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NZ Reports Flagging Revenues

by Mary Swire,, Hong Kong

09 November 2010

New Zealand’s official statistics for the first three months of the 2010-11 fiscal year, released by the Treasury, show that the expected increased retail sales and, consequently, a boost to goods and services tax (GST) receipts, before its rate increase to 15% from 12.5% on October 1, failed to materialize.

Compared to the forecasts contained in the 2010 Budget Update, tax revenues in the quarter to end-September 2010 were NZD1.1bn (USD870m), or 8.2%, less than the expected receipts of NZD12.5bn. While corporate tax revenue was also down due to a lower revival in business profits than had been expected, GST collections were more than 15% below forecast during the quarter.

As a consequence of the lower-than-expected tax revenues, and additional costs linked to the Canterbury earthquake, the government’s operating balance (before gains and losses) was NZD2.2bn higher than expected at NZD3.7bn.

Despite the increased deficit, Finance Minister Bill English said that the government remained committed to sound management of its finances, and confirmed that the lower than forecast tax take was “largely the result of lower than expected consumer spending as New Zealanders pay down debt and save more."

"Although the Treasury expects some of the lower tax take to reverse in coming months, it reinforces the need for ongoing fiscal discipline,” he added. “We still have a significant medium-term challenge to get back into surplus as soon as possible. That is why the government is committed to spending restraint for the foreseeable future."

TAGS: tax | economics | fiscal policy | goods and services tax (GST) | New Zealand | revenue statistics | services

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