Tax take higher than forecast

Tax revenue for the year ended June was $2.1 billion higher than forecast in the May Budget, most of it from businesses.

But the increase does not reflect a perkier economy or higher profits, just an accounting quirk.

The Inland Revenue is now confident it can estimate provisional tax accurately enough to record it as it accrues rather than when it is paid.

The result is that for a transitional year, that to June 2006, one additional tranche of provisional tax revenue from companies and the self-employed has been brought to book, boosting the Government reported income by $1.8 billion. It accrued before June 2005 but was paid in September.

The result is that the official tax take for the 2005/06 year was $56.2 billion instead of the $54.1 billion forecast or the $54.4 billion which would have been recorded under the previous system.

As it happens the Treasury does believe economic activity was stronger in the first half of the year than it had expected, and has revised up its estimate of gross domestic product growth for the year to March 2005 from 1 to 1.5 per cent.

But it sees company profits as under pressure from rising input costs and wages.