Canada’s GST revenue now fully consumed by national debt interest payments

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Canada’s national debt has reached a point where the entire Goods and Services Tax (GST) revenue is now being used to cover interest payments. Every dollar collected from GST is funneled directly to bondholders, leaving nothing for essential government services. The numbers are staggering. In the last fiscal year, $55 billion was collected in GST, and $55 billion was paid out in interest on government debt.

The Bank of Canada holds 20 percent of these bonds, meaning it is effectively paying itself interest on the debt it owns. This raises serious concerns about the sustainability of Canada’s fiscal policy. When a country’s tax revenue is entirely consumed by debt payments, it signals deep structural problems.

The situation has worsened due to rising interest rates. Government borrowing costs have surged, forcing Ottawa to allocate more funds toward servicing debt rather than funding infrastructure, healthcare, or social programs. This is not just a financial issue—it is a policy failure.

The consequences are clear. With GST revenue fully absorbed by debt payments, the government must rely on other taxes or increased borrowing to fund basic operations. This cycle of debt dependency is unsustainable, and without intervention, Canada risks deeper economic instability.

The Bank of Canada’s role in this crisis cannot be ignored. By holding a significant portion of government bonds, it is both a lender and a recipient of interest payments. This arrangement raises questions about transparency and accountability in fiscal management.

The path forward is uncertain. Policymakers must address the growing debt burden before it spirals further out of control. If interest rates continue to rise, the strain on public finances will only intensify. The time for action is now.

SOURCES:

https://www.fraserinstitute.org/commentary/government-debt-burden-increasing-across-canada

https://www.bankofcanada.ca/publications/mpr/mpr-2025-04-16/

https://www.bankofcanada.ca/2025/05/financial-stability-report-2025/