Govt tax take drops - $1.1b below forecast

Photo / Mark Mitchell

Government tax revenue was $1.1 billion or 8.2 per cent lower than forecast for the three months to the end of September.

Publishing the Government's financial statements for the September quarter today, The Treasury said the figures showed the economy was recovering more slowly from recession than expected.

One of the two main reasons for the lower tax take was that GST revenue was $600 million or 15.8 per cent lower than forecast, mainly due to a smaller than expected boost in consumer spending before October's GST rate rise.

Some recovery in the December quarter was possible, given that consumption was not brought forward into the September quarter as much as expected, Treasury said.

Evidence suggested that spending in the September quarter continued to be subdued generally.

The second main reason for the low tax take was that corporate tax revenue was $500m or 22.4 per cent lower than forecast mostly due to lower than expected provisional tax assessments.

That suggested that while corporate profits were higher than at the same time last year, they were still lower than anticipated, Treasury said.

Meanwhile, operating expenses in the statements include costs associated with the Canterbury earthquake.

The Earthquake Commission (EQC) recorded an estimated net cost of $1.5b for settling claims for damage arising from the earthquake.

While the total cost incurred by EQC was likely to exceed that figure, EQC had reinsurance cover for costs above $1.5b, Treasury said.

On top of that, the Government was also committed to reimburse a proportion of the restoration costs relating to critical local government infrastructure and certain other costs.

Those costs had not been included in the financial statements yet, as reliable estimates of the amounts had not been established.

The combined impact of the lower taxes and earthquake impact was that the operating balance before gains and losses deficit was $2.2b higher than expected at $3.7b.

That result was partly softened by net gains made on investment portfolios that were higher than expected, Treasury said.

The NZS Fund made gains on its investment portfolio of $820m more than expected.

ACC recorded an unforecast $805m actuarial loss on the valuation of its outstanding claims liability, largely generated by a decrease in the discount rate used to calculate the present value of expected future payments. But that loss was largely offset by gains on ACC's investment portfolio of $617m more than expected.

Overall, the Crown's operating balance deficit was around $1.5b higher than forecast, at $2.4b.

Gross debt was $2.5b higher than anticipated, at $59.1b, but $1.4b of that variance was due to a liability in relation to the deposit guarantee scheme related to South Canterbury Finance that was subsequently extinguished in October, without impacting net debt.

Lower than forecast tax receipts contributed to net debt being $900m higher than expected at $33.8b.

- NZPA