Annual lists 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

- Fiscal Monitor 2005 -

The Fiscal Monitor

Highlights of financial results for  November 2005

• PDF Version

November 2005

There was a budgetary deficit of $3.1 billion in November 2005, compared to a $1.7-billion surplus reported in November 2004.

Budgetary revenues fell by $3.6 billion, or 21.9 per cent, to $12.7 billion.

• Personal income tax revenues declined $3.6 billion, reflecting the inclusion in the November results of the majority of the costs of those personal income tax measures announced in the November 2005 Economic and Fiscal Update that pertain to the 2005 taxation year.

• Corporate income tax revenues rose $0.3 billion, or 14.7 per cent, reflecting ongoing profitability in the corporate sector.

• Other income tax receipts—withholdings from non-residents—were up 44.1 per cent in November, reflecting increases in dividends and royalties paid to non-residents, consistent with increases in corporate profitability in 2005. This revenue source can be volatile on a monthly basis.

• Excise taxes and duties fell $0.3 billion, or 7.1 per cent. Goods and services tax (GST) revenues declined 9.8 per cent, reflecting relatively modest growth in gross GST receipts and strong growth in GST refunds. Customs import duties were up $60 million, while sales and excise taxes were down $49 million. Revenues from the Air Travellers Security Charge were down $3 million.

• Employment insurance (EI) premiums declined 3.9 per cent.

• Other revenues, consisting of revenues from Crown corporations, sales of goods and services and foreign exchange revenues, were up 1.5 per cent. Other revenues can be volatile on a monthly basis.

Program expenses in November 2005 were $12.9 billion, up $1.2 billion, or 10.0 per cent, from November 2004, primarily due to higher transfer payments.

Transfer payments were up $0.8 billion, or 10.8 per cent.

• Major transfers to persons, consisting of elderly and EI benefits, were up $14 million, or 0.4 per cent. Elderly benefits increased 3.4 per cent due to both higher average benefits, which are indexed to Consumer Price Index inflation, and an increase in the number of individuals eligible for benefits. EI benefit payments decreased by 5.9 per cent, reflecting a decline in regular benefits.

• Major transfers to other levels of government, consisting of federal transfers in support of health and other social programs (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 $0.5 billion, or 21.1 per cent. The increase in federal transfers in support of health and other social programs and higher fiscal transfers largely reflect increased funding under the 2004 agreements on health care and equalization/TFF.

• Subsidies and other transfers increased by $0.3 billion, or 17.4 per cent. This component is volatile on a monthly basis.

Other program expenses consist of transfers to Crown corporations and operating expenses for departments and agencies, including defence. On a year-over-year basis, these expenses were up $0.4 billion, or 8.6 per cent, reflecting increased operating costs and the impact of previous budget measures.

Public debt charges increased by $0.1 billion, or 2.8 per cent, due to an increase in the average effective interest rate on the debt.

April to November 2005

In the first eight months of the 2005–06 fiscal year, there was a budgetary surplus of $6.3 billion, $4.0 billion below the $10.3-billion surplus reported in the same period of 2004–05.

Budgetary revenues were up $4.5 billion, or 3.6 per cent, to $129.2 billion.

• Personal income tax revenues rose $1.4 billion, or 2.4 per cent, reflecting the inclusion in the November results of the above-mentioned tax measures.

• Corporate income tax revenues were up $2.6 billion, or 17.9 per cent. This gain is in part due to the procedures under which corporations are required to remit monthly instalments. Corporations make monthly tax instalment payments based on either their previous year’s actual tax liability or their current year’s estimated liability, with any differences made up within 60 days of the close of their taxation year. During 2004–05, most corporations based their instalments on their 2003 tax liabilities. However, profits increased by nearly 20 per cent in 2004, resulting in large settlement payments in the final quarter of 2004–05. With monthly instalments in 2005 now based on 2004 tax liabilities, but instalments through November 2004 reflecting 2003 liabilities, the year-to-date growth in corporate receipts overstates the underlying growth in corporate income tax revenues. This year-to-date growth will moderate when the settlement payments are received in the last four months of 2005–06.

• Excise taxes and duties increased by $1.8 billion, or 5.9 per cent. GST revenues increased $1.7 billion, or 7.7 per cent, broadly consistent with the growth rate of retail sales of 6.6 per cent over the same period. Customs import duties were up 11.5 per cent. Sales and excise taxes were down 1.0 per cent while the Air Travellers Security Charge was down 14.4 per cent, reflecting reductions in the charge effective April 1, 2005.

• EI premiums were up 0.3 per cent, as the increase in the number of people employed more than offset the impact of the reduction in premium rates.

• Other revenues were down $2.0 billion, or 19.4 per cent, reflecting the one-time gain ($2.6 billion) from the sale of the Government’s remaining shares in Petro-Canada in September 2004.

On a year-over-year basis, program expenses in the April to November 2005 period were $100.1 billion, up $8.9 billion, or 9.8 per cent, from the same period of 2004–05, with most of the increase attributable to higher transfers to provinces and territories for health care and equalization/TFF. Public debt charges declined by $0.4 billion.

Transfer payments, which account for nearly two-thirds of total program expenses, increased by $6.5 billion, or 11.1 per cent.

• Transfers to persons advanced by 2.2 per cent. Elderly benefits were up 4.3 per cent while EI benefits were down 1.9 per cent. The year-to-date decline in EI benefits is mainly attributable to a decline in regular benefits, which is in turn due to improved labour market conditions compared to the same period in 2004–05.

• Transfers to other levels of government were up $4.8 billion, or 23.4 per cent, reflecting the impact of the 2004 agreement on health care and the new framework for equalization and TFF.

• Subsidies and other transfers increased by 10.9 per cent, reflecting the impact of measures from recent budgets.

Other program expenses increased by 7.5 per cent due to increases in departmental operating costs. Crown corporation expenses increased slightly by 0.9 per cent.

Public debt charges were down 1.9 per cent due to a decline in the stock of interest-bearing debt and a decline in the average effective interest rate on that debt.

Financial requirement of $1.7 billion for April to November 2005

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.

Non-budgetary transactions resulted in a net requirement of $8.0 billion in the April-to-November period, up $4.7 billion from the requirement in the same period of 2004–05. This increase largely reflects the $2.8-billion transfer to the provinces of Nova Scotia and Newfoundland and Labrador under the Offshore Revenues Accords, as well as a decrease in the source of funds arising from foreign exchange activities.

With a budgetary surplus of $6.3 billion and a net requirement of $8.0 billion from non-budgetary transactions, there was a financial requirement of $1.7 billion in the first eight months of 2005–06 compared to a financial source of $7.1 billion in the same period of 2004–05.

Net financing activities down $8.5 billion

The Government’s market debt was down $8.5 billion by the end of November 2005. To finance this reduction of market debt and the financial requirement of $1.7 billion, the Government reduced its cash balances by $10.1 billion. 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 November stood at $7.0 billion.

For other inquiries about this publication, contact Paul Rochon at
(613) 996-9447.