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Budget 2017 Home Page 2016 Tax Expenditure Statement - Budget 2017

Tax Expenditures Categorisation

In the tables that follow, tax expenditures and appropriated spending are categorised by Type and Impact.

Notes on Categorisation

In this statement there are three types of tax expenditures:

  1. Social: Tax expenditures that are introduced with the purpose of achieving certain social policy objectives. These can be either appropriated spending - such as the Working for Families tax credits - or income exemptions or deductions such as the Charities tax credit or the deduction for Māori Authority donations.
  2. Business: Tax expenditures that are aimed at incentivising certain types of business or commercial activities in order to meet explicit or implicit economic policy objectives. Some examples include: income exemption for bodies promoting scientific or industrial research, or the deduction for petroleum mining expenditure.
  3. Other: Tax expenditures that are not expressly introduced to achieve social or business economic policy objectives. An example is the tax exemption for the allowances of the Governor General.

Tax expenditures are also categorised by their impact. That is, whether their effect on the current tax base results from historic policy settings, and/or whether they are permanent, that is subject to no future reversal, or that they facilitate timing changes which reverse in the future. Detailed definitions of these impact categories are as follows:

  1. Historic: Tax expenditures that are no longer available for new claims, but qualifying activity from the past can still affect tax revenues. Some examples include: accelerated depreciation and home ownership savings.
  2. Permanent: Tax expenditures that reduce the overall amount of tax payable or increase entitlement to Crown expenditure. Some examples include: income exemption for Community Trusts and the Charitable or other public benefit tax credit.
  3. Timing: Tax expenditures that achieve a tax deferral through allowing later recognition of income or earlier deductions that reverse over following years. An example is the film industry expenditure deduction.
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