resolution to overpayments which had been made under the tax collection agreements (TCAs). Under these TCAs, the Government of Canada collects income taxes on behalf of most provincial governments.

This decision relates to an announcement on January 29, 2002 by the Canada Customs and Revenue Agency that it had identified an accounting problem whereby four provinces were receiving higher payments than they should under the Federal/Provincial Tax Collection Agreements. The federal government corrected the accounting error for the 2000 taxation year forward, to prevent further overpayments. While Newfoundland and Labrador was not directly affected by the tax overpayment, provinces receiving equalization had been concerned that the federal government would also move to recover related equalization payments. These tax recoveries reduce the total provincial revenues on which equalization payments are calculated.

"I am pleased that the federal government has decided not to recover equalization of $49 million paid to our province, related to the recovery of tax overpayments for the 1997-99 period", said Minister Aylward.

Minister Aylward indicated that she will be reviewing the implications of the Federal decision with her officials and will be seeking clarification on all aspects of the recent Federal decision. However, she reiterated that the decision not to recover equalization related to the 1997-1999 years is good news for the Province.

Media contact: Deirdre Robinson Greene, Communications, (709) 729-0084.

2002 09 05                                    1:10 p.m.