Company Tax Causes Sharp Fall In NZ Government Revenue

by Mary Swire, Tax-News.com, Hong Kong

08 December 2009

The impact of lower-than-expected business profits on company tax is a feature of New Zealand’s official financial statements for the first four months of the 2009-10 fiscal year, and highlights the challenges facing the government as the economy comes out of recession.

During that period, total tax revenues, at NZD15.4bn (USD11.2bn), were NZD1.6bn (or 9.4%) lower than forecast at the time of the 2009 budget. A large portion of the underlying revenue variance was caused by corporate taxes which were just over NZD1bn (or 41.8%) lower than targeted.

The reduced collections in the first part of the financial year indicate that lower company profits in 2009 will flow through to decreases in full year tax revenue. New Zealand’s Finance Minister, Bill English, said: “It's clear that the impact of the recession will be felt by many businesses and, in turn, on the government's books for some time.”

“This will influence our decisions around both revenue and spending,” he added. "It means there will be little or no new money for government departments and ministries for the foreseeable future.”

The government’s budget policy statement and half-year economic and financial updates are due on December 15. "They will help shape our decisions for budget 2010, as we focus on getting a better performing economy that supports more jobs and higher incomes," English added.

Recommended