Justin Trudeau and his Minister of Finance, Chrystia Freeland, surprised many last week by presenting a better budget outlook than expected a year ago.
Have they become less spendthrifts? A little ! But the main reason for the improvement in federal finances lies instead in the sharp increase in federal revenues.
During the current fiscal year 2022-23, the government of Justin Trudeau plans to siphon us off in taxes, duties of all kinds and various revenues some 74.3 billion dollars more than during the pre-pandemic fiscal year of 2019-20.
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WHERE DOES THE MONEY COME FROM
This additional federal revenue of $74.3 billion comes from five major federal revenue sources:
- Personal income tax: + $30 billion
- Corporate income tax: + $18.3 billion
- GST, various taxes, excise duties: + $11.4 billion
- Non-resident income tax: + $1.4 billion
- Employment insurance, various income: + $13.2 billion
Minister Freeland forecasts that budgetary revenues will reach $408.4 billion in the current fiscal year, compared to $334.1 billion in 2019-20, which fiscal year ended a week following the start of the ” paralysis” of the Canadian economy due to the COVID-19 pandemic.
GROWTH FACTORS
Federal revenues thus jumped 22% compared to the normal fiscal year of 2019-20. Clearly, this demonstrates that the Trudeau government has been enjoying solid economic growth since the so-called economic paralysis in 2020.
However, let’s give Trudeau his due: this surprising economic growth is attributable in particular to the $500 billion in financial aid that he himself injected into the Canadian economy in order to financially help all the victims of the pandemic. of the coronavirus, all individuals, businesses, provincial governments, etc.
According to the economic forecasts projected in the Trudeau government’s new budget, nominal GDP growth (real GDP + inflation) in the country reached 13.1% in 2021 and will rise to 7.7% in 2022.
Canada’s nominal GDP will swell this year to $2.656 billion, $345 billion more than in 2019, the pre-pandemic year.
When the value of all goods and services increases in this way, it generates more tax revenue, both in taxes and duties. The unemployment rate is back to its 2019-20 level of 5.7%.
EXPENSES
If federal revenues have increased so much, by $74 billion compared to 2019, how is it that the deficit has deteriorated over these same three years, going from $39.4 billion in 2019-20? to 52.8 billion in 2022-23?
One explanation: the level of expenditure has unfortunately increased more than the additional income. They will reach $461 billion by the end of the current fiscal year, which is $87 billion more than in 2019-20.