Govt's 7-month surplus bigger than expected on corporate tax take

Tuesday 7th March 2017

The government's seven-month operating surplus was more than twice the expected size as the government pulled in a bigger tax take from companies while uncertainties over the cost of the Kaikoura earthquake kept expenses below forecast.

The operating balance before gains and losses (obegal) was a surplus of $1.15 billion in the seven months ended Jan. 31, ahead of the $442 million surplus predicted in the half-year economic and fiscal update and more than the $934 million a year earlier.

Tax revenue rose 7.3 percent to $42.43 billion, some $291 million above forecast, as provisional and terminal tax assessments for companies beat expectations, "indicating that taxable profits in the 2016 tax year were higher than forecast and this has continued on into the 2017 tax year," the Treasury said in commentary accompanying the accounts. Core Crown expenses rose 4.8 percent to $44.18 billion, about $338 million lower than forecast, most of which related to expected costs arising from the Kaikoura quake, which aren't certain enough to be quantified.

The Treasury yesterday noted tax revenue was tracking ahead of forecast in its monthly economic indicators, although the degree to which those trends would stay in place was uncertain due to the volatility of monthly tax data and the projected slowing of residential investment and inbound tourism.

In December, the half-year fiscal and economic update reduced the obegal surplus by $200 million to $473 million for the 2017 fiscal year compared to the May budget, but with a forecast surplus of $8.5 billion in the year to June 2021.

Today's accounts show a residual cash surplus for the seven-month period of $555 million, below the $650 million forecast, on higher operating payments and later dividend receipts than expected. However, net debt was largely in line with forecast at $61.68 billion, or 24.1 percent of gross domestic product.

The actual operating balance, which includes unrealised movements in the Crown's investment portfolio and actuarial valuations of long-term liabilities, was a surplus of $7.83 billion, more than twice the expected surplus due to Accident Compensation Corp actuarial gains tracking ahead of expectations as rising interest rates lift the projected income needed to meet the workplace insurer's future claims. The ACC's liability of $34.94 billion was $3.05 billion below forecast.

The Crown's net worth of $97.23 billion was some $4.06 billion bigger than forecast because of the larger surpluses.

BusinessDesk.co.nz

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