Fiscal Constraints Likely to Limit Tax Reform Plans in Canada's Budget, Says KPMG

12:25 PM EST, 11/02/2026 (MT Newswires) -- This week's Canadian federal budget deficit is expected at about CA$65 billion in fiscal year 2026-27, narrowing to CA$60 billion in FY 2027-28, according to KPMG Canada in a note. Despite rising expectations for tax reform, fiscal and economic constraints are likely to limit the scope for major changes, leaving little room for a broader overhaul of the tax system, wrote KPMG Canada in Friday's note. Higher revenues are likely to be largely offset by the previously announced Productivity Mega Deduction and other smaller measures, said KPMG, ahead of Thursday's budget. With bond markets increasingly sensitive to rising deficits and persistent inflation, the government has limited scope for revenue-neutral tax reforms. This points to a cautious budget with little new stimulus or major policy changes, it added. More limited reforms remain within reach, including tax simplification, reduced compliance costs and stronger frameworks for evaluating future tax policy, without placing additional strain on public finances, according to KPMG.