Tax revenue surges in 11 months to May

An unexpected tax surge may deliver the government a smaller budget deficit.

Treasury figures showed a deficit of $7.75 billion for the 11 months ended May compared with a forecast of $8.75b.

Tax revenue was $111.1b, $1.6b above expectations, which Treasury said was expected to have continued through to the end of the financial year in June, but would not carry through to the future.

“This largely reflects higher than expected tax revenue from Portfolio Investment Entities (PIE) on the back of strong investment performance and resident withholding tax (RWT) on dividends due to an uplift in dividend payments.”

The tax collected from dividends was about $600m above forecast, as trusts paid more on their dividends ahead of changes to their tax rate in the coming financial year.

Despite the economic downturn and the fall back into a technical recession, the tax take was close to $8b higher than a year ago as a strong labour market boosted income tax returns, and the rise in interest rates meant higher tax charges on deposits.

Government expenses were $125.1b, $417m lower than forecast, with less spent on housing, environmental protection, core government services, and also because of the delay in settling a pay deal with police.

The recent budget forecast a full year deficit of $11.1b, with higher than expected deficits for the next three years before a return to surplus in 2028.

The net debt level was a shade lower at $173.6b, equating to 42.5 percent of the value of the economy.

According to the news on Radio New Zealand

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