ARCHIVED - RPP 2007-2008
Department of Finance Canada

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Section II: Analysis of Program Activities by Strategic Outcome

Section II provides detailed information on how each of the Department of Finance Canada's 10 program activities supports the Department's strategic outcome and priorities over the reporting period.

Strategic Outcome

The Department has one strategic outcome: To create a fiscal, economic, social, and global advantage for Canada by providing appropriate policies and sound advice with respect to economic, social, and financial conditions and to the government's overall agenda.

The Department continues to maintain a balanced approach that will ensure a sustainable fiscal structure, encourage a more productive, competitive, and dynamic Canada, and support and sustain Canadian society.

Figure 5 summarizes how each of the Department's 10 program activities is linked to its four priorities.

Figure 5

Support of Departmental Priorities by Program Activity

Program Activities	Priority 1 Sound Fiscal Management	Priority 2 Sustainable Economic Growth	Priority 3 Sound Social Policy Framework	Priority 4 Effective International Influence
1 Tax Policy	√	√	√
2. Economic and Fiscal Policy	√	√
3. Financial Sector Policy	√	√	√	√
4. Economic Development and Corporate Finance	√	√	√
5. Federal-Provincial Relations and Social Policy	√		√
6. International Trade and Finance		√		√
7. Public Debt	√
8. Domestic Coinage	√
9. Transfer Payments to Provinces and Territories			√
10. International Financial Organizations				√

Program Activity 1: Tax Policy

The Tax Policy Branch is responsible for the development and evaluation of federal taxation policies and legislation regarding personal and business income tax, sales tax, and excise tax. The Branch provides advice and recommendations for changes to improve the personal, corporate, sales, and excise tax systems while raising the required amount of revenue to finance government priorities. The Branch also provides advice on federal-provincial and federal-Aboriginal tax coordination.

Initiatives include developing tax legislation and negotiating tax treaties, federal-provincial tax collection and reciprocal agreements, federal-Aboriginal tax administration agreements, and tax policy research and evaluation.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
32,689	32,814	32,310

Human Resources (FTEs)

2007–08	2008–09	2009–10
244	248	247

Priorities

The work of the Branch and both its expected results contribute to the following three of the Department's priorities:

1. Sound Fiscal Management;
2. Sustainable Economic Growth; and a
3. Sound Social Policy Framework.

The tax system contributes to these priorities by raising sufficient revenues to pay for public services, including social programs (e.g. universal health care, and public safety and security) and strategic investments in areas that promote a more competitive and productive Canadian economy (e.g. education and training, basic scientific research, and infrastructure). At the same time, however, revenues must be raised in a manner that keeps tax burdens and marginal tax rates low to provide incentives to work, save, and invest. Tax revenues must also be raised in a fair manner so that taxpayers in similar circumstances face similar tax treatment, ensuring that the tax burden is shared in accordance with the ability of taxpayers to pay. Where appropriate, the tax system may also be used to pursue specific economic and social objectives, such as savings for post-secondary education, promoting physical activity among children, encouraging research and development, and helping protect the environment.

Expected results

1. Improving the fairness, efficiency, and competitiveness of the personal, corporate, sales, and excise tax systems while raising the required amount of tax revenue

The Tax Policy Branch will continue to advise the minister of Finance over the 2007–10 planning period on potential measures to further improve the competitiveness, efficiency, and fairness of the tax system in a fiscally sustainable manner. This will include reducing the GST by an additional percentage point starting no later than January 1, 2011, and developing other measures to support implementations of Advantage Canada, the government's strategic long-term economic plan.

The Tax Policy Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Provide sound and timely advice, analysis, briefings, and recommendations to the minister and senior officials on ways to improve the tax system, including proposals to make it more attractive for Canadians to work, save, and invest; make the tax system fairer; improve the competitiveness of the tax system; and support other government priorities.
• Meet and consult with the Canada Revenue Agency, the Department of Justice Canada, and other government departments, as well as external stakeholders, including tax professionals, business groups, and representatives of non-governmental organizations, other jurisdictions, provincial governments, Aboriginal peoples, and international organizations to listen to their concerns and views, to discuss and explain the government's policies, and to ensure the effective functioning of Canada's tax system and implementation of policy changes.
• Conduct consultations with provinces and stakeholders on various taxation issues.
• Manage the Air Travellers' Security Charge, the Comprehensive Integrated Tax Coordination Agreement, and the Harmonized Sales Tax provincial revenue payment mechanism.
• Assess and manage risks associated with court challenges related to taxation matters and be prepared to take appropriate actions.
• Evaluate various measures in the Canadian tax structure to ensure that they continue to be relevant, effective, and efficient.
• Improve databases, research tools, and research methodologies in order to enhance the quality of analysis in the Branch.
• Increase the use of contract research to broaden scope and improve timeliness.
• Publish the annual tax expenditure report.

Key commitments

• Identify initiatives for budgets and provide thorough analysis of these initiatives, including estimates of costs and effects on affected taxpayers. Among other potential policy measures that will be assessed and possibly implemented during the planning period are:
  • options to support the government's commitment to use interest savings on national debt repayments to reduce personal income taxes;
  • options for reducing taxes on new investment towards the goal of establishing a Canadian marginal effective tax rate (METR) that is the lowest in the G7—this will include aligning capital cost allowance rates with the useful life of assets and encouraging provinces to pursue policies that improve the competitiveness and efficiency of Canada's tax system;
  • options to improve the tax treatment of personal savings (including capital gains);
  • ways to help parents save for the long-term financial security of a child with severe disabilities; and
  • improved incentives to work for low-income Canadians, including the Working Income Tax Benefit.
• Prepare and draft parts of the budget plan relating to taxation, the supplementary tax annexes, and other budget products within deadlines.
• Implement goods and services tax / harmonized sales tax (GST/HST) measures to streamline GST/HST compliance in the financial services sector.
• Draft income tax legislation to implement government initiatives (e.g. the Tax Fairness Plan announced in October 2006, outstanding technical amendments and measures related to foreign affiliates, and future measures to be announced both in the budget and outside the budget over the 2007–10 period) on a sound and timely basis.
• Undertake research to support future tax policy initiatives, including the expanded use of the marginal effective tax rate methodology.

2. Sound fiscal relationships with provinces, Aboriginal governments, and other countries

In order to ensure that the tax system functions efficiently, the federal government works with provinces, Aboriginal governments, and other countries to improve tax policy coordination. It also undertakes ongoing analysis of the impact of both new and existing tax policy initiatives on these jurisdictions.

The Tax Policy Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Review new provincial tax measures administered under the tax collection agreements.
• Review entities in Schedule A of the reciprocal taxation agreements.
• Review set-off arrangements with provinces.
• Make methodological improvements to payments under the tax collection agreements.
• Evaluate and develop options that promote federal-provincial tax harmonization.
• Manage the First Nations Sales Tax, the First Nations Goods and Services Tax, and the First Nations Personal Income Tax payment mechanism.
• Negotiate tax elements related to more than 20 agreements in principle and four final comprehensive land claim agreements and self-governing agreements with Aboriginal peoples.
• Negotiate new First Nations Goods and Services Tax, and First Nations Personal Income Tax agreements with Aboriginal governments.
• Maintain Canada's network of international tax treaties.
• Seek to obtain tax information exchange agreements with non-treaty jurisdictions.

Key commitments

• Develop options to address the challenge set out in Advantage Canada, released in November 2006, to work with provinces to build a more competitive national tax system.
• Enter into a corporate income tax collection agreement with Ontario consistent with the Canada–Ontario Memorandum of Agreement signed on October 6, 2006.
• Negotiate new reciprocal taxation agreements with a number of provinces and territories.
• Develop long-term sustainable tax policies regarding Aboriginal self-government and comprehensive land claims.
• Develop negotiation strategies in respect of comprehensive land claim and self-government agreements.
• Negotiate new and revised tax treaties with other countries, as appropriate.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Improving the fairness, efficiency, and competitiveness of the personal, corporate, sales, and excise tax systems while raising the required amount of tax revenue	2. Sound fiscal relationships with provinces, Aboriginal governments, and other countries
Performance Indicators	1.1 Proposals and research to improve the competitiveness, efficiency, and fairness of the personal, corporate, sales, and excise tax systems 1.2 Amount of tax revenue raised	2.1 Active negotiation of additional tax administration agreements with provincial and Aboriginal governments 2.2 Effective network of tax treaties with other countries 2.3 Effective meetings of the Federal-Provincial Tax Committee
Data Sources	Federal budgets, legislation, regulations, press releases, tax treaties, the Department's Marginal Effective Tax Rate models, Public Accounts, tax evaluations, working and research papers, and tax expenditure reports	Federal-provincial agreements, federal-provincial meetings, federal-Aboriginal agreements, and federal-Aboriginal negotiations
Frequency	Annual	Annual
Target	1.1 Proposals in the budget and throughout the year, as required, to implement the government's tax policy agenda and maintain a competitive, effective, and fair tax system 1.2 Collect sufficient tax revenues to pay for public services 1.3 Publication of the tax expenditures and evaluations report 1.4 Two published evaluations per year	Increased number of tax agreements and tax treaties signed
Target Date	Ongoing	Ongoing

Program Activity 2: Economic and Fiscal Policy

The Economic and Fiscal Policy Branch is responsible for monitoring and preparing forecasts of Canada's economic and fiscal position, and plays a lead role in the management of the government's fiscal framework. The Branch provides ongoing analysis and advice regarding the government's economic policy framework, its budget planning framework and spending priorities, as well as the fiscal positions of other levels of government and in other countries.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
15,007	15,065	15,064

Human Resources (FTEs)

2007–08	2008–09	2009–10
121	122	122

Priorities

Priority 1: Sound Fiscal Management

The Branch contributes to sound fiscal management by ensuring that budget planning is carried out in a transparent manner and supports long-term fiscal sustainability. The Economic and Fiscal Update 2006 builds on changes made in Budget 2006 to improve fiscal transparency and accountability of budget planning.

Expected results

1. Transparent fiscal planning and sustainable fiscal policy

The government's framework will help ensure that fiscal planning is transparent and supports long-term fiscal sustainability.

The Branch will undertake the following ongoing activities and key commitments in support of the expected result.

Ongoing

• Continue to monitor and assess fiscal developments, update fiscal projections, provide fiscal policy analysis and advice, and play a lead role in the management of the fiscal framework and coordination of the Economic and Fiscal Update and the budget.
• Provide information on the government's financial position in the monthly Fiscal Monitor.
• As committed to in the Federal Accountability Action Plan, provide quarterly updates of the fiscal outlook for the current fiscal year.
• Prepare the Annual Financial Report of the Government of Canada on the government's fiscal performance for the previous fiscal year.

Key commitments

• Present in the Economic and Fiscal Update fiscal projections for the current year and the next five years to show medium-term implications of current policies. Since a short planning horizon is appropriate for budgetary decisions, the budget will continue to focus on a two-year horizon.
• Plan for annual debt reduction of $3 billion and a reduction of the debt-to-GDP ratio to 25 per cent by 2012–13. This is the government's contribution to the goal of eliminating Canada's total government net debt by 2021.
• Dedicate interest savings from federal debt reduction to personal income tax reductions.
• Keep growth of spending, on average, below the rate of growth in the economy.

Priority 2: Sustainable Economic Growth

The Branch contributes to sustainable economic growth through an accurate assessment of current and future economic conditions both in Canada and abroad, an analysis of effective economic policies, and in-depth economic research.

A focus for 2007–08 will be to monitor and assess the implications for the Canadian economy of U.S. economic developments, and of fluctuations in commodity prices and the Canadian dollar. In the longer term, two areas of focus are the implications of the rise of emerging markets and population aging.

An effective assessment of these issues will enable the government to better anticipate potential fiscal constraints arising from future economic conditions and to develop effective policies to promote long-term growth.

Expected results

2. Effective analysis of economic performance

The current economic environment is one characterized by issues that are constantly changing, complex, and far-reaching. It is critical that the government understand the strengths and weaknesses of the Canadian economy now and in the future in order to develop economic policies that lead to sustained economic growth. In-depth economic research is also essential to understand and evaluate the interactions and effects of economic developments.

The government benefits from understanding past, ongoing, or proposed reforms in other countries and their implications for the economic and fiscal situation abroad. This understanding will enable the government to develop and implement economic policies that are best suited to promote sustained economic growth in Canada. International cooperation is necessary to understand and provide an accurate assessment of the economic and fiscal conditions around the world.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Provide regular briefings to the minister on major macroeconomic developments in Canada and abroad, as well as informing the public of key economic developments.
• Provide briefings on the main drivers of productivity growth, the implications of globalization and emerging economies, and population aging. This information includes chapters on economic developments and outlook in the Economic and Fiscal Update and the Budget Plan, briefing notes to the minister, and regular documents such as the Economy in Brief.
• Consult regularly with officials from the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) to share data and views on economic developments in Canada and the world.
• Continue to represent Canada at OECD meetings and to provide analysis on economic policies proposed by the institution.

Key commitments

• Conduct four private-sector surveys of the Canadian economic outlook and assess the potential risks to these outlooks.
• Analyze and monitor key structural factors underlying Canada's economic performance.
• Analyze possible measures to improve Canada's productivity performance.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Transparent fiscal planning and sustainable fiscal policy	2. Effective analysis of economic performance
Performance Indicators	1.1  Publication of fiscal projections 1.2  Federal debt as a share of the gross domestic product (GDP)	Canada's GDP growth relative to the G6 (G7 less Canada)
Data Sources	1.1  Federal budget and Economic and Fiscal Update 1.2 Annual Financial Report of the Government of Canada	IMF World Economic Outlook
Frequency	1.1  Twice a year 1.2 Annual	Semi-annual
Target	1.1  Publish two-year and five-year fiscal projections 1.2  Reduce the federal debt-to-GDP ratio to 25% by 2012–13	Above-average annual growth rate
Target Date	1.1  Ongoing 1.2  March 31, 2013	Ongoing

Program Activity 3: Financial Sector Policy

Under this program activity, the Financial Sector Policy Branch is responsible for providing analysis of Canada's financial services sector and financial markets, as well as developing the legislative and regulatory framework governing federally chartered financial institutions (banks, trust companies, insurance companies, and cooperative credit associations) and federally regulated defined benefit pension plans. The Branch is also responsible for issues related to anti-money laundering and anti-terrorist financing. The Branch also manages the government's cash and official international reserves, and provides support to the minister regarding Crown corporation borrowing.

The Branch is responsible for the public debt and domestic coinage programs. For more information on these programs, see Program Activities 7 and 8, Public Debt and Domestic Coinage.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
18,113	15,966	16,483

Human Resources (FTEs)

2007–08	2008–09	2009–10
129	116	118

Priorities

Priority 1: Sound Fiscal Management

The focus of Financial Sector Policy Branch activity for 2007–08 will be pursuing improvement to the borrowing framework for major government-backed entities. These activities will, among other things, contribute to reduced debt service costs for the federal government and its agencies.

Expected results

1. Prudent and cost-effective treasury management of the borrowing activities of Crown corporations and the government's investment portfolios

Under the Financial Administration Act, the minister is responsible for approving borrowing by government entities and ensuring prudent treasury management policies. A 2005 study by an outside consulting firm of the current borrowing framework for major Crown borrowers identified improvements to the existing framework and advised on the potential benefits and costs of a consolidated borrowing framework.

In addition, under the Financial Administration Act and the Currency Act, the minister is responsible for the management of the government's cash and reserve assets. Funds need to be invested with due regard for risk and return. External evaluations of cash management and reserves management conducted in 2006 identified a number of possible enhancements.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Provide advice on borrowing plan approvals and on ministerial policies for prudent treasury management for major Crown borrowers.
• Provide advice on cash and reserves investment policy, working in collaboration with the government's fiscal agent, the Bank of Canada.

Key commitments

• Enhance the borrowing framework for major government-backed borrowers, taking into account the interests of the entities and their stakeholders, market participants, and the government as a shareholder.
• Follow up on the recommendations of the external evaluations of cash management and reserve management.

Priority 2: Sustainable Economic Growth

Ensuring the competitiveness, efficiency, safety, and soundness of Canada's financial sector and ensuring that domestic financial markets function well are necessary to achieving sustainable growth in the Canadian economy. For 2007–08, the focus will be on making progress on more collaborative and efficient securities regulation and enforcement, and on establishing a common securities regulator in Canada, implementing and drafting regulations in the context of the 2006 review of the financial institutions statutes, implementing regulations associated with the new corporate governance legislation for financial institutions, undergoing a planned Financial Sector Assessment Program (FSAP) update by the International Monetary Fund, as a follow-up to the assessment conducted in 1999, and reviewing the mortgage insurance framework.

Expected results

2. A regulatory framework that promotes a sound, efficient, and competitive Canadian financial sector that serves the needs of individuals, businesses, and the economy

The Department advises on and develops policy, legislation, and regulations to support a leading-edge financial services sector and domestic capital market to achieve a more productive, competitive, and dynamic economy.

The Branch plans to attain the expected result through the following ongoing actions and key commitments.

Ongoing

• Conduct policy analysis and provide advice on a broad range of financial sector issues, including:
  • payment systems;
  • financial stability issues;
  • issues related to the regulatory and supervisory framework for the financial services industry;
  • federal-provincial financial sector issues;
  • structural issues;
  • consumer issues;
  • financial services trade issues; and
  • competition issues.
• Develop a supportive environment for financing Canadian companies by identifying areas for potential policy change.

Key commitments

• Implement and draft regulations associated with Bill C-37, An Act to amend the law governing financial institutions and to provide for related and consequential matters.
• Develop regulations associated with Bill C-57, An Act to amend certain Acts in relation to financial institutions.
• Plan, coordinate, and undergo an IMF FSAP update.
• Work with the provinces and territories to make progress on more collaborative and efficient securities regulation and enforcement, and on establishing a common securities regulator in Canada.
• Review the mortgage insurance framework.

Priority 3: Sound Social Policy Framework

A properly designed private pension system, with appropriate incentives for both employers and employees, can contribute to the security and prosperity of Canadian workers and retirees, and support increases in living standards.

Expected results

3. A legislative and regulatory framework that ensures the security and viability of federally regulated defined benefit pension plans

The Department will continue to review and assess means to strengthen the legislative and regulatory framework for federally regulated defined benefit pension plans in order to ensure the security and viability of defined benefit pension plans.

The Branch plans to attain the expected result through the following ongoing activity.

Ongoing

• Conduct analysis and research, draw upon consultations, and study domestic and international trends in order to provide policy advice on pension issues.

Priority 4: Effective International Influence

The Department is responsible for issues related to anti-money laundering and anti-terrorist financing. The Department's leading role in the global fight against money laundering and terrorist financing contributes to public safety in Canada and worldwide. Until July 2007, the focus will be on the continuing role of the presidency of the Financial Action Task Force (FATF). Presiding over the FATF demonstrates internationally Canada's commitment to remain at the forefront of the global fight against terrorist financing and money laundering. Throughout the year, the focus will be on enhancing Canada's anti-money laundering and anti-terrorist financing regime and establishing the permanent home of the Egmont Secretariat, the group of international financial intelligence units.

The Department is also responsible for the federal government's relations with foreign governments in the area of trade in financial services, namely the administration of Canada's commitments under the North American Free Trade Agreement and the World Trade Organization (WTO) General Agreement on Trade in Services, international trade negotiations related to these agreements, as well as other bilateral and multilateral trade initiatives.

Expected results

4. An effective anti-money laundering (AML) and anti-terrorist financing (ATF) framework

The goal of Canada's AML and ATF regime is to combat money laundering and terrorism financing by providing appropriate tools to law enforcement, while respecting the privacy of Canadians and conforming to international standards.

The Branch plans to attain the expected result through the following ongoing initiatives and key commitments.

Ongoing

• Conduct analysis and research, and study domestic and international trends in order to provide policy advice on AML and ATF issues.
• Coordinate the AML and ATF regime with federal partners, including the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Key commitments

• Pursuant to the passage of Bill C-25, An Act to amend the Proceeds of Crime (MoneyLaundering) and Terrorist Financing Act and the Income Tax Act and to make a consequential amendment to another Act (PCMLTFA), develop regulations to fully implement and bring the regime into compliance with international standards and the recommendations of the Auditor General of Canada and Treasury Board-mandated evaluation reports.
• Undergo an evaluation of our AML/ATF regime against the Financial Action Task Force 40+9 recommendations to combat money laundering and terrorist financing.
• Provide effective support for Canada's presidency of the FATF until the end of June 2007. The work plan of the presidency builds on ongoing work of the FATF, including regular member assessments and improving international cooperation, and focusses on a few key priorities: actively pursuing the accession to membership by China, India, and Korea; enhancing dialogue with the private sector; and a review of the strategic direction of the organization in preparation for its mid-term review.
• Work with FINTRAC towards the establishment of the permanent home of the Egmont Secretariat in Toronto until it is operational in 2007–08. Canada will host the permanent home of the Egmont Secretariat, the group that coordinates the exchange of information, provides training, and shares expertise among its 101 financial intelligence unit members worldwide.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Prudent and cost-effective treasury management of the borrowing activities of Crown corporations and the government's investment portfolios	2. A regulatory framework that promotes a sound, efficient, and competitive Canadian financial sector that serves the needs of individuals, businesses, and the economy	3. An enhanced legislative and regulatory framework for federally regulated defined benefit pension plans	4. An effective anti-money laundering (AML) and anti-terrorist financing (ATF) framework
Performance Indicators	1.1 Crown borrowing costs 1.2 Net returns on liquid asset portfolios 1.3 Amount of exposure to financial risk 1.4 Administrative costs of treasury functions	Policy, legislative, and regulatory initiatives	Policy, legislative, and regulatory initiatives	4.1 Regulations 4.2 International standards and evaluation reports 4.3 Canadian presidency of the Financial Action Task Force on Money Laundering (FATF) 4.4 Establishment of the Egmont Secretariat
Data Sources	1.1 Crown annual reports and corporate plans 1.2 Public Accounts, Debt Management Report, Report on the Management of Canada's Official International Reserves 1.3 Debt Management Report, Report on the Management of Canada's Official International Reserves 1.4 Crown and Bank of Canada annual reports	Legislation, regulations, and publications	Legislation and regulations	4.1 Legislation, regulations 4.2 FATF mutual evaluation report 4.3 Report from the outgoing president 4.4 Official announcement of the Secretariat
Frequency	Annual	Legislative and regulatory amendments as needed; securities regulation work on an ongoing basis Financial Sector Assessment Program in (FSAP) 2007	Amendments as needed	4.1 Regulations as needed 4.2 Mutual evaluation roughly every five years 4.3 Presidency is rotated among the FATF members 4.4 One time
Target	1.1 Low and stable risk-adjusted costs of borrowing and investing funds 1.2 Positive returns on investment portfolios, net of costs 1.3 Exposure to financial risks within Board- and minister-approved limits 1.4 Overhead costs in line with comparable entities	2.1 Implement and draft regulations for Bill C-37 2.2 Develop Bill C-57 regulations 2.3 Complete IMF FSAP update 2.4 Develop policies for the review of the mortgage insurance framework	Develop legislation and regulations as needed	4.1 Develop regulationsfor the Proceeds of Crime (Money Laundering) and Terrorist Financing Act 4.2 Comply with international standards and the recommendation of the Auditor General of Canada and Treasury Board-mandated evaluation reports 4.3 Deliver the FATF president's work program 4.4 Egmont Secretariat becomes operational
Target Date	Ongoing	2007–08	Ongoing	2007–08

Program Activity 4: Economic Development and Corporate Finance

Under this program activity, the Economic Development and Corporate Finance Branch is responsible for fulfilling the challenge function of the Department of Finance Canada, including providing policy analysis and advice to the minister on the financial implications of the government's microeconomic policy and programs; for providing proposals for the funding of programs; for developing regional and sectoral policy analysis in the areas of the knowledge-based economy, defence, transportation, public infrastructure, environment, energy and resources, agriculture, fisheries, and privatization; and for advising on corporate restructuring regarding Crown corporation and other corporate holdings. The Branch is also responsible for analysis and advice on other projects, such as the Smart Regulation Initiative.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
8,289	8,321	8,321

Human Resources (FTEs)

2007–08	2008–09	2009–10
67	68	67

Priorities

The work of the Branch and its expected result contribute to the following three of the Department's priorities:

1. Sound Fiscal Management;
2. Sustainable Economic Growth; and a
3. Sound Social Policy Framework.

The focus of the Branch's work will be on supporting the government's microeconomic policy, including monitoring world-class research and development, creating a cleaner and healthier environment, strengthening the economic union, and outlining the government's comprehensive plan for infrastructure. The Branch will also advise the minister regarding other departments' funding and policy proposals.

Expected results

1. Sound advice to the minister on economic, funding, and policy proposals

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Provide weekly briefings, including policy analysis and recommendations for consideration by the minister to assist in the preparation for meetings of Cabinet and its committees, the annual budget, and fiscal updates, as required.
• Assess operating and capital funding for key federal assets and programs.
• Provide advice for Cabinet reviews of program spending and new policy proposals.
• Fulfil the central agency role of the Department by identifying major policy issues and proposals under development in the economic departments.
• Ongoing examination of policy and program options related to key government infrastructure programs.
• Help shape regional development policies and sectoral policies such as agriculture, environment, fisheries, aerospace, and automotive.

Key commitments

• Provide advice on potential initiatives for budgets in 2007–08, 2008–09, and 2009–10 that implement the government's economic agenda in the following areas:
  • post-secondary education, research, and commercialization;
  • support for private sector research and development;
  • improvement of the regulatory framework and reducing the paper burden on business;
  • work towards a comprehensive plan for infrastructure that includes long-term predictable funding;
  • energy and the environment; and
  • strengthening of the economic union through improved frameworks for internal trade and foreign investment.
• Reform the government's science and technology strategy.
• Consideration of proposals for government support for the Mackenzie Gas Project.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Sound advice to the minister on economic proposals
Performance Indicators	Announcement of measures that advance productivity and economic growth
Data Sources	Budget and Economic Update
Frequency	Annual
Target	Implementation of microeconomic policy directions in the government's economic agenda
Target Date	Ongoing

Program Activity 5: Federal-Provincial Relations and Social Policy

Under this program activity, the Federal-Provincial Relations and Social Policy Branch has primary responsibility for providing analysis and advice to the minister of Finance on federal-provincial-territorial fiscal arrangements, fiscal and economic relations, and Canadian social policies and programs, such as health care, employment insurance, seniors' benefits, Aboriginal programs, education programs, and cultural programs.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
12,298	12,345	12,344

Human Resources (FTEs)

2007–08	2008–09	2009–10
92	93	93

Priorities

Priority 1: Sound Fiscal Management

The focus for the 2007–08 fiscal year will be on implementing a principled framework to restore fiscal balance. In Budget 2006, the government took important first steps to restore fiscal balance. These included tax reductions, new investments, and a commitment to provide funding of $3.3 billion to provinces and territories for shared priorities.

In Budget 2006, the government also committed to bringing forward proposals to restore fiscal balance after undertaking consultations with provinces and territories, academics and experts, and individual Canadians. The government followed through on this commitment. As reported in Advantage Canada (November 2006): "The key message the Government has heard is that Canadians support a system of fiscal arrangements that funds national priorities and redistributes wealth from the more prosperous regions to the less prosperous ones—but that these arrangements must be founded on principles of fairness and predictability." The government intends to table its proposals to restore fiscal balance in Budget 2007.

Expected results

1. A principled framework to restore fiscal balance in Canada

Canada's government is committed to restoring fiscal balance, in part through the development of a principle-based transfer system, with a clearer delineation of responsibilities among different orders of government and with greater overall efficiency for governments and enhanced accountability for citizens.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Implement policy and program proposals related to fiscal balance broadly, and fiscal arrangements more specifically, as per approved policy statements (e.g. consistent with Budget 2007). Provide analysis and advice, including assessments of impacts, related to those proposals.
• Ensure well-functioning processes are in place to support ongoing federal-provincial-territorial fiscal relations and communications regarding fiscal balance and changes to federal-provincial-territorial fiscal arrangements.

Key commitments

• Continue to work on various elements of the commitment to restore fiscal balance, including improved transparency and accountability of the Government of Canada to citizens.
• Establish a principle-based program for Equalization and TFF to ensure all provinces and territories have access to sufficient revenues to provide reasonably comparable programs and services at reasonably comparable levels of taxation.
• Prepare legislation and regulatory changes, and coordinate with provinces and territories to renew the Canada Social Transfer (CST). The CST expires at the end of 2007–08; therefore new legislation must be in place to allow for payments in 2008–09.

Priority 3: Sound Social Policy Framework

The focus for the 2007–08 fiscal year will be on contributing to the government's social policy priorities by providing analysis and advice to the minister of Finance and senior government officials on a wide range of social policy issues, including items outlined in Advantage Canada.

Expected results

2. Sound advice to the minister on government social policy priorities

The Federal-Provincial Relations and Social Policy Branch is responsible for the provision of analysis and advice to the minister of Finance and senior government officials on social policy issues, including early learning and childcare, post-secondary education, income security, justice and safety, health and wellness, culture, and Aboriginal opportunities.

The Branch plans to attain the expected result through the following ongoing activity and key commitments.

Ongoing

• Provide weekly briefings, including policy analysis and recommendations for consideration by the minister to assist in the preparation for meetings of Cabinet and its committees, the annual budget, and fiscal updates, as required.
• Assess operating and capital funding for key federal assets and programs.
• Provide advice for Cabinet reviews of program spending and new policy proposals.
• Fulfil the central agency role of the Department by identifying major policy issues and proposals under development in the social departments.
• Help shape social policies and sectoral policies such as Aboriginal issues, health, justice, security, cultures, income security, labour market, and immigration.

Key commitments

• Work with other branches of the Department, central agencies, government departments, and external stakeholders to ensure timely decisions with respect to, and implementation of, the commitment to provide long-term and predictable support for post-secondary education and training.
• Work with other branches of the Department, central agencies, government departments, and external stakeholders to ensure timely decisions with respect to, and implementation of, the commitment to make it easier for Canadian-educated foreign students and temporary foreign workers to stay in Canada.
• Work with other branches of the Department, central agencies, government departments and external stakeholders to ensure timely decisions with respect to, and implementation of, initiatives and related funding in the areas of social policy identified by the government as priorities.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Principled framework to restore fiscal balance in Canada	2. Sound advice to the minister on government social policy priorities
Performance Indicators	Implementation of a principle-based transfer system	Announcement of measures and related funding that advance social policy priorities
Data Sources	Transfer agreements	Budget, and the Economic and Fiscal Update
Frequency	Ongoing	Annual
Target	1.1 Timely, accurate implementation of legislative and regulatory changes 1.2 New arrangements for Equalization, TFF, and the CST 1.3 Enhanced accountability and transparency of fiscal arrangements for citizens	Timely implementation of social policy priorities in the government's agenda
Target Date	1.1 Proposals for new framework intended to be brought forward as part of Budget 2007 1.2 New Equalization and TFF legislation to be tabled by spring 2007; new legislation for the CST must be in place by April 2008 1.3 Ongoing	Ongoing

Program Activity 6: International Trade and Finance

Under this program activity, the International Trade and Finance Branch:

• supports the minister's participation in the G7, G8, and G20 and in international financial institutions;
• conducts work related to international development assistance, export finance, and international economic and financial relations;
• maintains responsibility for the policy management of import legislation (tariffs and trade remedies);
• provides analytical support and policy advice on international trade and investment matters;
• works with other members of the international community to reduce the risks of international financial and economic instability; and
• contributes to the international effort to reform the governance and operations of the IMF.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
15,879	15,939	15,938

Human Resources (FTEs)

2007–08	2008–09	2009–10
118	120	120

Priorities

Priority 2: Sustainable Economic Growth

As a highly open economy in an increasingly integrated global marketplace, Canada's economic performance and future prosperity depend on trade and investment flows supported by high-standard multilateral, regional, and bilateral trade and investment rules and agreements. Securing access to key markets for Canadian exporters and investors, and reducing tariffs where possible will enhance the competitiveness of domestic industries and expand commercial opportunities for them.

Expected results

1. Secure access to key markets for Canadian exporters and investors

The Branch will work to improve Canada's overall economic performance by building a stronger international trade and investment system that opens markets, enhances competitiveness of domestic industries, and expands access for Canadian exports and investments in major foreign markets.

The Branch plans to attain the expected result through the following ongoing activity and key commitments.

Ongoing

• Work to foster trade and investment liberalization through trade and investment agreements and initiatives.

Key commitments

• Work to conclude WTO negotiations, foreign investment and protection agreements, and bilateral free trade agreements in partnership with other government departments.
• Improve the competitiveness of Canadian industry by reducing tariffs where possible.
• Lay a strong foundation for the North American Security and Prosperity Partnership, particularly on border efficiency, with other government departments.

Priority 4: Effective International Influence

As an open economy that benefits from a strong multilateral system of global economic and financial governance, Canada has a strong interest in promoting initiatives to strengthen the leadership of forums such as the G7 and G20, as well as in ensuring the credibility and strength of organizations such as the IMF and World Bank. In addition, Canada will work with other players in the international community to reduce the risks of international financial and economic instability. Canada also has an interest in greater security, prosperity, and economic and social progress in developing economies.

Expected results

2. Canadian leadership and influence in the international forums on international economic, financial, development, and trade finance issues

The Branch seeks to promote Canadian prosperity and economic security by reducing international financial and economic instability. It does this by advancing Canadian leadership in international forums such as the G7 and G20, and by providing policy direction to international financial institutions that is consistent with Canadian interests and policy objectives. This includes contributing to economic and social progress in developing economies, and the development and promotion of initiatives on trade finance issues.

The Branch will also work to support a strong multilateral system of global economic and financial governance by strengthening the leadership of groups such as the G7 and G20, and by ensuring the credibility and strength of organizations such as the IMF and World Bank.

The Branch plans to attain the expected result through the following ongoing activities and key commitments.

Ongoing

• Support Canada's role in international forums on international and development issues.
• Ensure timely and high-quality briefings at the G7, G20, and other international forums on key economic issues, on international financial and development issues, as well as on the need to ensure international financial stability.
• Identify Canadian priorities and provide strategic advice on how to advance Canadian interests and policy positions on trade finance, debt relief, and other critical issues.
• Pursue research programs focussing on current and emerging issues that are of importance to Canada.
• Monitor overseas economies on an ongoing basis.

Key commitments

• Develop initiatives for more effective use of international assistance and debt management capacity.
• Develop and promote positions that will lead to effective international cooperation on government support for trade finance.
• Provide high-quality advice on the key elements of a comprehensive IMF and World Bank reform exercise.
• Provide advice on international financial assistance programs assembled by the IMF to assist economies in maintaining stability and avoiding financial crises.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Secure access to key markets for Canadian exporters and investors	2. Canadian leadership and influence on international economic, financial, development, and trade finance issues
Performance Indicators	Progress will be measured through various domestic, regional, and multilateral trade and investment negotiations and initiatives	Outcomes of international forums and policy decisions
Data Sources	Trade and investment negotiations and agreements	Results (and communiqués) and agreements from international meetings and negotiations
Frequency	Ongoing	Ongoing
Target	Completed negotiations and agreements	Canadian policy positions and interests are reflected at international meetings and negotiations
Target Date	Ongoing	Ongoing

Program Activity 7: Public Debt

Under this program activity, the Financial Sector Policy Branch is responsible for managing the Government of Canada's debt program, including the statutory funding of interest, the service costs of the public debt, and the issuing costs of new borrowings.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
34,697,000	34,645,000	34,685,000

Human Resources (FTEs)

2007–08	2008–09	2009–10
28	22	22

Priority

Priority 1: Sound Fiscal Management

Debt service is the largest spending program of the federal government. The prudent and effective management of the government's debt continues to be an important element of the Department's strategy for sound fiscal management. The focus for 2007–08 will be on reviewing and evaluating the effectiveness of debt management and treasury management frameworks and programs. The Department also will work to implement changes to the retail debt program to enhance cost-effectiveness.

Expected results

1. Stable low-cost financing for the Government of Canada

The government's operational needs are met through borrowing from capital markets. The government's debt structure (the mix of fixed- and floating-rate debt) is managed to ensure that debt costs are kept low and stable over time.

The Branch plans to attain the expected result through the following ongoing actions and key commitments.

Ongoing

• Plan and conduct, in conjunction with the Bank of Canada, debt and cash management operations to meet operational needs.
• Periodically review funds management frameworks, targets, and programs to ensure the soundness of governance regimes and effectiveness of the management of financial cost and risk.

Key commitments

• Adjust bond and bond buyback programs to continue progress toward the debt structure target of 60 per cent fixed-rate debt announced in the 2003 budget.
• Implement a rationalized administrative structure for the retail debt program following up on the September 2006 decision to wind down the Canada Investment and Savings Agency (a special operating agency of the Department of Finance Canada) while maintaining broad availability of Canada Savings Bonds.

2. A well-functioning market in Government of Canada securities

A well-functioning wholesale market in Government of Canada securities benefits the government and a wide range of market participants. For the government as a debt issuer, a well-functioning market attracts investors and ensures that funding costs are kept low. For market participants, a liquid and active secondary market in government debt provides credit-risk-free assets for investment portfolios, a pricing benchmark for other instruments, and a primary tool for hedging risk.

The Branch plans to attain the expected result through the following ongoing activities and commitment.

Ongoing

• Design and implement Government of Canada debt programs to provide liquidity, transparency, and regularity.
• Consult regularly with market participants to identify adjustments to debt programs to maintain well-functioning markets in Government of Canada securities.

Key Commitment

• Adjust debt program design to supplement supply at key maturities for market participants.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. Stable low-cost financing for the Government of Canada	2. A well-functioning market in Government of Canada securities
Performance Indicators	1.1  Measures of operational performance (e.g. auction statistics) 1.2  Public debt structure	Measures of market performance (e.g. turnover, trading spreads)
Data Sources	1.1  Fiscal Monitor; Debt Management Report 1.2  Annual Financial Report of the Government of Canada and other outcomes summarized in the Debt Management Report	Debt Management Report
Frequency	Monthly; annual	Annual
Target	1.1 Well-contested auctions and operations 1.2 Debt structure target of 60% fixed-rate debt	Operational measures, in particular operational results reporting times, and secondary market indicators such as volumes and trading spreads that are in line with or better than previous years
Target Date	Ongoing	Ongoing

Program Activity 8: Domestic Coinage

Under this program activity, the Financial Sector Policy Branch is responsible for providing advice to the minister on Royal Canadian Mint initiatives and for the payment of the production and distribution costs, in the domain of domestic circulating coinage.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
145,000	147,000	149,000

Priority

Priority 1: Sound Fiscal Management

Under the Royal Canadian Mint Act, the minister of Finance is responsible for buying domestic circulating coinage from the Royal Canadian Mint (RCM). The RCM distributes the coins produced to financial institutions on the minister's behalf. The overriding objective is to ensure the supply of circulating coinage meets the needs of the economy. A secondary objective is to ensure that coins are produced at reasonable cost. Coin sales earn seigniorage for the government. Seigniorage is the net revenue derived from the issuing of currency and is the difference between the face value of a coin or bank note and the cost of producing, distributing, and eventually retiring it from circulation.

Expected results

1. A supply of coinage at a reasonable cost

The Branch will work to achieve the expected result through the following ongoing activities and key commitment.

Ongoing

• Provide analysis and advice to the minister on plans and initiatives in the domain of domestic circulating coinage, including the production of commemorative coins.
• Pay RCM production and distribution costs for domestic circulating coinage.

Key commitment

• Review the RCM contract and the composition of the coinage system to improve incentives for the RCM and reduce coinage costs.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected results under this program activity.

Expected Results / Performance Measurement	1. A supply of coinage at a reasonable cost
Performance Indicators	1.1 Production and demand for coinage 1.2 Seigniorage earned by the government
Data Sources	1.1 Royal Canadian Mint annual report 1.2 Public Accounts
Frequency	1.1 Annual 1.2 Annual
Target	1.1 Production of coinage meets the demand of the economy 1.2 Reduce costs and increase the amount of seigniorage earned by the government
Target Date	Ongoing

Program Activity 9: Transfer Payments to Provinces and Territories

Under this program activity, the Federal-Provincial Relations and Social Policy Branch is primarily responsible for the administration of the major transfer payments to provinces and territories.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
40,328,203	41,903,765	43,817,109

Priority

Priority 3: Sound Social Policy Framework

The focus for the 2007–08 fiscal year will be administering federal transfers to the provinces and territories, including Equalization, Territorial Formula Financing (TFF), the Canada Health Transfer (CHT), and the Canada Social Transfer (CST).

Expected results

1. Administer federal transfers to the provinces and territories including Equalization, TFF, CHT, and CST

Payments made under the various transfer programs are an important source of revenue for provincial and territorial governments. In 2007–08, an estimated $40.3 billion in cash payments will be provided to the provinces and territories.

The Branch plans to attain the expected result through the following ongoing activities.

Ongoing

• Administer the transfer programs (see Table 8 for details on transfer payment programs), including the calculation of entitlements, provision of payments, provision of information for Government of Canada reports, and the provision of information to federal auditors—information concerning entitlements is provided to provincial and territorial officials, including auditors.
• Administer the various trust funds, including the five trust funds totalling $3.3 billion that were established in March 2006 using the authority of Bill C-48, the $4.25-billion Wait Times Reduction Transfer Trust announced in September 2004, and the $120-million Northern Strategy Trust Fund announced in Budget 2005.
• Administer several important loans and deferral arrangements currently in place, including the Equalization Repayable Floor loan, deferral of the effects of Census 2001 and 2002 taxation data (Equalization, and Canada Health and Social Transfer), and deferral of the effect of the new residential net capital stock data (Equalization) on Quebec.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected result under this program activity.

Expected Result / Performance Measurement	1. Administer federal transfers to the provinces and territories, including Equalization, TFF, CHT, and CST
Performance Indicators	Timely and accurate administration of transfer payments
Data Sources	Public Accounts of Canada / departmental financial reporting system
Frequency	Annual
Target	Payments made according to levels and formulas set out in legislation and agreements
Target Date	Ongoing

Program Activity 10: International Financial Organizations

Under this program activity, the International Trade and Finance Branch is responsible for the effective administration of Canada's international commitments associated with Paris Club debt rescheduling agreements and financial assistance to the International Development Association, the International Monetary Fund, and the European Bank for Reconstruction and Development.

Financial Resources ($ thousands)

2007–08	2008–09	2009–10
544,717	540,978	510,229

Priority

Priority 4: Effective International Influence

Expected result

1. Payments to international organizations and Canadian creditors consistent with our commitments

The Branch will contribute to international initiatives to improve outcomes in the developing economies through effective use of international assistance, debt relief, and other means and will provide payments consistent with the Department's commitments.

The Branch plans to attain the expected result through the following ongoing activity.

Ongoing

• Provide timely and accurate payments to a wide range of international financial organizations and Canadian creditors consistent with the government's commitments and policy objectives.

Performance measurement

The Department plans to apply the following performance measurement approach in monitoring and measuring performance against the expected result under this program activity.

Expected Results / Performance Measurement	1. Payments to international organizations and Canadian creditors consistent with our commitments
Performance Indicators	Timely and accurate payments
Data Sources	Public Accounts / departmental financial reporting system
Frequency	Periodic
Target	Payments made as per agreement and according to pre-determined schedule, or within 30 days of invoice being received
Target Date	Ongoing

 

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