In economics, a transfer payment
(or government transfer
or simply transfer
) is a redistribution of income in the market system
. These payments are considered to be non-exhaustive because they do not directly absorb
resources or create output. In other words, the transfer is made without any exchange of goods or services. Examples of certain transfer payments include welfare (financial aid), social security
, and government making subsidies for certain businesses (firms).
Use for administrative: In some federal systems the term can also be used to refer to payments from one order of a government to another.
In Canada, transfer payments usually refer to a system of payments from the federal government to the provinces. Major Canadian transfer payments include equalization payments
, the Canada Health Transfer and the Canada Social Transfer (formerly the Canada Health and Social Transfer) and Territorial Formula Financing.
In Australia, the horizontal fiscal imbalance
arises because of the mismatch between the tax revenues and government expenses for the various state and territorial governments. This imbalance is addressed by a horizontal fiscal equalisation (HFE) policy overseen by the Commonwealth Grants Commission.
Transfer payments are not a part of the national income so they are cut from national income to get n.n.p. in order to arrive national income such payments are bad
debts incurred by banks, payments of pensions, charity
, scholarships etc. In the UK they have several transfer payments such as EMA and a job seeker's allowance.