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The government’s tax take is growing faster than the economy, with corporates paying the bulk of the increase by an extra $1.2 billion.
That is one of the core factors in today’s release of the government accounts for the year to June.
Treasury announced an operating deficit, before gains and losses, of $9.2 billion for the year, slightly below the Budget 2012 forecast of $9.7 billion. Core government spending fell 2.2% for the year.
The tax take rose 6.8%, while nominal GDP rose 3.5% over the same period. That suggests the government is taking a larger proportion of any gradual increase in economic performance than would normally be the case.
The big jump in tax take is from corporate taxes, up 15.6% on last year, from $7.2 billion to $8.4 billion.
GST tax revenue is up 8.8%, while personal income tax paid is up 2.7%.
Tax revenue overall is ahead of forecast. The government collected $55.081 billion for the year compared to a forecast of $54.741 billion.
That is a turnaround over the final quarter of the financial year. Until March, the tax take was lagging behind forecasts. This is tax paid on an accrual and not a cash basis.
Over the longer term, the government is still increasing its debt levels. While the deficit has roughly halved in a year, from $18.4 billion to $9.2 billion, the government still has to borrow, and the total amount for the year was $8.6 billion.
On a balance sheet basis, the government’s net worth fell a massive $21.2 billion, partly because of the increased borrowing but largely due to write-downs in the value of assets such as KiwiRail, down $8.6 billion.
The remaining fall is because of a $7.1 billion rise in the liabilities faced by the Accident Compensation Corporation and the Government Superannuation Fund, due mostly to lower returns on the assets held by those funds.
This drop is offset by the rise in value of other assets such as the New Zealand Superannuation Fund and the state-owned enterprises.
Net government debt is now $50.7 billion, or 24.8% of GDP, up from $40.1 billion or 20.3% of GDP the previous year.
Debt is projected to increase to around 30% of GDP by the 2014-15 financial year, at which point the government plans to return to surplus and a reduction in debt can begin.
Finance Minister Bill English – who today is attending a book fair in Frankfurt, Germany, rather than the opening of the government books in Wellington – said in a press release the slight improvement in the deficit compared to budget forecasts means the government is on track to return to surplus by its target date.
“The consequences of too much government debt are all to clear and Europe in the United States, where we are seeing big cuts to public services and pensions and higher taxes,” Mr English says.
His trip to the northern hemisphere includes meetings with EU finance ministers and an International Monetary Fund meeting later this week.
“As I have said before, we have less control over our revenue – particularly with other parts of the world struggling with high levels of debt and sluggish economies. This will have an impact on New Zealand.”