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By Leah Schnurr
OTTAWA Oct 7 The Canadian government posted a
much smaller-than-expected budget deficit in the fiscal year
2015-16, helped by increased income tax revenue related to
changes to tax brackets made by the new government, the finance
department said on Friday.
Canada ran a budgetary deficit of C$1.0 billion ($755
million) for the fiscal year that ended on March 31, 2016,
according to the annual financial report released by the
That is well short of the deficit of C$5.4 billion that the
government had forecast in its budget released earlier this
year. Still, the swing to a deficit comes after the government
posted a surplus of C$1.9 billion in the previous fiscal
Revenue was up 4.6 percent from the 2014-15 fiscal year, due
to the growth in income tax revenue and other taxes. That was
C$4.2 billion, or 1.5 percent, higher than had been forecast.
The Liberal government has sizeable deficits forecast for
the next five years as it looks to invigorate the economy with
infrastructure and other spending.
The smaller deficit for last year could give the government
room to roll out even more stimulus, said Doug Porter, chief
economist at BMO Capital Markets.
"Arguably, they could loosen fiscal policy by just a notch
further without doing any damage to where we thought the fiscal
position was beforehand," said Porter.
The government is trying to dispense infrastructure
investments into the economy as quickly as possible, Prime
Minister Justin Trudeau said in an interview with Reuters on
The 2015-16 fiscal year encompassed both the former
Conservative government and the new Liberal government that came
to power last November.
Shortly after, the Liberals made good on a campaign promise
to reduce income taxes for lower income earners, while raising
them for higher earners.
A 6.7 percent increase in personal income tax revenue in the
fiscal year was due to gains in personal income and wealthier
Canadians recognizing income in 2015 before the higher tax came
into effect this year, the finance department said.
The previous Conservative government's sale of its shares of
General Motors in April last year also contributed C$2.1
billion to revenue, while program expenses and public debt
charges were C$100 million lower than forecast.
($1 = 1.3246 Canadian dollars)
(Additional reporting by Jeffrey Hodgson in Toronto; Editing by