Statement of Specific Fiscal Risks (continued)
Revenue - Cash Held in Tax Pools (unchanged, unquantified risk)
Funds held in tax pools are recognised as an asset to the Crown. There is a risk that funds held in these pools, over and above a customer's provisional tax liability, may be withdrawn, resulting in an unquantified cash loss to the Crown.
Revenue - Charitable Giving (unchanged, unquantified risk)
Officials are investigating possible tax incentives for charitable giving, including gift aid and changes in the tax treatment of cultural gifts.
Revenue - Child Support - Shared Care (unchanged, unquantified risk)
A Government discussion document will be released on shared care in the child support formula, including taking into account the incomes of both parents and the costs of children. Any changes would have administrative costs for Inland Revenue and could have further costs to Government from reduced offsets to benefits.
Revenue - Imputation (unchanged, unquantified risk)
Aspects of the current imputation system are being reviewed. This includes whether companies should be able to stream imputation credits, and the refundability of imputation credits, particularly to charities.
Revenue - International Tax Review (unchanged, unquantified risk)
A number of proposals will be considered, and possibly progressed, as part of Phase II of the international tax review. Since all these proposals involve exempting income in particular circumstances, they may, if progressed, have a negative impact on tax revenue.
Revenue - Redesigning Business Processes at Inland Revenue (unchanged, unquantified risk)
The Government is investigating options to redesign business processes at Inland Revenue, which could include both policy and administrative options to simplify customer interactions in the Pay As You Earn and Personal Tax Summary systems. Any changes could impact tax revenue collections or have material administrative costs to implement.
Revenue - Potential Tax Policy Changes (unchanged, unquantified risk)
The Government is considering changes to various tax policies as indicated in the 18 month tax policy work programme. Measures on the current work programme are expected to be revenue neutral in aggregate. Measures enacted to date, and included in revenue forecasts, have increased tax revenue by around $50 million per annum. The remaining items are expected to be revenue negative up to the same extent. Because it is unclear exactly what additional policy changes, if any, will be made at this stage, these further changes have not been included in revenue forecasts. The work programme will be revised as soon as possible after the Budget.
Revenue - Review Tax Treatment of Fitout of Commercial and Industrial Buildings (new, unquantified risk)
The Government has announced a review of the appropriate tax treatment for “fitouts” of commercial and industrial buildings in light of Inland Revenue's interpretation statement IS10/01 on the treatment of residential building fitout. Depending on the outcome of that review, there could be a fiscal gain or loss over the forecast period.
Revenue - Reviews Stemming from Budget 2010 Tax Changes (new, unquantified risk)
The tax changes announced in Budget 2010 include commencing consultation on the exact nature of policy changes that will be legislated later in 2010 for enactment from 1 April 2011. To the extent that consultation leads to enacted legislation that is different from what is currently expected, the revenue implications of policy changes may be different from what is forecast.
Revenue - Tax Issues Relating to Auckland Governance Reform (unchanged, unquantified risk)
New entities are likely to emerge from the reform of local governance in Auckland. Some of these new entities could have tax liabilities different to the tax liabilities of existing entities, which would impact on the total tax paid by Auckland local government entities beyond the 1 November 2010 transition date. Depending on the shape of entities adopted, the changes could decrease tax revenue.
Reviews of the Delivery of Public Services (unchanged, unquantified risk)
The Government has announced its intention to deliver more public services, more effectively, for fewer resources. The Government may undertake one or a number of value-for-money in-depth reviews over the next 12 months. The Government has also agreed to the implementation of a number of Performance Improvement Actions (PIAs). Reviews and PIAs may identify areas of expenditure that are not efficient, effective or aligned to government policy, or could be delivered differently. Reviews and PIAs may recommend, or result in, changes to service delivery and/or free up resources for reprioritisation within the vote (or within the organisation) or be returned to the centre to meet pressures in other areas. Reviews of government activities that result in improved cost-effectiveness are likely to have a positive impact on the fiscal position.
Risk to Third-Party Revenue (unchanged, unquantified risk)
A wide range of government activities are funded through third-party fees and charges. With a decrease in economic activity, there is a risk that decreases in third-party revenue streams will require changes to service delivery with transitional costs to the Crown. For example, decreases in Customs revenue or in levies on building activity may mean that some activities are temporarily unable to be fully cost-recovered and the Government will need to transition out of an activity or temporarily subsidise that activity.
State Sector Employment Agreements (unchanged, unquantified risk)
A number of large collective agreements are due to be renegotiated in the short to medium term. As well as direct fiscal implications from any changes to remuneration, the renegotiation of these agreements can have flow-on effects to remuneration in other sectors. The Government has signalled an expectation for restraint given the current economic environment and conditions in the private sector.
Transport - Changes to Penalties for Driving Offences (new, unquantified risk)
The Government is considering changes to driving offences, in particular increasing penalties for driving offences causing injury or death. Final costs will depend on options chosen and may increase costs in Votes Courts, Justice, Attorney-General, Police, and Corrections.
Transport - Support for New Zealand Railways Corporation (KiwiRail) Business Strategy (new, quantified risk)
The Government has agreed in principle to support a 10-year strategy for the New Zealand Railways Corporation (NZRC, trading as KiwiRail Group) to achieve a commercially viable rail network. A total of $750 million in capital over the next three years is forecasted as the Crown contribution towards the strategy, but its disbursement will be dependent on the approval of suitable business cases and demonstrable progress towards objectives. Budget 2010 has provided $250 million in capital as the first tranche of Crown funding for this strategy. If this funding results in progress towards the desired service improvements and revenue uplift, and if subsequent business cases can justify further investment, up to $500 million in additional capital may be required over the next two Budgets. Budget 2010 also provides for the refinancing of $170 million of NZRC debt to the Crown. In addition to this, NZRC has $220 million in debt to the Crown maturing over the period 2011/12 to 2014/15, which the Crown may also need to refinance.
Transport - Tauranga Eastern Corridor (unchanged, unquantified risk)
The Crown may be asked to provide a loan to the New Zealand Transport Agency to advance the construction of the Tauranga Eastern Corridor Roading Project. It is intended that the loan will be repaid by toll revenue from the road.
