Fiscal Impacts
Table 1.4 outlines the impact on the operating balance of the different parts of the tax package. The negative fiscal impact in the first few years is a transitional effect owing to the time required for revenue to accrue from some of the base-broadening measures. In the final year of the forecast period, the impact on the operating balance is positive, and the tax package is expected to be broadly fiscally neutral taking into account macroeconomic effects. The adjustment for macroeconomic effects includes the extra tax revenue the Government receives as a result of extra economic growth from the tax package; for example, higher levels of PAYE as more people are working. It also includes changes to benefit expenses resulting from stronger employment growth because of the labour market effects described above.
| $ million (rounded to nearest $5m) | Increase (decrease) in operating balance | ||||
|---|---|---|---|---|---|
| 2010/11 | 2011/12 | 2012/13 | 2013/14 | 4-yr total | |
| Personal tax rate cuts | (2,455) | (3,685) | (3,935) | (4,255) | (14,330) |
| Compensation for GST rate increase | (420) | (585) | (610) | (620) | (2,235) |
| Company tax cut to 28% | (20) | (340) | (450) | (305) | (1,115) |
| PIEs & savings vehicles capped at 28% | (15) | (40) | (55) | (60) | (170) |
| Administration associated with tax package | (10) | - | - | - | (10) |
| Sub-total of negative impacts on operating balance | (2,920) | (4,650) | (5,050) | (5,240) | (17,860) |
| GST rate increase1 | 2,040 | 2,840 | 2,985 | 3,160 | 11,025 |
| Non-compensatory Working for Families changes | 5 | 40 | 75 | 65 | 185 |
| Depreciation measures | 140 | 935 | 1,000 | 1,045 | 3,120 |
| LAQC changes | - | 70 | 65 | 55 | 190 |
| Thin capitalisation 60% threshold | - | 200 | 200 | 200 | 600 |
| GST base changes | 15 | 60 | 60 | 60 | 195 |
| Tobacco excise rate increases | 135 | 180 | 210 | 190 | 715 |
| Increased audit and compliance activity (net revenue) | 120 | 210 | 210 | 205 | 745 |
| Sub-total of positive impacts on operating balance | 2,455 | 4,535 | 4,805 | 4,980 | 16,775 |
| Sub-total of estimated static impact | (465) | (115) | (245) | (260) | (1,085) |
| Adjustment for macroeconomic effects | 5 | 25 | 205 | 435 | 670 |
| Total impact on operating balance | (460) | (90) | (40) | 175 | (415) |
- Includes the additional tax revenue generated from spending associated with the static net income gain for households resulting from the tax package
