OTTAWA — A major drop in tax receipts from corporations is helping push the federal government into the biggest deficit in its history, the latest fiscal reporting from the Finance Department shows.
The recession is hitting the federal government in all areas, but none so dramatically as with the corporate sector, where taxes collected so far this year are down 37 per cent in comparison with last year.
The $6.6-billion shortfall from business taxes is actually more than the $4.9-billion decrease the government has seen in personal taxes, which represent a far bigger slice of the revenue pie.
Overall, Ottawa reported Friday it was roughly in line with meeting its projection of a record $56.2-billion deficit.
For the first seven months of the fiscal year, which ends March 31, 2010, the department said Ottawa is now $31.9 billion in the red, as opposed to the relatively thin, $100-million shortfall it was experiencing at this time last year.
The October shortfall was $3.3 billion.
Although $12 billion of the year-to-date shortfall is due to measures Ottawa introduced last January to combat the recession, it blames the majority of the deficit on falling revenues and rising program costs.
Revenues are down $16.1 billion, or close to 12 per cent, as receipts from corporate, personal and the goods and services tax declined.
The loss from corporate taxes represents 41 per cent of the total revenue hit experienced by the government so far this year.
The department said almost half of the lost revenue stream comes from Ottawa having to reimburse firms for collected taxes after profits failed to materialize.
Program expenses are also eroding the government’s fiscal position, with the biggest change stemming from supporting the growing number of unemployed.
More than 400,000 jobs have been lost in the recession, and hundreds of thousands more employees saw their work hours reduced.
The department said Ottawa paid out $3.9 billion more on employment insurance benefits in the first seven months of this fiscal year than last, an increase of 48.7 per cent.
Overall, program expenses were up $17.4 billion, reflecting increased payouts to the elderly, major transfer payments to provinces, the auto bailout, and costs associated with stimulus measures.
Although the government debt is increasing, the cost of servicing the debt actually fell by $1.5 billion because of super-low interest rates.
Ottawa also reported Friday that total transfers to provinces and territories will increase by $2.4 billion in 2010-11, to bring total federal support to $54.4 billion,
Equalization payments to provinces for 2010-11 will total $14.4 billion, an increase of $187 million.
The Canada Health Transfer will grow to $25.4 billion, while the Canada Social Transfer will total $11.2 billion.
Territorial formula financing will amount to $2.7 billion.