9 Nov 2010

Tax take much lower than forecast

3:30 pm on 9 November 2010

Constrained household spending and higher corporate losses have led to a sharp slump in the tax take.

Tax revenue came in $1.1 billion below forecasts in the three months to September as people curbed spending before October's rise in the GST and there was a shortfall in company tax.

Coupled with a $1.5 billion charge from the cost of the big Canterbury earthquake, the operating deficit totaled $3.7 billion, after excluding investment gains and losses. That is two-and-a-half times worse than expected.

Finance Minister Bill English says the figures show the challenge facing the Government.

He is expecting more household spending next year, as people sort out their finances, allowing the Government to rein in its own spending.

The lower tax take also pushed out net debt, which totaled nearly $34 billion, or 17.9%, of gross domestic product.

The Government's net cash position - the difference between all income and spending - was a deficit of $6.5 billion.