CORRECTED: Canada posts C$9.6 bln surplus in 2007-08

Mon Sep 29, 2008 5:17pm EDT
 
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Corrects sixth paragraph to say the increase in personal income tax collection was 2.3 percent, not 47 percent

OTTAWA (Reuters) - Canada posted a budget surplus of C$9.6 billion for the year ended March 31, the government said on Monday as a general election campaign focuses on which party can best steer the country through the financial crisis.

The 2007-08 surplus marks Canada's 11th consecutive balanced budget and follows a surplus of C$14.2 billion the previous year. Ottawa had originally planned for a C$3 billion surplus but later revised that estimate to C$10.2 billion.

The surplus represented 0.6 percent of gross domestic product, down from 0.9 percent in 2006-07 as spending growth outpaced that of revenue, the Department of Finance said in a report.

The budget results will be more fodder for the governing Conservatives, who are already ahead in the polls, as they seek re-election in the October 14 vote. Prime Minister Stephen Harper is trying to persuade voters his party is the most fiscally prudent. He points to a record of past tax cuts and accuses the opposition Liberals of fiscal recklessness with their proposed carbon tax.

Liberal leader Stephane Dion, who hails from the party that led Canada out of a deficit over a decade ago, accuses Harper of spending his way perilously close to a deficit, with a projected surplus in 2008-09 of C$2.3 billion, and C$1.3 billion in the following year.

In the past fiscal year, revenues climbed 2.7 percent from a year earlier due largely to a 2.3 percent increase in personal income tax collection, partly offset by a cut in the federal sales tax.

Program expenses jumped 6 percent, driven by transfers to provincial governments and operating expenses of different government departments and agencies.

The federal government's debt as a percentage of GDP fell to 29.8 percent in March 2008 from 32.3 percent a year earlier.

($1=$1.04 Canadian)

(Reporting by Louise Egan; editing by Rob Wilson)