Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Tax take continues to fall short, pushing government deficit

Tax take continues to fall short, pushing government finances to higher deficit

By Paul McBeth

March 11 (BusinessDesk) - The New Zealand government’s operating deficit was wider than expected in the first seven months of the 2014 financial year, with a smaller tax take than forecast and lower than anticipated tobacco excise duty.

The Crown’s operating balance before gains and losses (obegal) was a deficit of $1.06 billion in the seven months ended Jan. 31, more than twice the size of the $426 million deficit predicted three months ago, in the Dec. 17 half-year economic and fiscal update.

However, the obegal is still tracking below the deficit of $2.51 billion recorded at the same time last year. Core tax revenue was 2.4 percent, or $876 million, below forecast at $34.98 billion.

“At this stage, it is difficult to determine how much of the lower than forecast tax is temporary versus permanent, but we expect this to become clearer over the next few months,” the Treasury’s acting chief government accountant Fergus Welsh said in a statement. “Timing issues are likely to see some of the current variance narrow by year end.”

Finance Minister Bill English acknowledged the growing concern over the lower than expected tax take, which was occurring “despite stronger economic growth.”

“The lower revenue is at odds with other macro-economic indicators that have been broadly in line with the Half-Year Update forecasts and, if anything, point to even stronger economic growth in the second half of the 2014 fiscal year,” said English.

The reduced tax-take was across the board with personal tax accrued 1.4 percent below forecast at $16.46 billion, corporate tax 4.9 percent short of expectations at $4.29 billion, other income tax such as resident withholding tax 1.2 percent below forecast at $1.13 billion, and goods and services tax accrued 3.7 percent below expectations at $9.2 billion.

Treasury officials said some of the lower tax receipts were due to a mismatch in timing between GST refunds and receipts relating to exports and the Canterbury rebuild, and tax revenue from some large corporate taxpayerss not yet visible to the Inland Revenue Department.

Tobacco excise was 11 percent below forecast at $987 million, adding to pressure on the Crown revenue, and the Treasury now expects about $80 million of that reduction to be permanent. The government hiked tobacco excise in the 2012 Budget, which was forecast to raise $1.4 billion over a four-year period, but was raised in part to reduce tobacco use and therefore should fall over time as smokers quit.

The government expects to post an obegal deficit of $2.3 billion in the current financial year ending June 30 before returning a surplus of $86 million the following year. Treasury officials are picking accelerating tax revenue growth as an expanding labour market provides more income tax, and as rising wages get caught in the fiscal drag of people entering a higher tax bracket.

Finance Minister Bill English said the government is still on track to meet its surplus in the 2015 financial year, but the tax take uncertainty underlined the importance of controlling government spending, even as the economy recovers.

The Crown’s operating expenses were 0.3 percent, or $138 million, lower than forecast at $40.13 billion in the seven-month period, due to delays in finalising Treaty of Waitangi negotiations.

The core residual cash deficit was $4.11 billion, 27 percent below forecast, due to the lower than expected tax take and earlier personnel and operating payments across a number of government departments.

The Crown’s net debt was a bigger than expected $59.9 billion, or 27.7 percent of gross domestic product, while gross debt was below forecast at $83.33 billion, or 38.6 percent of GDP.

The operating balance, which includes movements in the Crown’s investment portfolios and actuarial adjustments, was a surplus of $3.37 billion, $629 million ahead of the December forecast, due to unrealised investment gains from the likes of the New Zealand Superannuation Fund. That compares with a surplus of $4.17 billion a year earlier.

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
More RSS  RSS
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news