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 A1.6 and A1.7 of Budget 2024.
Figure 1 illustrates Budget 2024 revenues and expenses as a Sankey diagram. This diagram shows the flow of money by category of revenue and expense, where the width of each flow is proportional to its 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 net actuarial losses.
Figure 1 – Revenues and Expenses of the Federal Government, 2024–2025 ($ billions)
Note: Figures in the diagram have been rounded and/or adjusted to account for fiscal arrangements. As a result, numbers may vary slightly.
*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).
**Transfers to other governments also include the Quebec Abatement; statutory subsidies; payments under the Canada-Nova Scotia Arrangement on Offshore Revenues; payments for the transfer of Hibernia Net Profits Interest and Incidental -Net Profits Interest net revenues to Newfoundland and Labrador; and Fiscal Stabilization payments. These transfers account for approximately -$7.2 billion in expenses. Thus, the forecasted amount of funds disbursed for transfers to other levels of government is approximately $106 billion.
***Health transfers consist of the Canada Health Transfer and health agreements with provinces and territories.
Source: Figure prepared by the Library of Parliament, 2024, using data obtained from Government of Canada, Fairness for every generation, Budget 2024.
Budgetary Revenues
The first step in putting Budget 2024 together is estimating total revenues from, among others, income tax, excise tax and duties. These estimates are reflected in the light-blue (second from the left) section of the diagram. The breakdown of these revenue sources by component can be seen in the dark-blue (leftmost) section of the diagram. Personal income tax revenues are the largest component, accounting for about 69% of total income tax revenues and roughly 47% of total budgetary revenues for 2024–2025 are shown in the grey (or middle) section of the diagram. Corporate income tax accounts for about 18% 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 71% of the total in 2024–2025. 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 (second from the left) section of the diagram and comprise about 17% of total budgetary revenues.
Budgetary Expenses
Budget 2024 breaks down total federal budgetary expenses into five main components: net 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 (second from the right) section of the diagram. Transfers to persons (the elderly, families with children and workers) are around 25% of total budgetary expenses for 2024–2025.
The light-beige (rightmost) 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 23% of total budgetary expenses for 2024–2025. Health transfers represent around 10% of total budgetary expenses.
Budgetary Balance
Total budgetary revenues and expenses for 2024–2025 are shown in the grey (or middle) section of the diagram. The federal government estimates that total budgetary revenues will be $498 billion for the fiscal year, and total budgetary expenses will be $538 billion. Thus, total budgetary expenses will need to be financed by a $40 billion deficit. This deficit represents about 7% of total budgetary expenses.
By Patric Harrigan and Emmanuel Preville, Library of Parliament
Categories: Economics and finance, Government, Parliament and politics
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