Tax revenue $1.1b under forecast

Stuff reports that Government’s surplus nearly $1b less than forecast at Budget 2016 due to core Crown tax revenue being $1.1 billion lower than forecast in the 10 months to April.

The Government’s financial statements, released on Friday, showed the operating balance before gains and losses (Obegal) was $297 million in the black for the 10 months to April. 

Finance Minister Bill English said it highlighted the monthly volatility in the Crown accounts. 

The surplus was $941m smaller than forecast in Budget 2016, largely as a result of core Crown tax revenue coming in $1.1 billion lower than forecast.

English said the lower-than-expected tax revenue was mostly driven by corporate tax being $1.4 billion below forecast.

“Treasury consider that most – if not all – of this variance will reverse out by June 30.

This shows that balancing the Government books (and forecasting accurately) is an ongoing challenge.

Further forecasts are for growth but a flattening out of the economy must cause some concern.

At the same time in possibly related news the ODT reports Economic activity static in quarter.

The national economy stood still in the three months ended March, the ANZ Regional Trends index failing to lift for the first time in five years.

ANZ economic statistician Kylie Uerata said the pause needed to be put into context.

Regional-based growth estimates were “incredibly strong” late last year.

“Pausing for breath after strength is not unusual.”

This chart of budget surpluses and deficits over the past 10 years from Trading Economics shows that New Zealand has barely recovered from the Global Financial Crisis that hit hard after New Zealand was already moving into recession in 2008 plus the substantial cost of the Christchurch earthquakes.

TradingEconomicsNZBudgetSurpluses

Stuff charts a longer period of 20 years of surpluses and deficits plus 5 years of forecasts.

BudgetSurplusdDeficitStuff

So after only just getting back to a meagre surplus it has flattened out, the forecast for next year is flat, and then someone hopes that the economy will recover and grow from there.

However what has to be considered is the possible effect of an election year budget where a thirds term Government may be tempted to splurge a bit on spending (vote buying).

Also what should be considered is the possibility and the possible effects of a change to a Labour-Green government next year, or to a Labour-Green-NZ First government, or to a National-NZ First government.

It is normal for larger minor parties to push for spending on their pet policies in reward for enabling a large party to form a coalition.

This could be exacerbated if a weakening Labour is joined by Greens and/or NZ First who are growing in relative strength.

Perhaps it’s time to seriously consider what influence NZ First would have on Government spending.

Would they assist with economic prudence or would they demand increased spending?

Leave a comment

3 Comments

  1. Alan Wilkinson

     /  4th June 2016

    Welcome to the real world. Meanwhile IRD runs a provisional tax system that penalises businesses and people that can’t forecast their future earnings exactly.

    Reply
  2. Blazer

     /  4th June 2016

    Well the P.M talks 3 billion tax cuts,refuses to address Super,glacial progress in international Corporate tax transfer rorts,and ignores advice on CGT…what a safe pair of ponytail pulling hands this fellow has!

    Reply
    • Gezza

       /  4th June 2016

      Couldn’t help noticing Nikki Kaye’s got pretty straight hair but even she doesn’t seem to wear hers in a pony tail during the working week down here.

      Reply

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