Operating deficit smaller than predicted as company tax take swells

The government's operating deficit was smaller than predicted in the first four months of the 2016 financial year, as a number of one-off corporate tax payments swelled the Crown's coffers.

The operating balance before gains and losses (obegal) was a deficit of $478 million in the four months ended October 30, smaller than the $1.17 billion shortfall predicted in the May budget, and narrowing from a $1 billion deficit a year earlier, figures in government's financial statements show.

That was helped by a 5.8% increase in tax revenue to $22.09 billion, which was $367 million ahead of forecast due mainly to "a small number of large one-off payments of non-resident withholding tax and higher than forecast provisional tax assessments in the month of October," the Treasury says. 

Personal income tax was also ahead of forecast, although falling deposit interest rates curbed the tax take on resident withholding tax. 

Core Crown expenses rose 2.5% to $24.55 billion, some $155 million below forecast, and due in part to the tax department writing off fewer bad debts, and working for family tax credits coming in below expectations.

In its monthly economic indicators, the Treasury says tax revenue has been running close to the budget target, although sluggish growth in the first half of 2015 and lower than expected interest rates may weigh on the tax take in the future. 

Finance Minister Bill English will update the government's forecasts next week at the half-year economic and fiscal update.

The Crown's residual cash deficit was $1.57 billion in the period, below the $2.5 billion shortfall projected, and smaller than the deficit of $2.25 billion a year earlier. 

The cash position was boosted by higher tax receipts than expected, and helped keep net debt at $62.19 billion, or 25.9% of gross domestic product, compared to forecast debt of $65.2 billion, or 26.7% of GDP.

The government's gross debt was $86.91 billion, or 36.1% of GDP, higher than the $83.71 billion, or 34.8% of GDP, forecast, due to a $2 billion syndication being brought forward a month to October.

The operating balance, which includes movements in the Crown's investment portfolios, was a deficit of $867 million, more than the $110 million, due to a drop in the New Zealand Superannuation Fund's equity investments. The operating balance was a deficit of $998 million a year earlier.

The Crown's provisions were $369 million more than forecast at $7.04 billion, employee entitlements tracking ahead of expectations at $3.45 billion, and other provisions at $1.65 billion.

(BusinessDesk)