Canada's budget falls into deficit for April-May

OTTAWA, July 25 (Reuters) - The Canadian government's budget stumbled at the start of the 2008-09 fiscal year, posting a deficit of C$517 million ($507 million) for April and May as corporate and sales tax collection fell sharply.

The deficit compares with a surplus of C$2.78 billion in the same two months of 2007.

The weak results were due to a 17 percent decline in corporate income tax revenue as well as a 21 percent drop in intake from the goods and services sales tax, the Department of Finance said in a report on Friday.

As a result, overall revenues dropped 4.1 percent from the previous year. Expenditures rose 7 percent in the same period.

Ottawa warned against jumping to the conclusion that the government's 11-year streak of budget surpluses might be coming to an end.

"The results for the first two months of the fiscal year are not indicative of the outcome for the year as a whole," it said.

The Conservative government of Prime Minister Stephen Harper cut the national sales tax to 5 percent from 6 percent, effective Jan. 1, as part of a tax-cutting package it says will help the economy as it takes a hit from the U.S. housing crisis.

Source : http://www.reuters.com