OTTAWA — The Finance Department says corporate tax payments to Ottawa fell by $2.5 billion in February — or 44 per cent lower than last year — in a graphic indication of how the recession has hit business profits.
Despite the decline in corporate taxes, the federal government managed to hold onto a small surplus position heading into the final month of the fiscal year, which ended in March.
Revenues from personal income taxes paid by Canadians in February were up $30 million from February 2008, despite a $400-million haircut from lower rates that went into effect Jan. 1.
Through the first 11 months of the 2008-09 fiscal year, Ottawa was $1.3 billion into the black after posting a $823-million surplus for February.
That’s well down from the $12.6-billion surplus it enjoyed after the 11 months from April 2007 to February 2008.
But the fact that the government was in surplus at all, with one month’s accounting remaining in the fiscal year, is a mild surprise given the severe downturn in the economy that began last October.
In the January budget, Finance Minister Jim Flaherty forecast the government would experience the first deficit in a dozen years with a $1.1-billion surplus for the 2008-09 year.
The numbers will start looking ugly going forward, however.
The budget projects the current fiscal year that began April 1 will bring a $33.7-billion deficit, which many analysts now predict will be even worse.
Although it does not impact the fiscal position, the department also reported a $81.4-billion financial requirement largely as a result of its decision to purchase insured mortgage pools from the chartered banks to ease credit conditions.
Over the first 11 months of the fiscal year, personal tax payments to the government remained strong, rising $3.9 per cent, or $3.9 billion.
But corporate taxes fell by $9 billion, or 25 per cent, reflecting weaker profits and the impact of tax cuts.
Another key change to the government’s position was the impact of the cut to the GST from six per cent to five. Government receipts from the sales tax are down $4.2 billion so far into the fiscal year, or 15 per cent.