Own-source revenue

Own-source revenue should decline by 4.9% in 2001-2002 compared with the preceding year, the most substantial decreases being recorded with regard to personal income tax, corporate tax and revenue from government enterprises. In 2002-2003 and 2003-2004, own-source revenue should grow by 5.5% and 5% respectively, with each source, notably government enterprises, contributing to the increase.

Own-source revenue as a proportion of gross domestic product, including consolidated organizations, peaked at 19.7% in 1999-2000. Given the tax reductions announced, the ratio should decline to 18.5% in 2003-2004.

Revenue by source:

• Personal income tax, the main source of government revenue, should decrease by 8.1% in 2001-2002 to $15.7 billion. During this fiscal year, the impact of the tax reductions announced in recent budgets will exceed the increase in tax revenue arising from the growth in income subject to tax. In 2002-2003, growth will be limited to 3.9% as the full impact of these tax reductions is felt. In 2003-2004, the growth rate will reach 5.9%, which, given the progressive nature of the taxation system, is compatible with the increase in income subject to tax.

• Health Services Fund contributions should amount to $4.4 billion in 2001-2002, slightly less than the preceding year. The increase stemming from the growth in wages and salaries is entirely offset by the impact of the tax holiday granted in the 2001-2002 Budget to manufacturing enterprises in resource regions and to the reduction in the contribution rate of small and medium-sized enterprises effective since January 1, 2001. This reduction is the last of the gradual reductions introduced as part of the corporate taxation reform announced in the 1998-1999 Budget. By the end of the reductions, the growth rate of this revenue should be comparable to that of wages and salaries over a fiscal year, i.e. 3.8% in 2002-2003 and 4.1% in 2003-2004.

• The 4.8% decrease in revenue expected from corporate taxes in 2001-2002 is due to the anticipated decline in corporate profits and the measure announced in the 2002-2003 Budget to improve the liquidity of small and medium-sized enterprises. Such enterprises were able to defer for six months the instalments of income tax and tax on capital that they were supposed to pay in the last quarter of 2001, thereby reducing revenue for 2001-2002 but increasing it accordingly in 2002-2003, which explains the anticipated increase of 8.3% in the course of this year. The non-recurrence of these amounts in 2003-2004 will reduce the growth in revenue and thus cancel out the positive effects of the increase in corporate profits in 2003.

• Consumption tax revenue should rise by 5.2% in 2001-2002, reflecting, among other things, the tobacco tax increase that took effect last April 5 and the tobacco tax increase announced in last November's Budget. The anticipated growth rate of 4.1% in 2002-2003 is comparable to that of household consumption when the full impact of the additional increase in the tobacco tax is taken into account. In 2003-2004, consumption tax revenue will grow at the same rate as household consumption, i.e. 4.2%.

• Revenue from government enterprises should increase by 22% in 2002-2003 and by 11.9% in 2003-2004 because of the improvement in the financial situation of government corporations as a whole.