It is important to check out the footnotes to financial statements. Notes to the Second Quarterly Report released by Finance Minister Gary Collins on November 29th show that contrary to some media reports, revenue from corporate income tax increased by less than 4%.

For the first six months of fiscal year 2004-05, BC reported personal income tax revenue up 8.3% relative to the first six months of 2003-04, but the Ministry of Finance projects personal income tax revenues will increase by only 4.1% on a full year basis. BC reported corporate income tax up by 9.6% for the first six months, but on an annual basis it forecast that corporate income tax revenues will be up by 56.6% relative to 2003-04.

How could it be that corporate income tax revenue appears to be booming while personal income tax revenue growth appears sluggish? The answer is in Appendix A.5 that explains "revenue assumptions". The note for corporate revenue says: "Revenue is recorded on a cash basis. Due to lags in the federal collection and installment systems, changes to the BC corporate profits and tax base affect revenue in the succeeding year. For example, 2004/05 installments from the federal government are based on BC's share of the national tax base for the 2002 tax-year (assessed as of December 31, 2003) and a forecast of the 2004 national tax base."

February's budget assumed that BC would lose $49 million in corporate income tax revenues due to adjustments for the prior year. In the Second Quarterly Report that changed to the receipt of an additional $154 million for prior year adjustments. In other words, of the $321 million improvement relative to the budget, $203 million (63%) is due to the adjustment for the prior year. If the $203 million is allocated to the prior year rather than to 2004-05, the increase drops from 56.6% to just 3.4%!