Transfer GST to the province as revenue for health care system. (Reports For Romanow).

The best way of ensuring additional future revenue for provincial health care systems would be to transfer federal GST revenue to the provinces, say two Saskatchewan researchers, Mellisa Rode and Michael Rushton.

Their report, Options for Raising Revenue for Health Care, examines and rejects several other ideas.

Hypothecated taxes--taxes earmarked for a specific purpose such as health care spending--are attractive because polling shows the public is more willing to pay more when they know exactly where the money is going. However, the authors say, such taxes have high administration costs, place restrictions on the provincial budget-making process, and pose long-term difficulties in keeping the process of revenue allocation transparent.

Proposals to treat individual use of the health care system as a taxable benefit in the personal income tax would require a major shift in Canadian thinking because it shifts some costs to the individual. The authors also question whether it is the best way to address overuse of the system.

Instead, they say, the best solution would be the transfer of tax room to the provinces. Since it could be argued that provinces are already over-reliant on corporate taxes and there are difficulties involved with using personal income tax, the paper suggests sales tax as the most promising avenue.

Federal GST revenue could be transferred to the provinces through a system similar to that already in place in the European Union. Administration would be based on existing interprovincial mechanisms, the report says. The authors believe such a transfer would lead to the elimination of existing provincial retail sales taxes.