New Zealand Tax Revenues Still Falling
December 6, 2010 Taxation in New Zealand
The New Zealand Treasury has reported that the country’s tax revenue figure for the last quarter is 6.3 percent below forecast, primarily due to low corporate profits and subdued consumer spending.
On December 6th the New Zealand Treasury released the Financial Statements of the Government of New Zealand for the four month ending October 31st 2010. The documents show that during the time period New Zealand’s tax revenues were NZD 1.1 billion (approx. USD 840 million) below official forecasts, representing a 6.3 percent drop below government expectations.
The fall in revenues was attributed to worse-than-expected corporate income tax results and below estimate Goods and Service Tax (GST) collections. According to the newly published statements, corporate tax revenues for the four months were 28 percent below the Government’s forecasts, at NZD 784 million (approx. USD 599 million). GST revenues also fell by 4.2 percent, to a level of NZD 190 million (approx. USD 145 million). In a press release accompanying the publication of the financial statements, Deputy Secretary to the Treasury Colin Lynch claimed that the GST revenue decrease was caused by households showing greater than expected spending restraints following the recession and the GST rate hike.
With the below-forecast tax revenues and one-off cost stemming damage caused by the recent Canterbury earthquake, the Government’s operating balance is now NZD 1.9 billion (approx. 1.45 billion) lower than predicted, with an overall budget deficit of NZD 4.4 billion (approx. USD 3.4 billion). The figure equates to a NZD 275 million (approx. USD 210 million)per week growth in the deficit over the last four months.
In a speech given on the morning of the statements’ release Finance Minister Bill English indicated that the Government would soon begin a new review into how to decrease public spending, increase service efficiency, and manage Government expenses. He stated that the investigation will be assisted by an anticipated report from the Welfare Working Group and a Government spending review. The Finance Minister reaffirmed that the Government still projects an operational budgetary surplus by 2016.
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