Canada's Budget Moving Closer To The Red

by Mike Godfrey, Tax-News.com, Washington

03 March 2009

Canadian government finances fell closer into the red in December 2008 with Finance Minister Jim Flaherty reporting on February 27 a budgetary surplus of CAD0.8bn for the month, compared to a surplus of CAD1.8bn in December 2007, mainly as a result of falling tax revenues.

According to the government, budgetary revenues were down CAD1.7bn, or 8.1%, from December 2007 reflecting lower corporate income tax and goods and services tax (GST) revenues. Program expenses increased by CAD0.3bn, or 1.7%, compared to December 2007, largely reflecting higher transfer payments.

For the first nine months of the 2008–09 fiscal year, there was a budgetary surplus of CAD0.5bn, down CAD8.0bn from the CAD8.4bn surplus reported in the same period of 2007–08. Revenues decreased by CAD1.2bn, or 0.7%, also reflecting declines in corporate income tax and GST revenues, although these declines were partially offset by growth in personal income tax and other revenues. Program expenses were up CAD8.0bn, or 5.7%.

The figures suggest that, after a long period of budget surpluses, the Canadian government will soon be running a budget deficit, as the strong currents of the global economic downturn continue to act as a drag on tax revenues, and as public spending rises.

Recommended