Releasing the Crown accounts, chief financial office of The Treasury, Kamlesh Patel said source deductions were $187 million, or 1.1%, above forecast, due to a higher effective tax rate. Recent economic data suggested that aggregate labour incomes had been consistent with forecast but that the composition of the labour force had changed, with a decrease in the proportion of low-income workers. That change increased the revenue collected because of the progressive nature of the income tax scale, he said.
Deloitte Dunedin tax partner Peter Truman said when contacted that the the comments on higher source deduction tax revenue were interesting.
''Treasury is suggesting that the number of people employed hasn't risen but that the income of those employed has increased. In relative terms, very little tax revenue is collected from those earning below the average wage, so this suggests that those earning higher incomes are receiving increases in their remuneration.''
Asked to explain, Mr Truman said people earning below the average wage received assistance through Working For Families and in-work tax credits, making their marginal tax rates much lower.
''The percentage of tax those individuals pay is very small and a 5% increase in the tax paid will make very little difference.''
The total workforce had remained much the same, and no new net jobs were created. Some new jobs had been created, but others had been lost, evening out the net jobs figure, he said.
That implied that people earning above the average wage was receiving pay increases.
The Treasury was also suggesting that average tax rates for individuals had increased due to individuals' income increasing and pushing them on to a higher tax rate, given the progressive nature of tax rates, Mr Truman said.\
''This reinforces the need to Government to continually review the income thresholds at which each tax rate applies, to maintain the fairness of the tax system.''
There were four tax bands. Those earning up to $14,000 paid 10.5%, between $14,000 and $48,000 they paid 17.5%, from $48,000 to $70,000 it was 30% and above $70,000 the top rate of 33% was paid, he said.
If someone was earning $47,500 but received an inflation-adjusted pay increase which took them to $49,000 (around 3.2%), they went into 30% tax rate - but only because of the inflation adjustment.
''If the Government does not review the tax bands regularly, everyone moving up will pay a higher proportion of the dollars they earn in tax.''
Tax revenue was higher than forecast for individuals only, Mr Truman said. Tax revenue from companies and indirect tax from GST were not trending higher, suggesting that economic activity was not growing any faster than earlier Government forecasts.
Individuals' tax collected through the provisional tax system, and year end terminal tax payments, often lagged behind the events which gave rise to the tax collection. Most individuals were not required to estimate provisional tax payments based on current year taxable income, but could instead base tax payments on prior year tax returns. An increase on forecast might just be a catch-up on the 2012 year. The final due date for filing 2012 tax returns fell on March 31, 2013 for individuals who used an accountant, he said.
