Canada's Surplus Dwindles As Tax Revenues Plunge

by Mike Godfrey, Tax-News.com, Washington

31 March 2009

The Canadian government reported a budgetary surplus of just CAD37m in January 2009, compared with a surplus of CAD1.2bn recorded in January 2008, as tax revenues continued to decline.

The federal government's latest fiscal monitor shows that budgetary revenues were down CAD2.1bn, or 9.8%, from January 2008, largely reflecting lower corporate income tax and goods and services tax (GST) revenues.

For the first ten months of the 2008–09 fiscal year, which began in April 2008, there was a budgetary surplus of CAD0.5bn, down CAD9.1bn from the CAD9.6bn surplus reported in the same period of 2007–08. Revenues decreased by CAD3.3bn, or 1.7%, primarily as a result of declines in corporate income tax and GST revenues, although these were partially offset by growth in personal income tax and other revenues.

Expenditure was up CAD7.5bn, or 4.7%, over the same period, due to higher transfer payments, Crown corporation expenses and defence spending. Public debt charges were down CAD1.7bn on a year-over-year basis, reflecting a lower average effective interest rate on the stock of interest-bearing debt.

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