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

 

Media: Fairfax Moves To Create Modern Newsroom

Fairfax Media New Zealand continues its newsroom transformation this week, with a proposal to further organise its editorial operations into focused, local teams and specialist national topic areas. More>>

ALSO:

Dairy: Fonterra Forecast For 2015/16 Season

Fonterra Co-operative Group Limited has today reduced its forecast Farmgate Milk Price for the 2014/15 season to $4.40 per kgMS. Along with its previously announced forecast dividend range of 20-30 cents per share, the change amounts to a forecast ... More>>

ALSO:

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>


BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>

Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news