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The Treasury still expects the government to reach its targeted surplus in the 2015 financial year, even as the current tax-take continues to fall short, and widening the Crown's operating deficit.
The government's operating balance before gains and losses (obegal) was $1.39 billion in the eight months ended Feb. 28, more than twice the $509 million shortfall predicted in the December half-year economic and fiscal update, though less than half the deficit of $3.01 billion a year earlier.
Core tax revenue of $39.47 billion was $1.14 billion below expectations, and the Treasury anticipates more than half that deficit will remain by the end of the financial year, with assumptions around personal tax and custom duty not eventuating, and lower corporate tax and source deductions though to be a matter of timing.
"It is anticipated that a stronger outlook for the economy will further boost tax revenues from their current position, largely offsetting the current weakness in revenue outturns, resulting in an outlook for tax revenue for 2014/15 that is broadly similar to that presented in the HYEFU," acting chief government accountant Fergus Welsh said in a statement. "As a result, tax revenue developments are not likely to impact on the forecast surplus for 2014/15."
The government expects to post an obegal deficit of $2.32 billion in the current financial year ending June 30 before returning a surplus of $86 million the following year. Treasury officials are picking accelerating tax revenue growth as an expanding labour market provides more income tax, and as rising wages get caught in the fiscal drag of people entering a higher tax bracket.
Finance Minister Bill English said the Crown accounts show the return to surplus is a challenging task, and requires fiscal discipline.
"These figures will be factored into next month's Budget and reinforce the need for restraint in government spending," English said. "They also confirm that there will be no capacity for reckless spending promises ahead of the election later this year."
The lower-than-expected tax take remained across the board, with total income tax accrued 3 percent lower at $24.6 billion. Of that, income tax was 1.5 percent below forecast at $18.6 billion, corporate tax was 8.7 percent short of expectations at $4.73 billion, and other income tax was 2.2 percent below target at $1.27 billion.
Goods and services tax was 3.2 percent below forecast at $10.55 billion, and tobacco excise was 9.1 percent lower than expected at $1.03 billion. Dividend revenue was $96 million below forecast at $384 million.
The Treasury said the lower corporate tax take was largely due to later than expected filings of final 2013 tax returns, which should turnaround by the end of June. Still, weak profits pose a downside risk, it said.
The smaller tax collection weighed on the Crown's residual cash position, which was a deficit of $3.95 billion, more than the $3.28 billion expected. That led a bigger than expected net debt of $60.04 billion or 27.1 percent of gross domestic product, as at Feb. 28, compared to the forecast $59.6 billion, or 26.9 percent of GDP.
The Crown's total expenses were $59 billion in the eight month period, compared to the forecast $59.63 billion.
The operating balance, which includes movements in the Crown's investment portfolios and actuarial adjustments, was a surplus of $3.72 billion, $891 million ahead of the December forecast, due to unrealised investment gains from the likes of the New Zealand Superannuation Fund. That compares with a surplus of $4.29 billion a year earlier.