KEY POINTS:
A $600 million slip-up will be taken into account when Inland Revenue Department commissioner Bob Russell's performance is reviewed, State Services Commissioner Mark Prebble says.
What had looked to be the Government's first operating balance deficit in almost 15 years turned out to be a surplus after all
after it was revealed today the people responsible for doing the sums made a $600m error.
It was stated earlier this month that the operating balance for the seven months to the end of January had moved $394 million into deficit.
But human error meant $600m wasn't included, so the correct figure was a $198 million surplus.
That was $3.6 billion below forecast, rather than the $4.2 billion below forecast previously reported.
Secretary to the Treasury John Whitehead and Mr Russell today called a press conference to explain how Inland Revenue had failed to account for about $600m in provisional tax accruals during January.
"We used the wrong tax accrual figures. That was a human error, but a bad one," Mr Russell said.
"I have apologised to the Minister of Revenue and the Minister of Finance."
Mr Russell emphasised the problem was an accounting error over how much was estimated for accruals, and was nothing to do with forecasting or with actual tax payments.
Senior officials from Treasury and IRD are investigating the error and are expected to report their findings in about a week.
Despite the correction, the Government still took a massive hit to its books in January.
Today Finance Minister Michael Cullen acknowledged he had been concerned over what had initially appeared to be a $700m drop in forecast revenue - suggesting the economy was slowing faster than anyone had expected.
"Obviously if tax revenue was falling away quickly then that did have an impact around what was sustainable over the medium term," he said.
The revised accounts gave him slightly more headroom for his May budget.
He told reporters he had received an apology for what was a "simple mistake".
"They used an incorrect forecasting figure and that flowed through. It's the classic case of where you get one thing wrong right at the start, you simply repeat that all the way through and it flows through into the final outcome," he said.
Dr Prebble said he was disappointed the error had happened.
"It is a serious error because it affected the accuracy of the Crown accounts and I will take it into account in considering Bob Russell's performance for the year," he said.
Mr Russell was determined to find out what went wrong and make any improvements necessary to ensure such a mistake was avoided in the future, Dr Prebble said.
The overall slump in the January accounts was largely due to a sharp dip in global financial markets, which had led to a $2.5b hit on investments held by the Cullen Super Fund, ACC and the Earthquake Commission.
The Government also took a $1b paper loss from revalued ACC liabilities, largely due to a revised inflation forecast.
- NZPA
