Thursday 31st October 2019
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A lumpy tax take pushed the government's accounts into the red in the September quarter as the Inland Revenue Department's new systems meant some revenue was recognised earlier than anticipated.
The operating balance before gains and losses (obegal) was a deficit of $593 million in the three months ended Sept. 30, compared to a deficit of $343 million a year earlier. Treasury had forecast an obegal surplus of $1 billion. However, the tax take of $20.35 billion was almost $1.5 billion below expectations, due in part to IRD's new information technology system recognising tax revenue more smoothly.
The Treasury and IRD are working their way through the new timing, which bolstered the June 2019 accounts by bringing forward some tax revenue. The September quarter tax take was 7.1 percent higher than a year earlier, with corporate tax revenue up 30 percent due to a combination of IRD's new process, increased profits, and a greater number of filed tax assessments.
The personal income tax take rose 6.4 percent due to higher wages and more employment, while GST was up 4 percent due to increased consumer spending.
Finance Minister Grant Robertson foreshadowed the timing issue when he unveiled the 2019 accounts last month, and today said the variance to forecast would reverse through the year as the timing issues levelled out.
"It’s not unusual to have a deficit in the first three months of a financial year. This is because expenses are more evenly spread across the year, while revenue increases towards the end. There was a deficit at the start of the last year which later reversed out," he said.
Robertson has stuck to a strict set of fiscal rules in keeping government debt from ballooning, standing firm in the face of growing calls to ramp up infrastructure spending even more than the planned $40 billion-plus programme over the coming five years.
Today's accounts show net debt at $60.8 billion, or 20.3 percent of gross domestic product, was about $2.1 billion below forecast, due to the stronger starting point. That was despite a bigger residual cash deficit than expected of $3 billion.
Robertson said measures not affected by IRD's timing issues showed the accounts to be in good shape.
"These include the lower-than-forecast net debt position at 20.3 percent of GDP. Also, the corporate tax ‘receipts’ measure – which tracks the actual amount of cash coming in – was $356 million - 10 percent - higher than forecast, indicating stronger business profits over the past year," he said.
The government's operating balance, which includes movements in the fair value of its investment portfolios and actuarial adjustments, was a deficit of $3.5 billion, wider than the $1.07 billion shortfall reported a year earlier, and well below the forecast surplus of $1.85 billion. That was due to the persistently low global interest rate environment pushing up the actuarial loss on ACC's long-term liabilities and higher carbon prices increasing the losses on the emissions trading scheme.
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