The government isn’t seeing as much tax from corporate taxpayers as it anticipated in the first seven months of the fiscal year, but the operating surplus is still ahead of forecast because of less spending than expected.
The operating balance before gains and losses – obegal – was a $1.91 billion surplus in the seven months ended Jan. 31, $481 million more than forecast in the December half-year economic and fiscal update.
Core tax revenue rose 6.3 percent to $44.66 billion and was some $251 million ahead of forecast, due largely to an extra $189 million of unexpected tobacco excise and $207 million from personal income taxes.
That helped offset corporate tax coming in $234 million below forecast at $5.08 billion. Non-resident withholding tax also fell $40 million short of the expected $354 million. Both were down from a year earlier when they contributed $5.1 billion and $369 million respectively in the period.
Treasury officials said the shortfall in the corporate tax take was due to below-forecast provisional tax estimates and assessments.
“Part of this variance is timing in nature, however, many major taxpayers’ provisional assessments were also below forecast,” they said.
Business sentiment has been in the doldrums since the coalition government took office, with fears raised over the extent of planned tax changes and increased regulatory obligations and how they may crimp company profits. That’s compounded with economic activity coming off a peak, with global growth slowing in the face of rising trade tensions, particularly between the US and China.
Still, the economy has remained robust enough to maintain a strong labour market which has yet to spill over into rising consumer price inflation. The Crown expects to collect $32.72 billion of income tax in the year ending June, up from $30.72 billion a year earlier.
Finance Minister Grant Robertson will unveil his well-being budget on May 31, with the coalition fixated on levelling what they claim is an unequal playing field by offering targeted support.
That’s seen transfer payments and subsidies rise to $16.21 billion in the seven months through January, from $14.59 billion a year earlier.
Of that, superannuation remains the biggest cost at $8.45 billion, compared to $7.96 billion a year earlier. The family tax credit – Working For Families – rose to $1.33 billion from $940 million, while jobseeker payments at $1.09 billion were up from $1 billion. Supported living payments were largely flat at $913 million and accommodation subsidies rose to $942 million from $658 million.
Core Crown spending rose 7.4 percent to $49.39 billion in the seven-month period from a year earlier, tracking $638 million below forecast. Treasury said about $200 million of that was from demand-driven factors in education. That, and $100 million of under-spending on each of welfare and KiwiBuild, were likely due to timing.
“Our responsible fiscal management of running surpluses and keeping expenses and debt under control is necessary and effective,” Robertson said in a statement.
Net debt of $60.27 billion was 20.7 percent of GDP, some $233 million higher than forecast and due largely to a bigger-than-expected residual cash deficit of $2.37 billion. The cash deficit was larger due to about $200 million of extra capital spending than anticipated.
The Crown’s operating balance, including $500 million of investment losses made by entities including the New Zealand Superannuation Fund and Accident Compensation Corp, was a deficit of $2.37 billion, compared to a forecast surplus of $1.39 billion. Changes in the discount rates used to calculate ACC’s long-term claims and the Government Superannuation Fund’s long-term liabilities drove $3.8 billion of losses on non-financial instruments which also weighed on the balance.
The Crown’s net worth of $127.7 billion, or 43.9 percent of GDP, was $3.9 billion below forecast, but still more than the $117 billion reported a year earlier.