The Ministry of Finance in Canada has released the July 2010 fiscal update.
The noticeable highlights for the four months ending July 31, 2010 vs. July 31, 2009 include:
– Bottom-line deficit down to $7.7 billion ($23.1 annualized) vs. $18.3 billion ($54.9 annualized)
– Corporate income tax collection up 1.7%, despite a 5.3% drop in the rate (from 19% to 18% effective January 1, 2010).
– GST collections up 34% (indicating a significant increase in consumer spending);
– EI benefit payments down 7% (implying expiry of previous benefits and/or people finding employment)
As the government’s stimulus package is due to end on March 31, 2011, it remains quite conceivable that they will be able to balance the budget in a couple years. This bodes well for Canada because a zero deficit number will signal to the marketplace that tax increases are not imminent.
The other factor I will keep mentioning is that the corporate tax rate is due to decline from 18% to 15% by January 1, 2012. If the government does not fall between now and then, the big winners of this will be investors in profitable Canadian firms.