Canadian Tax Revenues Recover

by Mike Godfrey, Tax-News.com, Washington

01 June 2010

The Canadian government, releasing its fiscal monitor for the first quarter of 2010, said that the government's fiscal plan for 2010 is 'broadly on track', despite a significant increase in the budget deficit year-on-year.

The economy has begun to respond to measures introduced in the 2010 budget, the government reported, with corporate and individual income tax revenues, and revenues from goods and services showing a marked increase year-on-year, amid falls among other revenue streams.

Overall the government reported that the tax-take in March 2010 was up CAD4.3bn, or 22.8%, compared to March 2009. Personal income tax revenues increased by CAD1.0bn, or 11.1%, reflecting higher employment; corporate income tax revenues were up CAD3.1bn, or 130.8%, reflecting higher settlement payments and lower refunds relative to March 2009; and excise taxes and duties were up CAD1.1bn, or 47.1%, driven by higher goods and services tax revenues.

Preliminary data on year-end accruals and valuation adjustments on government assets and liabilities during the 2009/10 fiscal year caused an enlarged budget deficit in the first quarter as the new statistics were factored in. Although the statistics will be confirmed when they are made official in the autumn of 2010, the government anticipates a budget deficit of CAD6.4bn (USD6bn) for the first quarter of 2010.

For the April 2009 to March 2010 period, the budgetary deficit amounted to CAD47bn, up from CAD2.2bn reported in the same period of 2008/09. The government said that this was in part as a result of Canada's costly Economic Action Plan, which increased the deficit by CAD19bn. Program expenses increased by CAD33.6bn, or 16.6%, mainly reflecting higher employment insurance benefit payments, higher transfers to other levels of government and support for the automotive industry. Meanwhile public debt charges were down CAD1.5bn on a year-on-year basis, reflecting lower interest rates.

A statement from the government said:

"While the results to date - particularly for budgetary revenues - are stronger than anticipated in the 2010 budget, given the potential for further adjustments referred to previously, as well as ongoing global economic uncertainty, the government judges that the fiscal projection set out in the 2010 budget remains broadly on track."

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