NZ Govt tax revenue near forecast

Government tax revenue of $20.5 billion for the five months to the end of November was near the forecast in the 2010 Half Year Economic and Fiscal Update published in December.

Revenue for the five months from source deductions was $185 million or 2.1 percent higher than forecast, with November having been the first month that Inland Revenue received PAYE assessments resulting from the October personal tax cut, the Treasury said today.

The forecast had assumed source deductions would decline in November in line with the tax cuts, but they fell less than anticipated.

Corporate tax revenue was $179m or 7.2 percent lower than forecast, while overall tax revenue was $27m or 0.1 percent above forecast.

"While the Treasury's judgment is that the corporate tax variance is likely to be timing in nature, it is too early to predict whether the PAYE variance will persist."

Core Crown expenses were $272m lower than forecast due to individually small variances across a number of departments, the Treasury said.

The operating balance before gains and losses (obegal) was largely in line with forecast at a deficit of $5.8 billion.

Within that, both insurance expenses and other revenue in relation to reinsurance were $1b higher than forecast, as the estimated costs of the Canterbury earthquake had risen to $3b.

Including gains and losses, the operating balance was $2.5b in deficit, $2.3b or 47.9 percent less than forecast. That variance was due to gains recorded by NZS Fund and ACC.

The NZS Fund recorded gains in its investment portfolio that were $1b higher than forecast, based on solid performances in global equity markets.

ACC recorded an actuarial gain on its outstanding claims liability of $500m, $1.3b above its forecast actuarial loss. The gain arose from a rise in the discount rates used to calculate the present value of expected payments on the liability, the Treasury said.

The residual cash deficit at $9.1b was $181m less than forecast, with the main contributor being GST receipts which were $168m or 3.5 percent higher than forecast.

That variance was likely to relate to forecasting assumptions regarding the October GST rate rise.

At November 30, gross debt was $60.8b or 31.9 percent of GDP, $1.5b higher than forecast across a number of debt instruments, the Treasury said.

That variance did not translate into a corresponding increase in net debt, at $35.9b or 18.8 percent of GDP, because there were similar increases in financial assets during the period.