The Treasury

Global Navigation

Personal tools

Government
Publication

Budget 2017 Home Page 2016 Tax Expenditure Statement - Budget 2017

Quantification Methods

This section provides further information on the methods used to obtain those expenditures listed in Table 2.

Quantified Tax Expenditures

Charitable or other public benefit gifts by a company: deduction

This item is sourced from the Income Tax return for companies (IR4). The values returned are the amount of donations made; the tax expenditure associated with these donations are the amount of donations multiplied by the company tax rate prevailing for the tax year in which the donations are returned.

Analysis of filing patterns in the previous two years suggests that claims for donation-related deductions are generally available by April the following year, and additional claims for a deduction are not large. Consequently, data for 2015/16 uses the claims information available at the end of April 2017 with a small allowance for later claims.

The forecast for 2016/17 is, in the absence of better information, held at the same level as for 2015/16.

Charitable or other public benefits: tax credit

This item is sourced from the tax credit claim form (IR526) and from Employer Monthly Schedules for payroll giving.

Analysis of filing patterns for the IR526 return suggests that over 90 percent of claims for tax credits in the 2015/16 year will be received by April 2017. Consequently, for the estimated actual figure for 2015/16 we have assumed a small scale up on the credits received by April.

The forecast for 2016/17 is, in the absence of better information, held at the same level as the 2015/16 estimate.

The (small) payroll giving component of the donations reported in this expenditure are available within 20 days of the end of the month in which the donation was made, and actual data is used for both the 2015/16 and 2016/17 years.

Independent earner tax credit

The Independent Earner Tax Credit (IETC) can be claimed at year end, or during the year through the PAYE system. For the year-end claims, the amount is compiled directly from IR3 tax returns or personal tax summaries. For the PAYE claims of people who do not square up at year end, the amount of IETC claimed is imputed monthly from the PAYE earnings of people who have selected ‘ME' tax codes for their PAYE. This monthly imputation annualises the earnings of that particular month, and imputes entitlement on the basis of these monthly earnings, not on the basis of the annual earnings.

The final step in quantification of IETC for any given return period is an estimate for late claims. Not all claims are made within a year of their entitlement, and back periods can continue to grow as late claims are made through the square-up process. From past experience, up to $20 million of additional claims can be made in second and subsequent years.

Because of the ongoing potential for back-year claims, the estimate for any year is set at the largest of the preceding “complete” years.

Māori Authorities: donations

This item is sourced from the Income Tax return for Māori authorities (IR8). The values returned are the amount of donations made; the tax expenditure associated with these donations is the amount of donations multiplied by the Māori authority tax rate for the tax year in which the donations are returned.

Analysis of filing patterns in the previous two years suggests that claims for donation-related deductions are generally available by April the following year, and additional claims for a deduction are not large. Consequently, data for 2015/16 uses the claims information available at April 2017.

The 2016/17 year is estimated to be similar to 2015/16.

Appropriated spending through the tax system

Child tax credit, Family tax credit, In-work tax credit, Parental tax credit, and Minimum Family tax credit

Historical values for these Working for Families tax credits are provided by Inland Revenue's Crown Accounting team, based on actual expenditure on these credits. These items are also formally forecast as part of the preparation of the Government's Budget process, and the values reported in the Tax Expenditure statement are taken from these forecasts.

KiwiSaver tax credit

The KiwiSaver tax credit reflects the combined expenditure on (historically) Kickstart, Member Tax Credit and interest payments made by Inland Revenue relating to the period when contributions to members' scheme providers are held by Inland Revenue.

Historical values for these tax credits are provided by Inland Revenue's Crown Accounting team, based on actual expenditure on these credits. This item is also formally forecast as part of the preparation of the Government's Budget process, and the values reported in the Tax Expenditure statement are taken from these forecasts.

Page top