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Auditor General - Budget Making - Long-Term Impact of Budget Measures? 

Canadian Tax Adviser

 

October 30, 2012

 

The Auditor General (AG) recently released his Fall 2012 report. The only tax issue addressed in the October 23, 2012 report is whether Finance considers the impact of spending and tax measures on long-term fiscal sustainability before recommending new policies. The AG found that Finance's approach to preparing long-term fiscal analyses of these measures is generally reasonable and recommended that these analyses should be provided to the Finance Minister sooner, before budget measures are approved.

Long-term fiscal sustainability refers to a government's capacity to finance its activities and debt obligations in the future without imposing an unfair burden on future generations. Though long-term projections of fiscal sustainability are not projections, they underpin fiscal sustainability and inform fiscal policy decisions, according to the AG.

 

The AG found that Finance officials prepare long-term fiscal analyses of spending and tax measures only if they consider it relevant to do so. Therefore, if the fiscal impact of measures being considered is not expected to change significantly relative to the size of the economy, Finance will not project the impact beyond five years. Although there are opportunities for improvement, the AG concluded that this approach, where officials use their professional judgment to determine whether the long-term fiscal impact needs to be considered, is reasonable.

 

However, the AG noted that when Finance does prepare long-term analyses, these analyses are not prepared in time to support budget decisions. For example, long-term projections that included the impact of measures announced in the federal budget in March 2012 were given to the Finance Minister in August 2012, well after the government had approved the budget measures.

 

Consequently, the AG recommended that, as Finance concludes the budget process, it should analyze the overall long-term fiscal implications for the federal government and should inform the Minister before budget measures are decided and approved. Finance agreed with the recommendation.

 

For more information, contact your KPMG adviser.

 

 

 

 

 

Information is current to October 30, 2012. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.

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