Canada July budget deficit widens on hit to revenues

Reuters

* July deficit widens to C$1.98 bln

* April-July shortfall C$4.54 bln vs yr-earlier C$4.16 bln

* Gov't says sharp drop in corporate tax revenues a blip

By Louise Egan

OTTAWA, Sept 27 (Reuters) - Canada had bigger budgetdeficits in July and in the April-July period than it did in thesame periods last year due to a sharp drop in corporate incometax revenues, which the government said would be reversed inAugust.

The federal budget deficit widened to C$1.98 billion ($1.92billion) in July, compared with a shortfall of C$1.35 billion inJuly 2012, the Department of Finance said on Friday in a monthlyreport. The government ran a C$158 million surplus in the monthof June.

Revenues from corporate income taxes plunged 73.7 percent inJuly, down C$1.3 billion, "reflecting timing issues whichlowered July revenues but are expected to raise Augustrevenues," the government said.

The government's books will take into account some Julycorporate income tax revenues in August, unlike last year, afinance ministry spokesman said.

Overall, revenues fell 2.6 percent in the month to C$19.8billion, while program expenses clawed 0.1 percent higher toC$19.3 billion. Public debt charges increased by C$0.1 billion,or 3.8 percent in the month.

In the first four months of the fiscal year, from April toJuly, the deficit stood at C$4.54 billion, up from C$4.16billion a year earlier.

Revenues rose 2.6 percent, compared with a 3.4 percent risein expenses. The hit in July to corporate income tax collectionoffset big gains in revenues from personal income taxes andemployment insurance premiums.

The Conservative government has promised to eliminate thedeficit by 2015, and has predicted a budget shortfall in 2013-14of C$18.7 billion, equivalent to 1 percent of gross domesticproduct.

It plans to do that without any major policy shifts orspending cuts, Finance Minister Jim Flaherty said in August.

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