Crown accounts show careful fiscal management
The Government continues to run a surplus, manage expenses carefully and keep debt under control.
The latest Crown accounts show expenses were within 0.4 percent of forecast in the ten months to 30 April. Net core Crown debt was at 21.2 percent of GDP, against the 21.6 percent forecast.
“The accounts show we’re managing the books carefully and living within our means by running a surplus,” Grant Robertson said.
The April accounts were the first to use a new Inland Revenue system for recording how much tax revenue the Government has collected. This is one of the reasons the April accounts show differences between the revenue numbers and the Treasury’s forecasts, which were compiled under the old system.
For example, the Crown accounts show core Crown tax revenue for the ten months to 30 April was $2.3 billion above the Treasury forecast due to higher-than-expected revenue for corporate tax, GST and ‘other persons’ tax. This affected the ten-month surplus number by about the same amount.
“The Government is taking the responsible approach of waiting to see how the variance between actual revenue and the forecasts shifts over the next few months. There is a chance that some of it reverses out due to timing differences, which have made it look like revenue is running ahead of the forecasts based on the old model,” Grant Robertson said.
The Treasury is working on building the new data into its next forecasting round. In the meantime there will be some large differences between the new actual monthly revenue numbers and the forecasts over the coming year.
“We always knew that there would be a transition period for the new revenue system. I have asked the Treasury and Inland Revenue to work closely together to make sure the forecasts align with the new data coming through,” Grant Robertson said.
Note to editors: The previous process largely relied heavily on year-end assessments to estimate income tax revenue, particularly for large taxpayers. In contrast, the new “START” (Simplified Tax and Revenue Technology) system enables income tax revenue to be recognised more consistently during the year, as estimates are based on the most recently available data for each individual and corporate taxpayer. This process change will have the effect of bringing forward the recognition of some tax revenue, which makes it look like revenue is running ahead of the forecasts which used the old model.