Prime Minister Mark Carney says cabinet is reviewing Canada's tax system as an escalating trade war and 50% tariffs threaten to push the federal deficit beyond previous forecasts.“We are constantly looking at our tax system, how we can make it as fair as possible, shift the burden to those who are most able to pay and in a way that incentivizes spending and entrepreneurship, right?” Carney told reporters Saturday.Blacklock's Reporter said he did not provide details on what tax changes the government is considering.Carney also acknowledged Ottawa will have to take on additional debt, saying more borrowing is unavoidable as the government responds to economic pressures.“We will borrow, but borrowing for spending, not for operating expenses, and that shift in borrowing there,” he said.Cabinet's April 28 budget, Canada Strong For All, forecast a $65.3 billion deficit this year. The projection was partly based on expectations the Canadian economy would continue growing and the country would benefit from improved terms of trade, according to Department of Finance documents.The Parliamentary Budget Office was already forecasting a significantly larger deficit before the latest collapse in trade negotiations.Its June 4 Economic And Fiscal Outlook projected the deficit would climb to $71.8 billion this year.“We project the deficit to increase markedly,” the report said.That estimate did not account for the subsequent breakdown in trade talks and the impact of expanded tariffs.A federal budget update is expected after Parliament returns from its 13-week summer recess Sept. 21. The government has not announced when it will release revised deficit projections.Budget Officer Annette Ryan told the Commons government operations committee April 30 that federal debt was equivalent to $33,592 for every Canadian.Ryan said annual federal debt-servicing costs per Canadian were projected to rise from $1,409 to $1,901..Conservative MP Philip Lawrence questioned the government's projections because they assumed continued economic growth.“That is based on the government’s projection,” Lawrence said. “We haven’t had a global recession going on five years. It’s very unlikely it will go another five years without having a recession.”Lawrence asked what would happen to Canada's fiscal outlook if a global recession struck.“It’s an important question,” Ryan replied.Lawrence also asked whether higher interest rates or weaker economic growth could threaten the sustainability of federal finances.“There is at least a reasonable probability of higher interest rates and slower growth; if either or both of these events were to happen, would you have any concern about the sustainability of Canada’s finances?” he asked.“The short answer is yes,” Ryan replied.
