Revised Financial Statements
Embargoed until 11:30am, Tuesday 18 March 2008
REVISED FINANCIAL STATEMENTS
Secretary to the Treasury John Whitehead today released revised Financial Statements for the seven months ended 31 January 2008.
This was to correct an error that came about when Inland Revenue failed to account for about $600 million in provisional tax accruals during January. Following this correction, the operating balance is in surplus by $200 million. It was previously reported as a deficit of $400 million.
“Clearly I regret any error in the Financial Statements, and I am taking this matter very seriously”, Mr Whitehead said.
Mr Whitehead and Inland Revenue Commissioner Robert Russell have commissioned a full investigation into the error, including what steps need to be taken to ensure it can’t happen again.
Mr Russell said Inland Revenue took full responsibility for the error.
“We used the wrong tax accrual figures. That was a human error, but a bad one. It should not have happened, and I have apologised to the Minister of Revenue and the Minister of Finance."
Mr Russell said each month when the Crown’s accounts are prepared it assesses future tax accrual levels based on the economic data supplied by Treasury.
“This time, we failed to use the updated data. As a result, we estimated $28.2 billion in total tax revenue for the year to January, instead of $28.8 billion.
“When the January figures came through we examined a number of possible explanations for the variance from forecast, when the answer was much more basic – we had not incorporated Treasury’s latest forecast.
Mr Russell noted “it was an accounting error over how much we estimated for accruals – nothing to do with forecasting or with actual tax payments”.
“We want a prompt and definitive report into how this happened and how we can give everyone confidence it won’t happen again,” Mr Russell said.
The terms of reference for the investigation are attached.
Paul Carpinter, Principal Advisor at the Treasury (and former Deputy Secretary of Treasury and former Chief Executive of MED) and Alan Pinder, Chief Adviser to the Deputy Commissioner of Inland Revenue, will conduct the investigation with support from senior staff in both agencies.