The Government's target of returning the Crown accounts
to surplus in the next financial year took another hit in
February when lower-than-expected tax revenue was recorded. It
showed the Government's operating balance before gains and
losses slipping further into deficit.
Core Crown tax revenue for the eight months ended February
increased $1.9 billion, or 5%, compared to the same time last
year, acting chief government accountant Fergus Welsh said.
However, that was $1.1 billion less than expected and was
reflected across most tax types, continuing the pattern of
The lower than forecast tax relating to corporate tax ($372
million) and source deductions ($136 million) was thought to
be mostly due to timing issues, he said.
Overall, it was expected that slightly more than half of the
$1.1 billion weaker year-to-date result would remain at year
end once the elements that appeared timing-related reversed.
''There are risks associated with this view and, owing to the
timing of tax assessments, much of the expected narrowing may
not be apparent until June data is received," Mr Welsh said.
Updated tax revenue forecasts would be announced in the May
Budget 2014, he said.
It was anticipated a stronger outlook for the economy would
further boost tax revenue, resulting in an outlook for tax
revenue for 2014-15 broadly similar to the one presented in
the fiscal update.
As a result, tax revenue developments were not likely to
impact on the forecast surplus for the 2014-15 year.
Deloitte Dunedin tax partner Peter Truman said the shortfall
in budget tax revenue across the board suggested the economic
recovery had been at a lower level than originally forecast
However, it would be expected there would be a delay between
a pick-up in activity and company income tax being collected.
Due to annual tax returns being filed - and those were
sometimes filed up to 12 months after the year of each
financial year - there could be a big delay in company tax
collections flowing through, he said.
''The relatively high 'use of money' interest rates charged
by IRD on provisional tax payments, where these are less than
the year end liability, act as disincentive for larger
businesses to defer paying provisional tax.
''I would expect PAYE and GST would respond more quickly to
an increase in economic activity, with higher employment
rates resulting in an increased PAYE take flowing to IRD
within a month or so.''
While there were some sectors of the economy where there were
signs of momentum in activity levels, there were other
sectors of the economy that continued to struggle due to the
high exchange rate, such as manufactured exports, Mr Truman
The books showed the Government's measure of the surplus and
deficit, the operating balance excluding gains and losses
(obegal) was a $1.4 billion deficit, compared to a forecast
deficit of $509 million. At the same time last year, the
obegal was a deficit of $3 billion.
The operating balance, which takes account of the gains from
Crown investments, was a surplus of $3.7 billion compared to
a forecast of $2.8 billion.
At the same time last year, the operating balance was a
surplus of $4.3 billion.
Continued strength in equity markets saw a gain of $3.5
billion recorded on the investments held by the Government
Superannuation Fund and ACC, $1.9 billion ahead of forecast.
Finance Minister Bill English continued his refrain from last
month in warning the Crown accounts showed there was no room
for an election year spend-up.
''Another month of revenue running below forecast has again
pushed up the deficit and reinforces the need for restraint
in government spending.
''We remain committed to reaching surplus next year and
Budget forecasts next month will confirm we are on track. But
today's figures confirm what we have said repeatedly: it is a
challenging task that will be achieved only if we remain
Commenting on the tax position, Mr English said while some of
the variance was due to timing issues, and was likely to
dissipate over coming months, corporate tax, GST, other
individual tax, source deductions and customs and excise
duties were all below forecast.
Those figures would be factored into next month's Budget and
reinforced the need for restraint in government spending.
''They also confirm there will be no capacity for reckless
spending promises ahead of the election later this year,'' he
Labour finance spokesman David Parker said National's excuses
were wearing thin.
If wages were rising, the tax take would be increasing.
''This is plainly not happening and hard-working New
Zealanders are not getting their fair share. Serious
questions need to be asked of National's economic
In November, December, January and now February, the Crown
accounts were worse then predicted.
For the November and December figures, Treasury said there
were timing issues.
They were given a bit of leeway.
''But now, even Treasury admits it doesn't know why the books
are even more in the red. Somehow, Bill English is presiding
over a growing economy but not getting the tax revenue that
should be coming in. He needs to explain himself,'' Mr Parker