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Budget 2016 Home Page Fiscal Strategy Report - Budget 2016

Managing the Crown's Revenue and Expenses

The Government supports a broad-base, low-rate tax system that responds to New Zealand's medium-term needs in a planned and coherent way, minimises economic distortions, rewards effort, has low compliance and administrative costs and minimises opportunities for tax avoidance and evasion. Further details on the Government's revenue strategy can be found at

The current tax policy work programme focuses on three areas:

  • using Inland Revenue's business transformation programme to modernise policy and tax administration settings
  • dealing with issues relating to international tax and base erosion and profit shifting, and
  • improving and enhancing tax and social policy within the Government's broad-base, low-rate tax framework.

The Government also receives revenue from other sources including sales of goods and services by Crown-owned companies, interest income and dividends. Total Crown revenue is expected to stay relatively constant as a percentage of GDP over the forecast and projection periods.

Expenditure control is key to achieving the Government's fiscal objectives. The policy of fixed nominal baselines means that the amount of funding an agency receives each year does not automatically increase to adjust for inflation. Instead, a specific policy decision is required to increase most expenditure items. The operating allowance is the pool of new operating funding available at each Budget, and the Government will continue to keep a tight rein on the size of this allowance.

The Government will continue to develop performance frameworks to drive demand reduction across government services.

The Government's social investment programme is using analysis and commercial tools such as actuarial valuations to understand the long-term needs of society's most vulnerable, and the cost of meeting these needs. Evidence-based tools are being applied to existing and new spending to decide when and how to intervene. Effective intervention in turn reduces the need for spending in the long run.

The Ministry of Social Development, for example, has been using the social investment approach to help people move from welfare into work. As a result, the latest figures show the welfare system's future lifetime cost has reduced by $12 billion over the past four years.

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