The federal budget outlines the government’s revenue estimates and expenditure priorities for the fiscal year. It is a key component of the parliamentary financial cycle. The outlook for budgetary revenues and expenses can be found in tables A1.5 to A1.7 of Budget 2023.
Figure 1 illustrates Budget 2023 revenues and expenses in the form of a Sankey flow diagram. This diagram shows the flow of dollars where the width of each flow is based upon quantity. Revenue flows into the diagram from the left in the form of taxes and other revenues. Expenses flow out on the right side of the diagram in the form of transfers, program expenses, debt charges and actuarial losses.
Figure 1 – Revenues and Expenses of the Federal Government, 2023–2024 ($ billions)
Note: Numbers may not add up. Figures have been rounded or approximated to their original value and adjusted to account for negative expenses (other fiscal arrangements).
*Other program revenues are affected by consolidated Crown corporation revenues, interest rates, inflation, and exchange rate movements (which affect the Canadian-dollar value of foreign-denominated assets).
Source: Figure prepared by the Library of Parliament using data obtained from Government of Canada, A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future, Budget 2023.
The first step in putting Budget 2023 together is estimating total revenues from, among others, income tax, excise tax and duties. These estimates are reflected in the light-blue section of the diagram. The breakdown of these revenue sources by component can be seen in the dark-blue section of the diagram. Personal income tax revenues are the largest component, accounting for about 78% of total income tax revenues and roughly 47% of total budgetary revenues for 2023–2024 (shown in the grey section). Corporate income tax accounts for about 19% of total budgetary revenues for the fiscal year.
Goods and Services taxes (GST) are the largest source of revenue from excise taxes and duties, accounting for about 73% of the total in 2023–2024. The GST accounts for around 11% of total budgetary revenues for the fiscal year.
The federal government then estimates revenue from additional sources, including Employment Insurance premiums, foreign exchange reserves, pollution pricing, as well as revenue from other programs and Crown corporations. These revenue sources are reflected in the light-blue section of the diagram and comprise about 16% of total budgetary revenues.
Budget 2023 breaks down total federal budgetary expenses into five main components: actuarial losses, direct program expenses, public debt charges, transfers to other levels of government and transfers to persons. These expenses are illustrated in the dark-beige section of the diagram. Transfers to persons (the elderly, families with children and workers) are around 25% of total budgetary expenses for 2023–2024.
The light-beige section of the diagram provides greater detail on the government’s expenditure estimates. Operating expenses, which include the expenditures of departments, agencies and Crown corporations, are the largest component of direct program expenses and account for about 25% of total budgetary expenses for 2023–2024. Health transfers represent around 11% of total budgetary expenses.
Total budgetary revenues and expenses for 2023–2024 are shown in the grey section of the diagram. The federal government estimates that total budgetary revenues will be $457 billion for the fiscal year, and total budgetary expenses will be $497 billion. Thus, total budgetary expenses will need to be financed by a $40 billion deficit. This deficit represents about 8% of the total budget.
By Emmanuel Preville, Library of Parliament
Categories: Economics and finance, Government, Parliament and politics