Government finance: Revenue, expenditure and surplus

Driven by increased consumer demand in 2002/03, revenues from consumption taxes helped to push the consolidated government surplus to $8.3 billion from $6.7 billion in 2001/02.

A surge of $8.2 billion in consumption taxes, plus an extra $4.0 billion in property taxes and contributions to the Canada and Quebec pension plans, offset a $7.5 billion reduction in income tax collections. Overall revenues increased by $7.4 billion to $473.8 billion. On the expenditure side, debt charges declined by $4.0 billion, while health expenditures increased by $3.4 billion and social services rose by $4.7 billion. Overall expenditure increased by $5.8 billion to $465.5 billion.

Surplus and deficits contrast by level of government

The combined federal government and Canada and Quebec pension plans had a surplus of $13.9 billion; this contrasted sharply with the combined $5.6 billion deficit of the provincial and local governments.

Income taxes lower

Consolidated government personal income tax collections fell for the first time since 1993/94, dropping by $3.8 billion to $140.5 billion. The reduction is explained mainly by the weakness in the stock markets and federal tax reductions.

Corporate income tax collections dropped for a second consecutive year to $34.7 billion, largely reflecting weak profit performance in the previous year. This drop represents an $8.7 billion reduction from 2000/01.

Federal personal and corporate income taxes declined by $6.4 billion, causing total revenues to go down for a second consecutive year. At the provincial level, personal income tax collections remained flat while corporate taxes recorded a drop of $1.5 billion in 2002/03.

British Columbia experienced a severe reduction of $1.7 billion in combined personal and corporate income tax revenues. The largest growth rates in income tax receipts were recorded in Saskatchewan, Newfoundland and Labrador and Prince Edward Island. Personal income taxes in Ontario continued to decline, while corporate taxes increased by 0.3 billion in 2002/03. Alberta saw a $0.4 billion increase in personal income taxes, while corporate taxes decreased by $0.2 billion.

Consumption taxes rise strongly

The federal government collected $44.4 billion in consumption taxes, up $4.7 billion from 2001/02. This is in line with strong new housing construction and durable good purchases. The goods and services tax (GST) accounted for almost three-quarters of the collections ($31.3 billion) and custom duties, tobacco, gasoline and other taxes accounted for the rest. The new federal Air Travellers Security Charge generated revenues of $0.4 billion.

At the provincial level, consumption taxes increased by $3.6 billion, reaching $52.4 billion in 2002/03. Quebec (+$1.3 billion) and Ontario (+$1.1 billion) recorded the largest increases. Among consumption taxes, the alcoholic beverages and tobacco category grew 36.2% or $1.3 billion, with Ontario contributing the most to the increase (+$0.5 billion) of this category and Alberta recording the highest growth rate, at 66%.

Expenditure growth slows

A drop of $3.6 billion in federal debt charges as well as a decrease of almost $0.7 billion in federal agricultural subsidies and compensation to airlines helped slow spending. The drop in compensation to airlines occurred as operating conditions recovered following the events of September 11, 2001.

Provincial debt charges decreased at a slower pace (-$0.8 billion) than those of the federal government, mainly because of growing debt. Almost all other categories of expenditures increased, as total provincial expenditures reached $242.2 billion, up 1.8% from 2001/02. Among provinces and territories, Alberta showed lower expenditures in 2002/03, as large energy rebate payments ended, and Saskatchewan reduced its payments to farmers from the previous year.

Municipal revenues not apace with expenditures

Local general governments (which exclude school boards) have seen revenue growth lag behind expenditures for the last three years, resulting in a deficit of $41 million - the first in five years. In 2002, municipal revenue increased by $666 million or 1.4%. An $815 million increase in property and related taxes, the primary own source revenue of municipalities, helped prevent the deficit from being larger by compensating for a reduction of $302 million in provincial transfers. The 2002 deficits are mostly concentrated in Ontario (-$314 million), British Columbia (-$199 million) and Quebec (-$155 million). Alberta ($686 million), Newfoundland and Labrador ($37 million) and Saskatchewan ($27 million) were the only provinces recording a surplus.

Over the last three years, revenues received from provincial governments continued their downward trend, representing 14.6% of the municipal expenditures and forcing them to rely more on their own source of revenue. These percentages varied among provinces, ranging from 4% in British Columbia municipalities to 27% in Newfoundland and Labrador. In the territories, Yukon recorded 29% while Northwest Territories and Nunavut showed 48% and 58% respectively.

Ratio of federal transfers to provincial expenditures up for the first time in two years

Provincial transfers received from the federal government covered 15.5% or $37.7 billion of all provincial expenditures in 2002/03. This proportion varied among provinces and territories, ranging from 10% in Alberta to 35% in Newfoundland and Labrador. The proportion was 80% in Yukon and Nunavut and 50% in Northwest Territories.

Largest provincial and local surpluses all in Alberta

In 2002/03, four of Canada's provincial and territorial governments registered a total surplus of $1.6 billion, of which Alberta accounted for $1.5 billion. At the local level (which includes school boards), Alberta also had the largest surplus ($0.7 billion) for a third year in a row; Ontario recorded a surplus of $0.4 billion. As a whole, the local government surplus was $0.7 billion.

The Canada pension plan recorded substantial surpluses in recent years, going from $1.7 billion in 1999/2000 to $6.3 billion in 2002/03. The federal government registered a fourth consecutive surplus, at $6.3 billion, a reduction of $1.1 billion over last year.

Share of government wages and salaries to total salaries stable

Wages and salaries paid by governments (including schools, hospitals, etc.) reached $112.6 billion in 2002, up 4.8% from 2001. Wages and salaries accounted for 25.6% of all government expenditures. Government payrolls also represented 21.3% of all wages and salaries paid to salaried employees in Canada in 2002, the same percentage as for the last two years.

There were 82 government employees per 1,000 people in 2002, the same number as in 1969 and the same as for the last three years. The highest level was recorded in 1991, when the number was 97 employees per 1,000.

Available on CANSIM: tables 183-0002 to 183-0004, 385-0001 to 385-0009, 385-0022 and 385-0023.

Definitions, data sources and methods: survey number 1735.

The 2002/03 issue of Public sector statistics - Supplement (68-213-SIE, free) is now available on Statistics Canada's website (http://www.statcan.gc.ca). From the Our products and services page, under Browse our Internet publications, choose Free, then Government.

Data are also available through custom and special tabulation. For more information on the products or services of the Public Institutions Division, contact Joanne Rice (613-951-0767; joanne.rice@statcan.gc.ca).

For more information, or to enquire about the concepts, methods or data quality of this release, contact Jean-François Carbonneau (613-951-8561), Public Institutions Division.