Federal budget surplus balloons to $14B

A booming Canadian economy generated such big tax revenues this past year that the federal budget surplus approached $14 billion, Prime Minister Stephen Harper said Thursday.

Corporate tax revenues jump 19%

Abooming Canadian economy generated such big tax revenues this past year that the federal budget surplus approached $14 billion, Prime Minister Stephen Harper said Thursday.

The final surplus for the 2006-07 fiscal year came in at $13.8 billion, Harper said at aToronto news conference. That was far more than the $9.2 billion forecast in the Conservatives' March budget.

Federal Revenues -2006/07

Amount (billions)

% change from 05/06
Personal income tax$110.5+6.5%
Corporate income tax$37.7+19.0%
Other income tax$4.9+7.7%
Excise taxes and duties$45.3-1.8%
EI premiums$16.8+1.5%
Other revenues$20.8+6.2%
Total revenues$236.0+6.2%
Source: Finance Dept.

The surplus will be used to pay down the federal government's accumulated debt, which will have dropped to$467.3 billion as of March 31 of this year — its lowest level in 14 years. Since 1996, the debt has been paid down by $95.6 billion.

Harper called the announcement "good news for taxpayers," saying the $14-billion debt reduction would save $725 million in annual interest payments — savings that he said would be passed along to taxpayers through continued cuts to personal income taxes.

Prime Minister Stephen Harper answers questions Thursday in Toronto after making his announcement about the government's unexpectedly high budget surplus. ((Adrian Wyld/Canadian Press))

Butthere are still challenges facing some sectors of an otherwise strong economy, such as in manufacturing and lumber, Harper said.

"Canada must spend with prudence, and we have to continue reducing the debt and reducing taxes for individuals, for businesses and for families," he said.

Finance Minister Jim Flaherty was at Harper's side for the news conference, which had the feel of pre-election positioning. Both men praised their minority government's record of fiscal management since it took power in early 2006.

Rumours are swirling that the country could soon be plunged into another federal election. CBC News reporter Paul Hunter said "the government has a lot of money to play with," soCanadians should look for the Oct. 16 throne speech to contain "hints of good things for taxpayers, given that there seems to be a strong likelihood that we could be headed for a fall election."

Federal Spending - 2006/07
RecipientAmount (billions)% change from 05/06
Transfers to persons$55.6+5.7%
Transfers to other govts.$42.5+4.2%
National Defence$15.7+4.6%
Public debt charges$33.9+0.5%
Total spending$222.2+7.5%
Source: Finance Dept.

The budget surplus for the 2007-08 fiscal year is also heading for the stratosphere. In August, the Finance Department acknowledged that the surplus would top its original$3-billion projection. Forjust the first three months of the new fiscal year, Ottawa has already pegged the surplus at $6.4 billion.

Surprise surplus a familiar tactic: critics

When in opposition, the Conservatives sharply criticized the Liberals for reporting hefty budget surpluses that were much higher than their forecasts.

Harper said his government wasn't guilty of the same thing.

"We were very critical of budget estimates that wethought were flagrantly untrue, deliberately underestimated," he said.

"That's not been the case with this government. We have worked carefully to produce the best estimates possible."

Liberal finance critic John McCallum, however,accused the prime minister of breakinghis promise to ensure that surplus forecasts were more accurate.

"Stephen Harper said never again under his watch would we get these big surprise surpluses, and lo and behold it's exactly what we have," he said.

NDP Leader Jack Layton, for his part,found little to choose between how the Tories and the Liberals dealt with surpluses.

Both, he said, haverefused to spendon programs and services he says Canadians need.

"Mr. Harper, you may have yourself… quite a significant surplus of taxpayers' dollars," he said. "But Canadians haven't got confidence that the basic infrastructure that's needed in an economy and in communities is going to be dealt with."

The Canadian Taxpayers Federation called for Ottawa to lowerpersonal and business tax rates."Annual surpluses represent over-taxation by government and the money should go back to taxpayers by way of income tax relief,"thefederation'sfederal director, John Williamson, said.