Canadian Budget 'Doesn't Add Up'

by Mike Godfrey, Tax-News.com, Washington

15 March 2010

In his capacity as Canada’s Parliamentary Budget Officer, Kevin Page has questioned Finance Minister Jim Flaherty’s rationale in calculating that the Budget, presented on March 4, will bring a near balanced budget by 2014.

Page has said that Flaherty’s assumption of a rapid economic recovery is not “prudent”, and has instead warned the government of a deficit of around CAD12bn (USD11.8bn) by 2014, based on proposals delivered in Budget 2010. His reasoning is that higher interest rates will increase the cost of servicing state debt, and corporate income tax receipts will be lower than projected in the short-term, due to the fall in company profits and planned cuts to the corporate income tax rate.

Page has recommended that this trajectory is not sustainable, and has advised a review of fiscal policy in order to meet the objectives set in Budget 2010.

Released on March 4, Flaherty’s budget forsees a deficit of CAD49.2bn (USD48.4bn) in FY2010/11, down from CAD53.8bn in FY2009/10. Flaherty has surmised that the deficit would fall to around CAD1.8bn (USD1.77) under his budget plans.

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