Former Economics Editor of the NZ Herald

Tax take falling below forecast, Treasury warns

Bill English sees need for restraint. Photo / Richard Robinson
Bill English sees need for restraint. Photo / Richard Robinson

Two-thirds or so of the way through the Government's financial year the tax take is $1.1 billion below forecast and the Treasury warns half of that shortfall is not likely to be caught up by the end of the year.

But for the 2014/15 year, in which the Government has pledged a return to surplus, the Treasury expects stronger economic growth to boost revenues and deliver a tax take broadly similar to its forecast in last December's half-year economic and fiscal update (Hyefu).

Hyefu forecast a tax take of $65.7 billion next fiscal year, up $3.7 billion or 6 per cent on its forecast for the current year - which was predicated on economic growth of 3.4 per cent - and up 7 per cent on what, the Treasury concedes, now appears likely.

For the eight months ended February, most tax types were lower than forecast and apart from PAYE, where the error was less than 1 per cent, the shortfalls ranged from 3.2 per cent (for GST) to 6.8 per cent (for company tax).

"Overall it is expected that slightly over half of the $1.1 billion weaker year-to-date out-turn will remain at year end once the elements that appear timing-related reverse," said the acting chief government accountant, Fergus Welsh.

By contrast, core Crown expenses were just 0.1 per cent ($68 million) lower than forecast.

Compared with the same period of the previous year, tax revenue is 5 per cent or $1.9 billion higher and spending 1.8 per cent or $800 million higher, of which 82 per cent is in the three big-ticket lines, health, education and social security and welfare, which account for 60 per cent of operating spending.

Reflecting the tax shortfall, the operating balance before gains and losses is $1.4 billion compared with the $500 million forecast for this point in the year.

"We remain committed to reaching surplus next year and Budget forecasts next month will confirm we are on track," said Finance Minister Bill English.

The figures reinforced the need for restraint in government spending, he said, and confirmed there would be no capacity for reckless spending promises ahead of the election.

Labour finance spokesman David Parker said: "Somehow Bill English is presiding over a growing economy but not getting the tax revenue that should be coming with it. He needs to explain himself."

- NZ Herald

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