Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Crazy Fools LightHouse -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (1823)	11/25/2006 7:06:55 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 3198

Canada Doubles Budget Surplus Forecast to C$7.2 Bln (Update2) By Theophilos Argitis and Alexandre Deslongchamps Nov. 23 (Bloomberg) -- Canadian Finance Minister Jim Flaherty doubled his budget surplus forecast for this year, and committed to reduce personal income taxes and buy back more bonds as part of a plan to eliminate the government's net debt by 2021. The government anticipates a surplus of C$7.2 billion ($6.3 billion) for the fiscal year that ends March 31, up from the initial estimate of C$3.6 billion, Flaherty said in his semi- annual budget update released today in Ottawa. Flaherty also forecast C$50.1 billion of combined surpluses through 2012. ``From this year, every dollar of every surplus of the government of Canada will be applied to bringing down the debt,'' Flaherty said today at a hearing of the House of Commons finance committee, where the budget update was presented. Flaherty's plan builds on a 10-year effort to improve Canada's competitiveness by shoring up its finances, cutting debt and reducing spending. Canada was the only Group of Seven country to post a budget surplus last year as the economy benefited from higher commodity prices and record corporate profits. Canada recorded a C$13.2 billion budget surplus for the last fiscal year, and since 1997 has used more than C$80 billion in extra money to buy back government debt. The surplus will rise to C$$7.3 billion next fiscal year. The so-called ``net'' government debt is about C$414 billion, and includes federal and provincial government debt, minus the assets of the Canada and Quebec pension plans, Flaherty said. The new target assumes that the provinces balance their budgets, and that the assets of the pension plans will soar to C$427 billion by 2021, Flaherty said. Ambitious The debt goal is ``very ambitious,'' Glen Hodgson, chief economist with the Conference Board of Canada, said in a telephone interview. The government also moved up by one year its target of reducing debt to 25 percent of gross domestic product to by 2012- 13, from the current ratio of 35 percent. The government will put interest savings toward reducing personal income taxes, starting with C$800 million worth of tax cuts in next year's budget, rising to C$1.4 million for the 2011 budget. The government will offer a tax benefit to low income earners next year, Flaherty said. ``Eliminating Canada's total government debt will mean that fewer dollars will be spent on interest costs,'' the document said. ``It will mean that more money will remain in people's pockets so they can spend it or save it.'' Sales Tax Flaherty reiterated the government plans to reduce the federal goods and services taxes to 5 percent from 6 percent by the end of 2010. The tax was cut earlier this year from 7 percent. Flaherty also pledged to devote part of any unforeseen budget surpluses to reducing personal income taxes. Flaherty also said he would seek in coming years to reduce taxes on savings, including on capital gains, and business investment, while taking measures to retain skilled workers. Canada will seek to have the lowest tax rates on new investments in the G-7, according to the document. While Flaherty didn't cost out the measures, the government left aside a ``planning surplus'' of about C$19 billion over six years that will be available for ``new spending and debt and tax reduction initiatives.'' ``We share their goal,'' said Nancy Hughes Anthony, chief executive officer of the Canadian Chamber of Commerce in Ottawa. ``The question is how fast can we go. We could go faster on the tax reduction side.'' Productivity Labor productivity has been a major concern, falling for the first time in two years in the second quarter. Manufacturers also have been hampered by the dollar's 38 percent rise since 2002, which they say made their goods more expensive abroad too quickly for them to adjust. Flaherty's first budget came under criticism for lowering the goods and services sales tax to 6 percent from 7 percent starting July 1. The International Monetary Fund, for instance, said the money may have been better spent by cutting income taxes. The sales-tax cut was partly financed by rolling back some income-tax reductions made by the Liberals before the Conservatives defeated them in January. Flaherty today also cut his forecast for economic growth this year to 2.8 percent, from 3 percent, but left his growth estimate for 2007 at 2.7 percent. Growth in 2008 is expected to accelerate to 3 percent. The government cut its forecast for the 10-year government bond yield to an average of 4.3 percent next year from 4.5 percent, and lowered its jobless rate estimate to 6.5 percent from 6.6 percent. Canada's 10-year bonds currently yield 3.98 percent, while the jobless rate was 6.2 percent in October. To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net . Last Updated: November 23, 2006 18:23 EST bloomberg.com