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- Fiscal Monitor 2001 -
The Fiscal Monitor
Highlights of financial results for May 2001
See also:
Highlights
May 2001: budgetary surplus of $2.9 billion
There was a budgetary surplus of $2.9 billion in May 2001, compared to a surplus of $3.5 billion in May 2000. This year-over-year decline of $0.6 billion in the surplus was attributable to slightly lower budgetary revenues, coupled with higher program spending and public debt charges.
April 2001 to May 2001: budgetary surplus of $7.4 billion
The budgetary surplus was estimated at $7.4 billion for the April 2001 to May 2001 period, compared to the surplus of $6.5 billion reported in the same period of 2000-01. The increase in the year-over-year surplus was largely attributable to higher personal income tax settlement payments with respect to taxation year 2000. These payments were related to extraordinary developments, primarily the strong increase in capital gains for the 2000 taxation year. | May 2001: budgetary results Budgetary revenues declined $0.1 billion, or 0.5 per cent, in
May 2001 on a year-over-year basis. All components except corporate and
other income tax revenues were lower.
- Personal income tax revenues declined slightly, as higher final
settlement payments related to the 2000 taxation year were more
than offset by lower tax deductions from employment income, higher
refunds and higher Canada Child Tax Benefit payments. The decline
in tax deductions from employment income reflected the impact of the tax
reduction measures announced in the February 2000 budget and the October
2000 Economic Statement and Budget Update, which came into effect
on July 1, 2000, and January 1, 2001.
- Corporate income tax revenues were up $0.3 billion, or 14.3 per
cent. This increase primarily reflects the tax instalment procedures, as
operating profits of Canadian corporations declined in the first quarter
of 2001. Corporations are required to remit monthly instalments based on
either their previous year’s actual tax liability or their current
year’s projected tax liability, with final settlement payments made
within 60 days of the end of their taxation year. Throughout most of
2000-01, monthly tax instalments were based on the tax liability for
1999. However, corporate profits grew strongly in 2000, with the result
that the monthly instalment payments understated the final tax liability
for 2000-01. With monthly instalments now based on the tax liability
for 2000, the year-over-year change in the monthly results could be
misleading.
- Employment insurance (EI)premium revenues were virtually unchanged, as
the decline in premium rates (the employee rate for 2001 is $2.25 per
$100 of insurable earnings compared to $2.40 in 2000) offset the
impact of the growth in the number of people employed and therefore
paying premiums.
- Excise taxes and duties were down $0.2 billion, or 6.3 per cent. This
decline reflected the timing of the payments of goods and services tax
refunds and rebates, as noted in the April 2001 Fiscal Monitor.
- Non-tax revenues were down sharply, primarily reflecting the timing of
receipts.
Table 1 Summary statement of transactions
|
|
May |
April to May |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary transactions |
|
|
|
|
Revenues |
15,432 |
15,353 |
30,370 |
32,601 |
Program spending |
-8,547 |
-9,062 |
-17,165 |
-18,370 |
Operating surplus |
6,885 |
6,291 |
13,205 |
14,231 |
Public debt charges |
-3,387 |
-3,405 |
-6,754 |
-6,794 |
Budgetary balance (deficit/surplus) |
3,498 |
2,886 |
6,451 |
7,437 |
Non-budgetary transactions |
2,711 |
1,853 |
-2,541 |
-3,139 |
Financial requirements/source |
|
|
|
|
(excluding foreign
exchange transactions) |
6,209 |
4,739 |
3,910 |
4,298 |
Foreign exchange transactions |
658 |
-295 |
1,613 |
-137 |
Net financial balance |
6,867 |
4,444 |
5,523 |
4,161 |
Net change in borrowings |
149 |
-883 |
-5,640 |
-813 |
Net change in cash balances |
7,016 |
3,561 |
-117 |
3,348 |
Cash balance at end of period |
|
|
12,743 |
16,530 |
|
Note: Positive numbers indicate a net source of funds. Negative
numbers indicate a net requirement for funds. |
On a year-over-year basis, program spending increased by $0.5 billion, or 6.0 per cent. Among the major components:
- Major transfers to persons were up 3.1 per cent, reflecting higher
elderly benefit payments as EI payments were lower.
- Major transfers to other levels of government were up 14.8 per cent,
reflecting higher cash transfers under the Canada Health and Social
Transfer (CHST). The increase in the CHST reflected the September 2000
agreement reached by first ministers to increase base funding from $13.5
billion in 2000-01 to $17.3 billion in 2001-02. The decline in
fiscal transfers was attributable to the timing of transfers to the
territories.
- Direct program spending, consisting of total program spending less the
major transfers to persons and other levels of government, increased by
3.6 per cent. Subsidies and other transfers, and payments to Crown
corporations, were up strongly, largely offset by lower operating
and capital expenditures. The monthly fluctuations in these components
are due in large part to the timing of payments.
Public debt charges, on a year-over-year basis, were up slightly, as an increase in the average effective interest rate largely offset the impact of the decline in the stock of interest-bearing debt.
April 2001 to May 2001: budgetary results
Over the first two months of fiscal year 2001-02, the budgetary surplus was estimated at $7.4 billion, up $1 billion from the surplus reported in the same period of 2000-01. This increase in the surplus primarily reflects personal income tax settlement payments with respect to the 2000 taxation year.
Budgetary revenues were up $2.2 billion, or 7.3 per cent, on a year-over-year basis. Among the major components:
- Personal income tax collections were up $1.6 billion, or 10.6 per
cent. All of this increase was attributable to final tax payments with
respect to the 2000 taxation year, reflecting extraordinary developments
in taxation year 2000. These included, among others, strong
increases in capital gains for the 2000 taxation year. Dampening the
impact of these settlement payments were higher refunds, reflecting the
faster processing of returns to date, and the impact of the tax
reduction measures announced in the February 2000 budget and the
October 2000 Economic Statement and Budget Update. The tax
reduction measures include the reduction in personal income tax
rates, the elimination of the 5-per-cent surtax, increases in the
thresholds, the restoration of full indexation of the personal income
tax system and related benefits, and increases in the Canada Child
Tax Benefit.
- Corporate income tax revenues were up $0.5 billion, or 11.9 per
cent. This is considerably stronger than the reported increase in
corporate profits so far this year, which suggests that the current
experience reflects the effects of the remittance procedures and should
be reversed once corporations file their final payments following the
end of their taxation year.
- EI premium revenues were up marginally, as the decline in
premium rates for 2000 and 2001 virtually offset the impact of
prior-year adjustments and the growth in the number of people employed
and therefore paying premiums. The employee rate for 2001 is
$2.25 per $100 of insurable earnings, compared to $2.40 in 2000 and
$2.55 in 1999.
- Excise taxes and duties increased by $0.2 billion, or 3.3 per
cent. Most of the increase was the result of higher customs
import duties.
- Non-tax revenues were down 7.3 per cent.
Table 2 Budgetary revenues
|
|
May |
|
April to May |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
Income taxes |
|
|
|
|
|
|
Personal income tax |
7,279 |
7,225 |
-0.7 |
14,628 |
16,178 |
10.6 |
Corporate income tax |
2,076 |
2,373 |
14.3 |
4,039 |
4,519 |
11.9 |
Other income tax revenue |
250 |
305 |
22.0 |
593 |
670 |
13.0 |
Total income tax |
9,605 |
9,903 |
3.1 |
19,260 |
21,367 |
10.9 |
Employment insurance
premium revenues |
1,775 |
1,770 |
-0.3 |
3,559 |
3,579 |
0.6 |
Excise taxes and duties |
|
|
|
|
|
|
Goods and services tax |
2,520 |
2,158 |
-14.4 |
4,597 |
4,607 |
0.2 |
Customs import duties |
130 |
226 |
73.8 |
290 |
395 |
36.2 |
Sales and excise taxes |
681 |
736 |
8.1 |
1,293 |
1,382 |
6.9 |
Total excise taxes and duties |
3,331 |
3,120 |
-6.3 |
6,180 |
6,384 |
3.3 |
Total tax revenues |
14,711 |
14,793 |
0.6 |
28,999 |
31,330 |
8.0 |
Non-tax revenues |
721 |
560 |
-22.3 |
1,371 |
1,271 |
-7.3 |
Total budgetary revenues |
15,432 |
15,353 |
-0.5 |
30,370 |
32,601 |
7.3 |
|
Program spending increased by $1.2 billion, or 7.0 per cent, in the April 2001 to May 2001 period, compared to the same period last year.
- Transfers to persons were up 3.9 per cent, attributable to higher
elderly benefits, reflecting an increase in the number of individuals
eligible for benefits and higher average benefits, which are indexed to
inflation, and an increase in EI benefit payments.
- Major transfers to other levels of government were up 21.2 per cent,
reflecting higher cash transfers under the CHST and fiscal transfers
programs. The increase in the CHST reflected the September 2000
agreement reached by first ministers to increase base funding from
$13.5 billion in 2000-01 to $17.3 billion in 2001-02. The increase
in fiscal transfers was primarily due to higher equalization
entitlements, reflecting the continued stronger growth in Ontario than
in the equalization-receiving provinces.
- Direct program spending, consisting of total program spending less the
major transfers to persons and other levels of government, increased by
2.5 per cent. During the first few months of the fiscal year,
developments in this component are largely affected by the timing
of payments.
Public debt charges were virtually unchanged, as the impact of the decline in the stock of interest-bearing debt was offset by an increase in the average effective interest rate on that debt.
Table 3 Budgetary expenditures
|
|
May |
|
April to May |
|
|
2000 |
2001 |
Change |
2000-01 |
2001-02 |
Change |
|
|
($ millions) |
(%) |
($ millions) |
(%) |
|
|
|
|
|
|
|
Transfer payments to: |
|
|
|
|
|
|
Persons |
|
|
|
|
|
|
Elderly benefits |
1,972 |
2,091 |
6.0 |
3,969 |
4,154 |
4.7 |
Employment insurance
benefits |
906 |
875 |
-3.4 |
1,944 |
1,988 |
2.3 |
Total |
2,878 |
2,966 |
3.1 |
5,913 |
6,142 |
3.9 |
Other levels of government |
|
|
|
|
|
|
Canada Health and
Social Transfer |
1,125 |
1,442 |
28.2 |
2,250 |
2,883 |
28.1 |
Fiscal transfers |
1,064 |
1,035 |
-2.7 |
1,895 |
2,041 |
7.7 |
Alternative Payments for
Standing Programs |
-205 |
-200 |
-2.4 |
-411 |
-400 |
-2.7 |
Total |
1,984 |
2,277 |
14.8 |
3,734 |
4,524 |
21.2 |
Direct program
spending |
|
|
|
|
|
|
Subsidies and
other transfers |
|
|
|
|
|
|
Agriculture |
14 |
192 |
1,271.4 |
22 |
230 |
945.5 |
Foreign Affairs |
89 |
62 |
-30.3 |
144 |
184 |
27.8 |
Health |
125 |
188 |
50.4 |
188 |
198 |
5.3 |
Human Resources
Development |
60 |
127 |
111.7 |
68 |
152 |
123.5 |
Indian and Northern
Development |
317 |
225 |
-29.0 |
1,158 |
916 |
-20.9 |
Industry and Regional
Development |
124 |
40 |
-67.7 |
152 |
152 |
0.0 |
Veterans Affairs |
121 |
124 |
2.5 |
237 |
242 |
2.1 |
Other |
96 |
162 |
68.8 |
340 |
382 |
12.4 |
Total |
946 |
1,120 |
18.4 |
2,309 |
2,456 |
6.4 |
Payments to
Crown corporations |
|
|
|
|
|
|
Canadian Broadcasting
Corporation |
42 |
40 |
-4.8 |
215 |
240 |
11.6 |
Canada Mortgage and
Housing Corporation |
150 |
158 |
5.3 |
300 |
316 |
5.3 |
Other |
65 |
92 |
41.5 |
205 |
293 |
42.9 |
Total |
257 |
290 |
12.8 |
720 |
849 |
17.9 |
Operating and
capital expenditures |
|
|
|
|
|
|
Defence |
667 |
602 |
-9.7 |
1,157 |
1,207 |
4.3 |
All other departmental
expenditures |
1,815 |
1,807 |
-0.4 |
3,332 |
3,192 |
-4.2 |
Total |
2,482 |
2,409 |
-2.9 |
4,489 |
4,399 |
-2.0 |
Total direct program
spending |
3,685 |
3,819 |
3.6 |
7,518 |
7,704 |
2.5 |
Total program
expenditures |
8,547 |
9,062 |
6.0 |
17,165 |
18,370 |
7.0 |
Public debt charges |
3,387 |
3,405 |
0.5 |
6,754 |
6,794 |
0.6 |
Total budgetary
expenditures |
11,934 |
12,467 |
4.5 |
23,919 |
25,164 |
5.2 |
Memorandum item: |
|
|
|
|
|
|
Total transfers |
5,808 |
6,363 |
9.6 |
11,956 |
13,122 |
9.8 |
|
Financial source of $4.3 billion (excluding foreign exchange
transactions) for April 2001 to May 2001
The budgetary balance is presented on a modified accrual basis of accounting, recording government liabilities when they are incurred, regardless of when the cash payment is made. In addition, the budgetary balance includes only those activities over which the Government has legislative control.
In contrast, financial requirements/source measures the difference between cash coming in to the Government and cash going out. Financial requirements/source differs from the budgetary balance as the former includes transactions in loans, investments and advances, federal employees’ pension accounts, other specified purpose accounts, and changes in other financial assets and liabilities. These activities are included as part of non-budgetary transactions. The conversion from accrual to cash is also reflected in non-budgetary transactions.
Non-budgetary transactions resulted in a net requirement of $3.1 billion in the first two months of 2001-02, compared to a net requirement of $2.5 billion in the same period in 2000-01.
As a result, with a budgetary surplus of $7.4 billion and a net requirement of $3.1 billion from non-budgetary transactions, there was a financial source (excluding foreign exchange transactions) of $4.3 billion in the April 2001 to May 2001 period, compared to a financial source of $3.9 billion in the same period last year.
Net financial source of $4.2 billion for April 2001 to May
2001
Foreign exchange transactions represent all transactions in international reserves held in the Exchange Fund Account. The purpose of the Exchange Fund Account is to promote order and stability in the foreign exchange market. The buying of Canadian dollars represents a source of funds from exchange fund transactions, while the selling of Canadian dollars represents a requirement. Changes in foreign currency liabilities, which are undertaken to change the level of Canada’s foreign exchange reserves, also impact on foreign exchange transactions. Taking all of these factors into account, there was a net requirement of $0.1 billion in the first two months of 2001-02, compared to a net source of $1.6 billion in the same period in 2000-01.
With a budgetary surplus of $7.4 billion, a net requirement of $3.1 billion from non-budgetary transactions and a net requirement of $0.1 billion from foreign exchange transactions, there was a net financial source of $4.2 billion in the April 2001 to May 2001 period, compared to a net source of $5.5 billion in the same period in 2000-01.
Net borrowings down $0.8 billion for April 2001 to May 2001
This financial source has allowed the Government to reduce its holding of market debt by $0.8 billion to the end of May 2001. In addition, cash balances increased by $3.3 billion to stand at $16.5 billion. The level of cash balances varies from month to month based on a number of factors including periodic large debt maturities, which can be quite volatile on a monthly basis.
Table 4 The budgetary balance and financial requirements/source
|
|
May |
April to May |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Budgetary balance (deficit/surplus) |
3,498 |
2,886 |
6,451 |
7,437 |
Loans, investments and advances |
|
|
|
|
Crown corporations |
7 |
47 |
7 |
180 |
Other |
-10 |
-42 |
96 |
-57 |
Total |
-3 |
5 |
103 |
123 |
Specified purpose accounts |
|
|
|
|
Canada Pension Plan Account |
219 |
627 |
-175 |
227 |
Superannuation accounts |
236 |
-241 |
543 |
-193 |
Other |
-47 |
31 |
-90 |
51 |
Total |
398 |
417 |
278 |
85 |
Other transactions |
2,316 |
1,431 |
-2,922 |
-3,347 |
Total non-budgetary transactions |
2,711 |
1,853 |
-2,541 |
-3,139 |
Financial requirements/source
(excluding foreign exchange transactions) |
6,209 |
4,739 |
3,910 |
4,298 |
Foreign exchange transactions |
658 |
-295 |
1,613 |
-137 |
Net financial balance |
6,867 |
4,444 |
5,523 |
4,161 |
|
Table 5 Net financial balance and net borrowings
|
|
May |
April to May |
|
2000 |
2001 |
2000-01 |
2001-02 |
|
|
($ millions) |
Net financial balance |
6,867 |
4,444 |
5,523 |
4,161 |
Net increase (+)/decrease (-) in borrowings |
|
|
|
|
Payable in Canadian dollars |
|
|
|
|
Marketable bonds |
3,362 |
-225 |
5,262 |
1,146 |
Canada Savings Bonds |
-141 |
-79 |
-147 |
-80 |
Treasury bills |
-1,700 |
-300 |
-8,950 |
-1,000 |
Other |
200 |
0 |
-200 |
0 |
Total |
1,721 |
-604 |
-3,635 |
66 |
Payable in foreign currencies |
|
|
|
|
Marketable bonds |
-2,174 |
-1,576 |
-2,174 |
-1,576 |
Notes and loans |
|
|
|
|
Canada bills |
602 |
1,360 |
169 |
870 |
Canada notes |
|
-63 |
|
-173 |
Total |
-1,572 |
-279 |
-2,005 |
-879 |
Net change in borrowings |
149 |
-883 |
-5,640 |
-813 |
Change in cash balance |
7,016 |
3,561 |
-117 |
3,348 |
|
Table 6 Condensed statement of assets and liabilities
|
|
March 31, 2001 |
May 31, 2001 |
Change |
|
|
($ millions) |
|
Liabilities |
|
|
|
Accounts payable, accruals and allowances |
43,511 |
40,164 |
-3,347 |
Interest-bearing debt |
|
|
|
Pension and other accounts |
|
|
|
Public sector pensions |
129,692 |
129,499 |
-193 |
Canada Pension Plan
(net of securities) |
6,409 |
6,636 |
227 |
Other pension and
other accounts |
7,080 |
7,131 |
51 |
Total pension and
other accounts |
143,181 |
143,266 |
85 |
Unmatured debt |
|
|
|
Payable in
Canadian dollars |
|
|
|
Marketable bonds |
294,627 |
295,773 |
1,146 |
Treasury bills |
88,700 |
87,700 |
-1,000 |
Canada Savings Bonds |
25,753 |
25,673 |
-80 |
Other |
3,473 |
3,473 |
0 |
Subtotal |
412,553 |
412,619 |
66 |
Payable in foreign
currencies |
33,171 |
32,292 |
-879 |
Total unmatured debt |
445,724 |
444,911 |
-813 |
Total interest-bearing debt |
588,905 |
588,177 |
-728 |
Total liabilities |
632,416 |
628,341 |
-4,075 |
Assets |
|
|
|
Cash and accounts receivable |
18,612 |
21,960 |
3,348 |
Foreign exchange accounts |
50,010 |
50,147 |
137 |
Loans, investments and advances (net of allowances) |
14,268 |
14,145 |
-123 |
Total assets |
82,890 |
86,252 |
3,362 |
Accumulated deficit
(net public debt) |
549,526 |
542,089 |
-7,437 |
|
Note: Assumes fiscal balance of $15 billion for 2000-01. |
Note to Readers:
The Government’s financial statements are presented on a modified accrual basis of accounting. This means that while most operating expenditures and non-tax revenues are recorded in the financial statements when they are incurred or earned (even if cash is not paid out or received until later), tax revenues are accounted for when cash is received and the entire amount of capital acquisitions, such as buildings, are treated as expenditures when acquired. In the February 1995 budget the Government announced its intention to adopt full accrual accounting. To this end, it has successfully introduced the Financial Information Strategy (FIS), a multi-year project which modernized financial systems and accounting practices. FIS consists of three components: the implementation of new financial systems, the adoption of full accrual accounting, and the provision of improved financial information to managers. In the 2000 budget the Government set a target date of 2001-02 for implementation of the first two components of FIS.
For the time being the monthly results for 2001-02 will continue to be presented on a modified accrual basis of accounting. However, the final audited financial statements for 2001-02, scheduled for release in the fall of 2002, will be presented on a full accrual basis of accounting. Previous years’ results will also be restated on a full accrual basis. For more information, see the backgrounder Implementation of Full Accrual Accounting in the Federal Government’s Financial Statements. |