U.S. Markets closed

UPDATE 1-Canada’s Liberals promise new spending, four more years of deficits

By Kelsey Johnson

(Adds PBO analysis, background)

By Kelsey Johnson

OTTAWA, Sept 29 (Reuters) - Canadian Prime Minister Justin Trudeau's Liberal Party is promising billions of dollars in new spending initiatives if re-elected next month, but said on Sunday those commitments would require annual deficits of more than C$20 billion ($15.11 billion) over the next four years.

Trudeau, who is in a tough battle for re-election, released the Liberals' fully costed platform during a campaign event in Mississauga, Ontario, where he promised new investments for families, students and the environment.

Opinion polls show the Liberals, whose campaign was forced on the defensive earlier this month after photos and video from years before emerged showing Trudeau wearing blackface makeup, are in a statistical tie with the main opposition Conservatives.

A recent Nanos poll had the Conservatives leading at 34.1%, while the Liberals were at 32.6%.

The Conservatives have focused their election campaign on fiscal responsibility and affordability issues. Canadians vote on Oct. 21.

If re-elected, the Liberals said they would spend C$9.3 billion in 2020-21, increasing to nearly C$17 billion by year four. The federal deficit would be C$27.4 billion in the first year of a second term, before declining to C$21 billion in 2023-24.

The Canadian government posted a budgetary deficit of C$14 billion in the fiscal year ended March 31, according to the Finance Department.

Trudeau promised during the 2015 campaign to run three years of deficits before returning the federal budget to balance this year. Sunday's platform made no mention of when the budget would be balanced.

Canada's debt-to-GDP ratio would remain around the 30% mark, beginning at 30.9% in 2020-21 before dropping slightly to 30.2% in year four, the party said.

New revenues were estimated at C$5.2 billion in the first year, rising to C$7.2 billion in 2023-24, thanks partly to the party's promise to crack down on corporate tax loopholes and implement a 10% tax on luxury cars, boats and personal aircraft over C$100,000.

The Liberals said digital companies with worldwide revenues of at least C$1 billion and Canadian revenues of more than C$40 million would be subject to a new 3% tax on revenue generated through the sale of online ads and user data. The tax would take effect on April 1, 2020.

In an analysis, Canada's Parliamentary Budget Officer (PBO), which provides independent and non-partisan analysis on federal financial matters, including party costing, said the Liberals' estimate of their planned luxury goods tax had a "high degree of uncertainty."

The PBO said prices and sales of luxury items like boats and personal aircraft could fluctuate because of changes in buyer behavior and exchange rates.

($1 = 1.3240 Canadian dollars) (Reporting by Kelsey Johnson; Editing by Peter Cooney)