Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Minister of Finance Jim Flaherty responds to a question during question period in the House of Commons, Tuesday, Jan. 29, 2013 in Ottawa.

Adrian Wyld/THE CANADIAN PRESS

Lower provincial revenues and British Columbia's move to raise corporate taxes won't sit well with Jim Flaherty as he prepares a 2013 budget that must find a way to erase a $26-billion federal deficit within two years.

The federal Finance Minister has circled March 8 as the day for his pre-budget meetings with private-sector forecasters, who will be analyzing this week's data from the provinces before providing updated forecasts to Mr. Flaherty.

Finance Canada relies on an average of growth forecasts from private-sector economists to underpin the budget numbers. The timing of this year's meeting with economists suggests the 2013 budget will come in late March.

Story continues below advertisement

Ottawa already projected worse-than-expected finances in Mr. Flaherty's November fiscal update, and Tuesday's provincial news is unlikely to give Ottawa's Conservative government hope that fiscal fortunes have improved.

Ottawa does not collect direct resource revenue through royalties, but the general downward trend will have some impact on national finances. The most direct hit could come through corporate tax revenue, should lower profits lead to a reduction in corporate revenue. Alberta's numbers released Tuesday may ease that fear somewhat. Corporate income-tax revenue is higher than projected in Alberta's March, 2012, budget but slightly lower than mid-year forecasts.

Further, B.C.'s move to raise the corporate tax rate goes against a personal campaign of Mr. Flaherty's, who has urged the provinces for years to work with Ottawa in billing Canada internationally as a low-tax destination for business.

Financial challenges for the governments of B.C., Alberta and Ontario could also make for more heated debate around the federal equalization program, which Ottawa must renew in 2014. Mr. Flaherty has said the size of the program will be capped at the rate of Canada's economic growth, and said Ottawa will only consider "technical" changes. But natural resources are a central part of the program's formula, meaning any tweaks to the way resources are treated will create provincial winners and losers.

Like Alberta, Ottawa has previously signalled that this year's deficit is coming in higher than expected. Mr. Flaherty's November fiscal update estimated this year's deficit would be $26-billion, up from the $21.1-billion he estimated in the March, 2012, budget.

In a speech earlier this month, Mr. Flaherty said lower commodity prices and low inflation (which affects nominal GDP and ultimately government revenues) will mean tougher decisions around spending.

Still, Mr. Flaherty said the lower expectations for revenues won't force him to "slash and burn." He also said he still expects to balance the budget by the 2015-16 fiscal year.

Story continues below advertisement

Monthly tracking of this fiscal year's federal deficit has been a bit of a "head scratcher," TD senior economist Sonya Gulati has noted. As of November, the deficit stood at $12.4-billion, which she said would work out to a year-end deficit of about $22-billion.

Finance Canada will release its fiscal update for December before the end of this month.

Report an error Editorial code of conduct
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies