Canadian budget deficit widens to C$3.21bn due to tax benefits
Tax benefits announced by the Conservative government have caused a widening of the Canada’s budget deficit to C$3.21 billion in October compared to C$2.48 billion in October 2013, the Finance Department said on Monday.
It was the largest monthly deficit since March 2014.
Excluding the family tax cuts, the deficit for October would have been C$1.6 billion, the Finance Department added.
On October 30th, the Canadian government said it would allow parents with children up to the age of 18 to split a part of their income in order to fall into a lower tax band. The higher earner can transfer up to C$50,000 of taxable annual income to the spouse in a lower income-tax bracket. Analysts say couples could reduce their tax bills by up to C$2,000 per year.
Prime Minister Stephen Harper’s administration also doubled a tax credit for children’s fitness.
For the April-to-October period, the deficit declined to C$3.95 billion versus $12.83 billion during the same period last year.
Source: “The Fiscal Monitor, October 2014,” Department of Finance.
Mr. Harper, who pledged to turn the deficit into a surplus in the next fiscal year, insists it is still possible despite oil prices plummeting.
His government recently predicted a C$2.9 billion deficit for this fiscal year (ending March 31, 2015) and a surplus of C$1.9 billion in fiscal 2016.
Government revenue fell by $0.2 billion (0.9%), as the impact of the year-to-date costs of the Family Tax Cut and increase in the Children’s Fitness Tax Credit were only partially offset by higher corporate income tax payments.