Finance Minister Jim Flaherty says that even with its rising debt levels, Canada is faring better than other G7 countries. (Canadian Press)

The federal deficit grew by another $5.3 billion in August as corporate tax revenues plunged and spending rose, the Finance Department said Friday.

That was almost triple the $1.9-billion deficit recorded in the same month last year.

Federal revenues in August were $2 billion lower than they were in August 2008 — a drop of 11.4 per cent.

About half of that drop was due to a 78.6 per cent plunge in corporate tax revenues. Many corporations, which had paid taxes in previous years, lost money in the 2008 taxation year. That led to "significant" refunds of taxes paid in previous years, according to the Finance Department's monthly Fiscal Monitor publication.

Personal income tax revenues fell by $500 million — a 5.5 per cent decline — as unemployment rose from a year earlier and previously announced tax cuts took hold.

Federal spending in August jumped $1.7 billion, or 10.4 per cent. Almost half of that increase — $900 million — went for higher jobless benefit payments.

Deficit on track to hit record

August's deficit figures brought the deficit in the first five months of the current fiscal year to $23.7 billion.

During the same period last year, the country's books registered a $1.1-billion surplus.

The Finance Department estimates that about $11 billion of the $23.7-billion deficit is due to stimulus measures, such as auto aid, enhanced EI benefits and some tax reductions.

The year-to-date accounting shows revenues in the April to August period were $10.6 billion lower than last year.

Spending in the same period rose $15.3 billion, reflecting mushrooming EI claims and aid for the auto industry.

In September, Finance Minister Jim Flaherty projected that the country would turn in a record $55.9-billion deficit in the current fiscal year, which ends in March 2010.

The latest economic numbers suggest that the federal treasury is on track to reach that projection.

Flaherty says Canada's fiscal position best in G7

Flaherty said Friday that even with its rising debt levels, Canada is faring better than other G7 countries.

"It has become obvious that Canada was well prepared for the crisis that hit us a year ago — paying down debt in good times, maintaining a prudent financial system and reducing taxes as the U.S. entered into recession in early 2008, to provide both a short-term gain and a long-term advantage," Flaherty said in remarks prepared for delivery to the Brampton, Ont., Board of Trade.

"It is also clear that, when extraordinary times demanded it, extraordinary measures were taken."