PBO sets budget baseline for campaign vows with tools, deficit projections

OTTAWA — Parliament’s spending watchdog is predicting years of deficits deeper than the government has laid out.

The numbers are in a report the parliamentary budget office says should set the baseline for the campaign promises parties will dangle in front of voters this fall.

The PBO estimates that federal books will be in the red by $20.7 billion this year and bottom out at a deficit of $23.3 billion the year after, before improving to a $12.5-billion deficit by 2022.

The numbers are better than the PBO predicted in April but worse than the figures in Finance Minister Bill Morneau’s pre-election budget that forecast deficits between $19.8 billion and $12.1 billion.

The estimates and a new online costing tool are part of PBO efforts to prepare for its role as an independent auditor of each party’s spending plans in the upcoming election campaign. The watchdog office plans to post cost estimates of campaign promises as the parties announce them before and during the campaign.

The report is likely to make it more difficult for any party to cook its own projections and also makes it difficult for any party to promise a quick return to balanced budgets.

Still, the PBO offers one possibility for making up some of the shortfall in a separate report detailing how much the government loses to tax evasion, to overseas tax havens, and through tax avoidance through legal loopholes that contravene the spirit of income-tax laws.

The difference between what is collected and what could be collected absent tax-evasion schemes is known as the “tax gap.”

The Canada Revenue Agency, in a report earlier in the week, pegged the lost take in federal corporate income taxes in 2014 at between $9.4 billion and $11.4 billion. But by looking at electronic transfers into and out of Canada, as well as special tax filings, the budget office gives a “hypothetical” estimate that $25 billion might have been lost in corporate tax revenue.

What the PBO was more certain of is that money flowing between Canada and countries known to be tax havens was “disproportionately large.”

“One thing is clear — we need greater transparency on corporate finances and financial flows, including who owns what companies,” said Toby Sanger, executive director of Canadians for Tax Fairness, in a statement.

The Canadian Press