Falling Tax Receipts Push Budget Deficit Up In NZ

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

08 May 2009

A sharp decline in tax receipts has pushed New Zealand's budget deficit up further than expected, it has been announced.

According to the country's Treasury Department, the cash budget deficit registered NZD7.88bn (USD4.6bn) at the end of March this year - a figure which is around NZD1.78bn (USD1.03bn) more than the government previously anticipated when they announced their pre-election update last October.

Much of the increase has been attributed to a significant drop in tax receipts during the current recession. The Treasury has calculated that, in total, tax receipts have registered around NZD1.42bn (USD825m) less than anticipated, with sales tax receipts alone down NZD427m (USD248m) on the government's expectations.

Reduced consumer spending, a lack of property investment and lower interest rates are all contributing factors, and further losses have been made from various state investment and pension funds.

Looking to the future, the Treasury said it expects the drop in tax revenues to worsen as the recession continues, explaining:

“The tax variances will become increasingly negative through the 2008-09 fiscal year as the continued deterioration in the world economic situation flows through to the New Zealand economy.”

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