Episode Transcript
[00:00:00] We've crunched the numbers from the 2024 budget and they don't lie. Canada doesn't have a revenue problem, but we sure have a spending problem. Prime Minister Carney promised us a budget and we're ready to see it and understand it. But when is it coming?
[00:00:16] After a lengthy prorogation, Parliament heads back into session on Monday, September 15th, and we can't wait. Stay tuned to True Patriot Love for a deep dive analysis into the 2025 budget. In the meantime, we've combed through the 2024 annual report and financials to bring you a budget analysis you won't find anywhere else.
[00:00:51] Welcome, everyone. Today we're going to go through the 2024 federal annual report and analyze it and ask some key questions.
[00:01:00] We have a critical time coming up in our country and our 2025 budget is going to be very important for our future and for Canada in general. So today we're going to jump right in. I'm going to take off my coat. We're going to go down and we're going to break down some of the revenues. So people ask me all the time, where do Canada's revenues come from?
[00:01:24] Well, let's go to the next slide, Nick. And here we go. So of course, we all know the biggest component of our revenue come from taxes. Okay, taxes, you know, $217 billion come from personal tax. So that's, you know, every April we're sitting down and we actually do our personal income tax and we either get money back or we pay the additional tax when we get our checks. It's the tax we pay on our checks. So $217 billion come from personal income tax, then corporate tax. So the companies that grow and thrive in Canada of course pay income tax and that equates to about $82.5 billion. Big portion of the pie.
[00:02:12] And you know what, that's been growing quite a bit over the last few years. Non resident tax or revenue that that makes up about 12.5 GST, 51.4, a lot bigger number than even I thought from a revenue perspective for the government. Energy tax, 5.6, that's been pretty constant over the last 10 years and remains so. And then of course, customs import duties, I thought that would be a little higher, but it's also 5.6. Custom import duties make up less than I thought. Other excise tax, about 6.8 billion. And then of course, employment insurance premiums, that is a big number. But that actually pretty much covers off what our unemployment in the country is right now so they kind of net each other.
[00:03:08] And we'll talk about that more when we get into the expense analysis portion of our podcast, which are the podcasts coming up over the next few podcasts.
[00:03:18] Other revenue this is kind of all the fees the government charges, whether it be for passports, whether it be for rentals or whatever, we'll go through that. It also has interest in a foreign exchange in it. And then of course carbon tax or the pollution pricing proceeds, which is my favorite. It's always hard to say, say it three times. It's a tongue twister.
[00:03:41] That's a big number and that's actually 10.5.
[00:03:45] You'll see when we do the expense analysis, a lot of that gets rebated back to us. So, you know, our the government of Canada, its revenues for 2024 are a whopping $459.5 billion, a really good revenue number. And now what we're going to do is we're going to go in and we're going to talk a little about each of sections we just outlined and we're going to tell you why probably there's a little bit of growth potential, but not a lot.
[00:04:15] So why don't we go to the next slide? You know, when I looked into it, I was very curious to see how we would, how we had done in our revenue to GA GDP ratio over the last couple years. And I found this chart in the annual report for 2024. It's a good chart, but you know what it shows is kind of a smile, as you can see, which is not a particularly great thing because ideally what you want to see is you want to see GDP grow and you want to see government revenue kind of stabilize. So ideally you'd like to see it go down. So on the right side of that chart, you'd like to see it tail off.
[00:04:59] Unfortunately, we're growing back quite a bit. So not the greatest chart for Canada as a growth potential. And we're going to talk about GDP on shows upcoming and try to figure out why the GDP is not growing and why we're not as productive. But I'm going to leave and put that aside for now because I think that's a whole other couple shows that we can jump into and I think we'll enjoy.
[00:05:26] So as we go to the next slide, you're going to see we're going to delve into personal income tax. So as I mentioned before, personal income tax is $217 billion for 2024. Right. So up 32% from 2019.
[00:05:48] So when I look at that, I thought, wow, that's. That's really crazy. Why would. Why would we see such a healthy increase in.
[00:05:58] In taxes year on year?
[00:06:02] So I delved into it.
[00:06:05] Pardon me, and here's what I found.
[00:06:08] So Canadians actively paying income tax in 2024 are about 22.8 million.
[00:06:17] So these are the people kind of between the ages of 24 and 65.
[00:06:22] They're active taxpayers, and we kind of remove from that number people who are on welfare.
[00:06:31] We take out children, and we come up with that number. Then there's seniors, and they make up about almost 8 million, 7.65 million.
[00:06:41] Very healthy number and a growing number, as we all know, and we talk about it quite a bit. So now, how does that equate to 2019? And the reason I use 2019 as an indicator is because this is before COVID and this is before sort of the world went upside down. So I think it's important to talk about how we get back to 2019 levels where our total deficit for the country was only 14 billion versus 61 billion now in 2024.
[00:07:17] So, you know, I won't get into the expense side of it, but I'm going to stay on the revenue side. So that means roughly that we have 30 million people who actually are paying income tax in the country at this point. And that equates to per capita, about $7,100 per person. So if you take the 217 billion, divide that by the 30.5 million, you come out with 7,000, which, you know what, that roughly makes sense because our average income per Canadian in 2024 was 65,526. Right? So we get it. So, you know, income tax, 217, 30 million people paying income tax, including seniors, and then basically 7,107 per capita tax paid federally. Now, that's not provincial tax, that's just federal tax. And that equates roughly to about 65,000 average income. So it tells a few stories, right? It tells a story of probably a bunch of Canadians or the majority of Canadians making roughly around the average. So, you know, you have lower, you have higher, but, you know, it does really. If you put a chart, a beta chart, and you showed kind of the average, you'd have a bunch of dots that would be all compiled together or bunched together. So not a great thing, because you traditionally want a little bit more dispersion in your income levels. But in Canada, we have a lot of people making very average income. So that. That kind of is the norm of what we understand.
[00:09:10] So how does that compare to 2019? Well, as I mentioned, right, so personal income tax since 2019 has gone up by $53 billion. Right.
[00:09:24] And say, okay, well, we integrated a bunch of people. Yeah, we immigrated a bunch of people. So basically from active taxpayers. Let's talk about active taxpayers. We have about a million more active taxpay in growth from 2019 to 2024. That's about a 4.6% increase from 2019 to 2024.
[00:09:51] Seniors. However, we've had a bigger growth of 1.15 million increase in number of seniors that have actually gone over the age of 65. So that is a 17.7% growth. Growth in seniors in our population demographics. So interesting, right? Because now we're having all those baby boomers shift into that category. We all knew it. You know, boom, bust and echo and all those books that people were reading and writing for years are coming true. We're getting an older population. Our baby boomers are reaching the retirement age. So we're starting to see some of the impacts. Right.
[00:10:36] So our income levels are sort of stabilizing or averaging out.
[00:10:42] And quite frankly, we're seeing a little bit of growth in our personal income tax.
[00:10:50] So, you know, overall, what does that mean for growth? It means we're pretty much at that level. So we're going to stagnate or we're going to come close to what our personal tax rate is unless we increase the personal tax rate. Now, as Canadians, we all know that's pretty difficult. Right? We all pay a fairly high tax rate.
[00:11:13] And quite frankly, I think the burden of the tax rate right now is probably at its maximum over the since 2019 to 2024.
[00:11:25] They slowly increased our tax rate by about 2%.
[00:11:33] So we go to the next slide. Nick, let's take a look at corporate.
[00:11:38] So corporate.
[00:11:41] Pardon me. As you can see, our corporate revenue went up to 82.5 billion.
[00:11:47] So a lot of times people say, why are corporations not paying more? Why do we not have more corporate income tax?
[00:11:56] Let's tax the corporations. Well, this is an interesting stat. And this kind of fell out as I was doing the analysis. In 2019, we had 50.4 billion in corporate taxes and revenue to the federal government.
[00:12:14] So it went up $32 billion or 64%. So just kind of fathom that for a minute. We went through Covid, right, in 2020, just demolished a bunch of companies. We lost 130,000 companies. And quite frankly, most of the time, I don't know if many people know it in Canada, we roughly. This is a pretty rough number, but it's kind of a rule of thumb that people use. We roughly have around 100,000 new companies start up a year. So throughout the country, we have roughly 100,000 new companies start up, and we have roughly half closures. So 50,000 close. So the net net on an annual basis usually is around 50,000. So, you know, if you looked at.
[00:13:06] If you look at between 2019 and 2024, you know, you would have thought we would have had if without Covid, we would have had about 250,000 new net companies, but we only had 130,000 companies.
[00:13:21] So the good news, I guess, or the news that people need to kind of get in their heads is that we're roughly $246,000 per new company attributed to the growth. So we added a number of new companies. They pay more taxes, right?
[00:13:42] And quite frankly, I think if you really look at it, and we're going to talk a little bit about other corporate taxes coming up, we're probably at the top end of what corporations can pay in Canada. If we want to keep corporations in Canada, I don't think we can go to the well and keep taxing much more. So that's my analysis of corporate tax. Now let's go, Nick to the next slide. Gst, right? We all know it. We all hate it, quite frankly. You know, yesterday I bought a fridge. I hated paying my gst, you know, but I did. And we all pay it every day of our lives. So this is a big nut, right? $51.4 billion in 2024, right? Up 13.2 billion from 2019. So we had a growth of roughly 35%.
[00:14:42] So. 35%, right.
[00:14:44] So if you look, you know, people actively paying gst, you know, take out kids, look at our population in 2024.
[00:14:53] We're looking at roughly $1500 per person compared to $1200 per person.
[00:15:01] That's a pretty healthy growth number.
[00:15:04] It's gone up as an average of our income. And we see that GST has become a bigger component of our lives as we purchase and buy. As our purchasing power went up in the economy was fine, coming through, Covid. We spent more money, of course, and therefore the revenue to the government from GST increased. So that's a benefit. Now, that's one we gotta be worried about a little bit as we see slumping economies, right? Because as we purchase less, our GST goes down. The ability of the government to actually Pull that off, you know, it becomes less likely. So do we see that number going up? I think we've again hit the apex, the top of this number. So I think this is the end or, you know, of growth in this number. I hope we see a little bit of a growth because I hope we keep growing. But right now this is a pretty big number for the number of people in our ecosystem of Canada. So as we go through. Let's go to the next one, Nick.
[00:16:06] So now we hit a bunch of them, which are really my favorites, and we can go through them one by one. But. And then I'm going to dissect some of them because I think we need to really get a feel for the smaller revenue items that the federal government takes in. So non resident, that makes up roughly $12.5 billion. It's up 3.1 billion.
[00:16:39] I thought this would be a little higher. I was actually shocked at how low this was. So this, even though it saw an increase of 33% based on all the immigration, all the new people, all the businesses that I see starting up from foreign companies, it still remains at a fairly low number. I don't know why we're going to dig into this and ask a few more questions, but that's the number that was posted in the annual report. The next one. This is one we all know. We all pump gas. You know, we get diesel, we fly, so we use aviation fuel. The next one is energy tax, 5.6. It's a very stable number. It goes up and down a couple hundred million a year. But that one, in essence will stay the same. Probably we're not looking for too much growth up or down on this, this line item in the annual budget going forward.
[00:17:34] Custom inboards duty.
[00:17:36] And this is based on transfer tax, so. Or transfer prices. This one's way smaller than I thought. So when we were going through the revenue line items, I came across custom imports. I thought, wow, you know, I see a lot of companies from India, China, you know, Taiwan, different places coming into the country. They're bringing in amounts. I assume the transfer pricing is why this is a lower number than I thought.
[00:18:06] I, you know, you come in, you bring a good in for 10 cents, you sell it for $4, but you're paying duty on the ship transfer price, which is 10 cents. So I think that's really why we're seeing a lower number. I think this is a unique opportunity for Canada.
[00:18:24] And I'm not talking like we're going to be a Trump here, but I'm talking about creating an average duty mechanism so we can actually partake in some of the benefits of importing items into Canada and allowing companies to import in. I think, you know, unfortunately, sometimes we're a little bit too generous in Canada and we don't be more open and forthright with our partners as far as how we should be participating as a country. So I think there's a great opportunity here. I think we can actually find some value and some revenue here. But is it a lot? I think it's, you know, somewhere in the, you know, 5 billion range. And I hope we look at it as a government going forward.
[00:19:15] Other excise taxes? Well, these ones we all know and I don't think we can do much more with these. I think there's also also a risk that these will go down.
[00:19:26] So these include taxes on alcohol, tobacco, cannabis and other luxury items. So $6.8 billion, it's a big number for that.
[00:19:38] I think these have probably the likelihood to go down.
[00:19:42] Um, you know, I know alcohol sales you're hearing all the time are decreasing.
[00:19:47] Tobacco I think is kind of hit its lowest level now. Cannabis, you know, we'll see. I don't have a lot of opinions on where that's gone. It kind of spiked up, spiked down.
[00:19:59] It's leveled off. So let's see where that goes. And luxury items, you know, we're all paying large excise tax on imported luxury items.
[00:20:10] The next one I mentioned, employment, insurance premiums, big number. Those come again from the companies, from the corporations employees. So I think 29.6 billion. It's up quite a bit as you saw. Corporate tax was up. So you know, as business thrived and growth happened and a lot of good things happened there, we saw EI premiums increase. So for the government, 32.7%.
[00:20:40] Again, I think we're probably close to the highest level on that one.
[00:20:45] But you know, positive story on that front.
[00:20:50] Other revenue, and that's income from corporations, service fees and investment. So foreign exchange gain, interest revenue, crown corporations fees.
[00:21:05] All these fit into this bucket. And this is a $37.4 billion bucket. A lot more than I thought I knew when I paid my passport fee. It went somewhere. But it goes into this line item, this line Items up since 2019, which is surprising.
[00:21:23] And I know there's been some interesting crown corporation developments lately.
[00:21:29] Canada Post, which I'll talk about in a minute, but that's up by $8.3 billion or 28.5%. So very interesting stuff. And news.
[00:21:41] Pollution, pricing, proceeds, carbon tax. Well, that's, that's going away.
[00:21:46] Wasn't around in 2019. Around in 2024. We gave rebates which almost matched. I think the rebates were like $9.5 billion. So I think it netted itself. So I'm not going to spend a ton of time on that.
[00:22:00] If we go to the next slide, Nick, you know, I wanted to break down other revenue because I was really intrigued with this other revenue line item. Right.
[00:22:10] So you know, $3.2 billion, so this is basically in the 2024 fiscal year end came from Enterprise, Crown corporation and business enterprises.
[00:22:23] 29 billion came from other revenues, which is those fees I talked about.
[00:22:28] And then net foreign exchange and return on investment from the interest made up $4.2 billion. So that equated to $37.3 billion. Really interesting. So. And a lot more than I thought, to tell you the truth.
[00:22:50] If I go to the next slide. So Nick, let's grab the next slide for a minute.
[00:22:55] So we look at breakdown between 23, 24 and what do we find? We find revenues increased as we talked about and we saw enterprises basically contributed a net positive amount, which is great. We see some of the Crown corporations increasing, which is great. They're adding more value.
[00:23:25] But you know, we then see some other growth mainly coming from service fees, which is a very interesting thing. Rents, like I said, passports, which we're going to get into a minute. And that's a big component of it. Foreign exchange and interest make up the difference and that's terrific. And now Nick, I broke down on the next slide, which I go through, you know, some of that and it's hard to read and I apologize for it. But let me read you through it.
[00:23:57] So this was interesting. Crown corporations, right? Two major ones that popped out of me. The bank of Canada lost $1.5 billion.
[00:24:10] So which is historically rare but was recently occurring due to higher interest expenses and the rising rate environment.
[00:24:21] And then Canada Post, which we know lost money, but they lost $45 million, which was lower than what I thought. So I didn't. Honestly, I thought Canada Post was like hundreds of millions. But they only. Well, they only. They lost $45 million. Right? So that's interesting.
[00:24:44] Other ones that I were noted in here that fit into this line item. The Canada Mortgage Housing Corporation had a profit of 331 million. Export Development had a profit of 266 million. Business Development bank of Canada had a profit of 124 million.
[00:25:05] Farm Credit Canada, which you don't hear much about. Had a profit of 183 million and the Royal Canadian Mint had a $12 million profit.
[00:25:16] So there you have it. So I guess when, you know, wrapping up. And I just wanted to summarize this. Can we do better? Better than $459.5 billion in revenue to the federal government?
[00:25:32] Sure, we can, right? We can always do better. And I think we'd always want to do better across Canada. But it does appear that we're going to have challenges making more revenue. You know, can we go to the well and increase taxes? I think the citizens probably aren't up for that. Are corporations already contributing a substantial amount? Yes, they are. You just saw that in my analysis, our corporate taxes has increased. Our EI is increased. All those things that corporations contribute to our society and to our tax base have increased substantially since before COVID Coming out of COVID you know, our population is small and our taxes is modest to high. So I think we've hit that. We've hit that inflection point where we have to start looking at our expenses. So we simply are trying to grow too fast. I think we get that.
[00:26:27] Join us in our next show and we're going to examine Canada's key expenses and debts challenge. So we look forward to seeing you subscribe. Watch and join us for our next analysis of the 2024 budget.
