Late company tax filings produce smaller than expected 10-month budget surplus

The New Zealand government posted a smaller than expected operating surplus in the first 10 months of the financial year as a number of large company tax assessments are being filed later than anticipated.

The operating balance before gains and losses (obegal) was a surplus of $297 million in the 10 months ended April 30, below the $1.24 billion surplus projected in last month's Budget forecasts, and smaller than last year's $448 million, the government's financial statements show. Core Crown tax revenue rose 3% to $56.7 billion, below the forecast $57.8 billion, largely due to a number of big company tax assessments expected to be filed in April not emerging.

"A large portion of the variance is expected to reverse out by the end of June 2016 once these assessments are filed," the Treasury said in notes accompanying the release. However, some $200 million of the shortfall came from a lower than expected take from portfolio investment entity tax, which "is expected to persist for the remainder of the 2015/16 fiscal year as the peak PIE tax payment month of April has now passed."

The May 26 Budget forecast a $700 million obegal surplus for the year to June 30, which is projected to increase over the coming years as a growing population underpins annual economic expansion of 2.9% out to 2020.

Source deductions for personal income tax were ahead of forecast, which Treasury said could include a small timing element, but could also indicate the strength of the labour market in March had extended into the June quarter.

Core Crown expenses were largely in line with forecast, rising 2.2% to $60.82 billion, with the Ministry of Social Development reporting smaller impairments than expected and NZ Transport Agency projects reporting a different split between operating and capital expenditure, which offset Inland Revenue writing off $106 million more bad debt than predicted.

The operating balance, which includes non-cash balance sheet items, was a deficit of $3.41 billion, more than the $2.34 billion forecast a month ago, due to bigger liabilities than expected from the emissions trading scheme on a rising carbon price. At last month's budget, the government said it would drop its subsidy for electricity producers, transport fuel providers and industries with high carbon emissions that let them offset only half their emissions.

The government's provision for ETS credits of $1.75 billion was $449 million more than expected, and up from $769 million at the same time a year earlier.

The Crown's residual cash deficit of $4.06 billion was $594 million below forecast, and smaller than the $4.84 billion shortfall a year earlier, due to slower payments to NZTA and delayed Ministry for Business, Innovation and Employment grants.

Net debt of $64.64 billion, or 26.3% of gross domestic product, was just below the projected $64.92 billion, or 26.4% of GDP.

The Crown's net worth of $82.65 billion was $1.24 billion below forecast due to the bigger than expected operating deficit.

(BusinessDesk)