Budget surplus on track as corporate tax-take starts catching up to forecast
The government's lagging tax-take got a boost in March as later than expected filing of 2013 company tax returns bolstered the contribution from corporate taxpayers, allowing Finance Minister Bill English to confirm next week's Budget will project a return to surplus.
The Crown's operating balance before gains and losses (obegal) was a deficit $1.66 billion in the nine months ended March 31, bigger than the December half-year economic and fiscal update forecast of $1.47 billion, though well down on the shortfall of $4.95 billion a year earlier.
Core tax revenue was 1.8 percent below forecast at $44.49 billion, catching up on the December projections after lagging for the prior three months, and up 6.3 percent from a year earlier. Core operating expenses were 0.8 percent below forecast at $52.04 billion, and down from $42.17 billion a year earlier.
"As the Budget will show next week, we remain on track to a small surplus next year and increasing surpluses in following years," English said in a statement. "But to meet this challenging target, we must remain focused on responsible fiscal policy and sensible economic policy that supports ongoing economic growth, more jobs and higher incomes."
The Treasury will update its forecasts at next week's Budget and expects the lower tax take won't have an impact on the predicted return to surplus in 2015 "as the variance-against forecasts are offset by a stronger outlook for the economy than had been anticipated," acting chief government accountant Fergus Welsh said in a statement.
The corporate tax-take caught up to forecasts as late 2013 company filings in February arrived in March. Total corporate tax accrued was 2.7 percent below forecast at $5.32 billion, and up from $4.97 billion a year earlier.
Personal income tax was 1.8 percent below forecast at $20.93 billion, compared to $19.67 billion in 2013, and other income tax was 2.4 percent short of expectations at $1.51 billion, from $1.49 billion a year earlier. Goods and services tax was 2.2 percent below forecast at $11.96 billion, and up from $11.22 billion a year earlier.
Tobacco excise was 9.2 percent below forecast at $1.06 billion, compared to $1.03 billion in 2013, and Treasury officials said the lower tax take from cigarettes is expected to persist to the end of the fiscal year. Dividend returns were 10 percent below forecast at $477 million, though up from $392 million a year earlier.
The smaller than expected tax take weighed on the residual cash deficit, which was $353 million bigger than forecast at $4.94 billion, though still down from $7.63 billion in 2013. That led to more net debt than forecast at $61.18 billion, or 27.6 percent of gross domestic product, compared to a forecast of $60.86 billion, or 27.5 percent of GDP.
The operating balance, which includes movements in the Crown's investment portfolio and actuarial adjustments, was a surplus of $3.33 billion, more than the $2.06 billion forecast due to unrealised investment gains, largely from the New Zealand Superannuation Fund. That compares to a surplus of $2.52 billion a year earlier.