- Fiscal Monitor 2007 -

Archived - The Fiscal Monitor

Highlights of financial results for April 2007

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April and May 2007 budgetary results

Through the first two months of the 2007–08 fiscal year, there was a budgetary surplus of $3.5 billion, down $0.1 billion from the $3.6-billion surplus reported during the same period of 2006–07.

On a year-over-year basis, budgetary revenues increased by $2.4 billion, or 6.5 per cent, to $39.7 billion, primarily reflecting strong gains in corporate income tax revenues.

• Personal income tax receipts rose $0.8 billion, or 4.6 per cent, through April and May, driven by higher source deductions which are consistent with the gains in employment and wages and salaries over the period.
• Corporate income tax revenues were up $1.4 billion, or 27.0 per cent, reflecting gains in profitability in 2006, and the ongoing strength in corporate profits this year. However, corporate income tax revenues can be volatile on a month-to-month basis as corporate year-ends are spread unevenly over the fiscal year, such that large refunds or settlement payments may be recorded in any given month. In addition, assessments or reassessments, which can relate to activity that took place in prior years, can influence results in a given month.
• Other income tax receipts—withholdings from non-residents—rose 19.1 per cent relative to the same period last year, also reflecting the ongoing strength in corporate profitability. Other income tax revenues also can be volatile on a monthly basis, as they are determined in large part by corporate dividend payments.
• Excise taxes and duties were down $0.7 billion, or 9.0 per cent, due to the $0.8 billion decline in GST revenues which reflected the 1-percentage-point reduction in the GST rate effective July 1, 2006. Sales and excise taxes increased $13 million. Customs import duties rose $102 million, and the Air Travellers Security Charge was up $3 million over the period.
• Employment insurance (EI) premium revenues increased by $0.2 billion, or 6.7 per cent, through April and May, reflecting improvements in employment and wages and salaries, which more than offset the decline in the premium rate from $1.87 to $1.80 per $100 of insurable earnings, effective January 1, 2007.
• Other revenues, consisting of net profits of enterprise Crown corporations, revenues of consolidated Crown corporations, sales of goods and services, return on investments, and foreign exchange revenues, increased by $0.5 billion. This revenue stream is volatile on a monthly basis, due in part to variations in the timing of large transactions from year to year.

Program expenses in the April to May 2007 period were $30.3 billion, up $2.3 billion, or 8.2 per cent, from the prior year, reflecting an increase in transfer payments and operating expenses of departments and agencies.

Transfer payments increased $1.2 billion, or 6.4 per cent.

• Major transfers to persons, consisting of elderly benefits, EI benefits and children’s benefits, rose $0.8 billion, or 8.8 per cent, on a year-over-year basis. Elderly benefits increased 4.3 per cent and EI benefit payments increased 6.5 per cent. Children’s benefits, which consist of the Canada Child Tax Benefit and the new Universal Child Care Benefit (UCCB), were up $0.4 billion compared to one year ago, reflecting transfers under the UCCB which began in July 2006.
• Major transfers to other levels of government, consisting of transfers in support of the Canada Health Transfer and Canada Social Transfer, fiscal transfers, transfers to provinces on behalf of Canada’s cities and communities, and Alternative Payments for Standing Programs, were up $0.4 billion, or 6.0 per cent, due largely to increases in the Canada Health Transfer. The year-to-date results do not yet reflect a combined $2.4 billion increase in funding for Equalization and the Canada Social Transfer announced in Budget 2007, enabling legislation for which did not receive Royal Assent until June.
• Subsidies and other transfers were up $35 million, or 1.0 per cent, from the prior year.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including National Defence, and also reflect the ongoing assessment of the government’s liabilities. On a year-over-year basis, these expenses increased $1.1 billion, or 11.7 per cent.

Public debt charges increased by $0.3 billion, or 4.7 per cent, in the first two months of 2007–08, due to an increase in the average effective interest rate on the stock of interest-bearing debt.

Financial source of $8.5 billion for April to May 2007

The budgetary balance is presented on a full accrual basis of accounting, recording government assets and liabilities when they are receivable or incurred, regardless of when the cash is received or paid. In contrast, the financial source/requirement measures the difference between cash coming in to the Government and cash going out. This measure is affected not only by changes in the budgetary balance but also by the cash source/requirement resulting from the Government’s investing activities through its acquisition of capital assets and its loans, financial investments and advances, as well as from other activities, including payment of accounts payable and collection of accounts receivable, foreign exchange activities, and the amortization of its tangible capital assets. The difference between the budgetary balance and financial source/requirement is recorded in non-budgetary transactions.

With a budgetary surplus of $3.5 billion and a source of $5.0 billion from non-budgetary transactions, there was a net financial source of $8.5 billion in the April to May 2007 period compared to a net financial source of $2.8 billion from the same period last year.

Net financing activities down $19.1 billion

The government used this financial source of $8.5 billion and a reduction in its cash balances of $10.6 billion to reduce its market debt by $19.1 billion by the end of May 2007. The reduction in market debt was achieved largely through a reduction of Treasury bills. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis. Cash balances at the end of May stood at $10.6 billion.

Table 1
Summary statement of transactions

Table 2
Budgetary revenues

Table 3
Budgetary expenses

Table 4
The budgetary balance and financial source/requirement

Table 5
Financial source/requirement and net financing activities

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