NZ Tax Revenues Below Forecast

November 8, 2010 Taxation in New Zealand

BeehiveNew Zealand’s national tax revenues are below projections, being reported at 8.2 percent below the government forecasts.

The New Zealand Government released its latest financial statements on November 8th, indicating that tax revenues for the three months ended September 30th 2010 were NZD 1.12 billion (approx. USD 889.84 million) below projections. According to the release, both the Goods and Service Tax (GST) and the corporate tax were below expectations, suggesting a slowing in the pace of the country’s economic recovery.

According to the financial statements, GST revenues for the period were NZD 0.6 billion (approx. USD 476.7 million) below forecasts, representing an approximate 15.8 percent drop. The decrease is being attributed to a lower than expected rise in consumer spending prior to the October increase to the national GST rate. Local economic analysts have not ruled out the possibility that the December quarter GST figure will experience a compensating increase, bring the annual figure closer to the Government’s projections.

The corporate tax collections for the same period was reported to be NZD 458 million (approx. USD 363.88 million) lower than forecasted, a drop of 22.4 percent. The lower than expected corporate tax revenues were a result of below-expectation provisional tax revenues, which reflect weaker than projected corporate profits.

Personal income tax revenues were the only major revenue source which was above projections, exceeding estimates by 2 percent and reaching NZD 569 million (approx. USD 452.07 million).

Commenting on the lower-than-expected GST revenue figure the New Zealand Minister of Finance Bill English said that decrease could be a positive sign for the economy, if considered over a long-term perspective. He explained, saying, “…while in the short term this increased saving means slightly lower growth and tax revenue, it is what the economy needs over the long term as we build our future on savings, productive investment and exports.”

Photo by Ewan-M