New Zealand Fiscal Deficit Much Worse After Lower Corporate Taxes

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

05 November 2009

New Zealand’s Treasury has released the government’s financial statement for the quarter to end-September 2009, which shows much reduced revenue.

Government tax revenue, at NZD11.9bn (USD8bn), was NZD1.1bn lower than forecast. The majority of this fall was down to corporate tax revenue, which was NZD0.9bn less than forecast. Lower-than-expected 2009 tax year profits was one of the key factors behind the variance.

The lower tax revenue was the main contributor to the government’s operating deficit of NZD2bn (NZD0.9bn greater than the NZD1.1bn deficit that had been forecast). Gross debt, at NZD48.5bn, was also NZD1.4bn higher than forecast.

Finance Minister, Bill English, commented that the financial statement confirmed that it would take time for the country’s economic recovery to flow through to tax revenue.

“The road to recovery will be quite bumpy and this is reflected in the financial statements issued today. Certainly, the impact of the recession on the government's revenue will be felt for some time," he observed, continuing:

"A clearer picture of the implications for the Crown accounts in 2010 is likely to emerge in the next few months, when seasonal volatility in provisional tax is expected to have settled down."

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