NZ Budget 2016: Is there room for tax cuts next year?

NZ Budget 2016: Is there room for tax cuts next year?

The big question after Budget 2016 is whether there is room for tax cuts in Budget 2017? The Government is caught between population growth putting pressure on core public services, low inflation leading to subdued tax revenue, and an ongoing need to address many poor social outcomes.

As a consequence, it has brought forward spending allowances from next year – an extra $0.6 billion per annum from Budget 16, but $1 billion per annum less for Budget 11. And the 2017 surplus is forecast at just $0.7 billion.

“Everyone is looking to an election year, but the question remains whether or not this Budget leaves the Government with room for much at all, whether a spending war chest or tax cuts” said PwC Partner Richard Forgan.

“And if tax cuts do emerge, they are more likely to be deferred, kicking in over time during the years following.”

The Government has clearly signalled that maintaining and growing operating surpluses, and reducing debt to meet its 20% of GDP target, are more important than reducing taxes.

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