Statement of Specific Fiscal Risks

Pending policy decisions affecting revenue

ACC - Levies (Unchanged, Unquantified)

Changes in tax settings, economic factors, and ACC's financial performance affect ACC's levy income.

Finance - Mixed Ownership Model (New, Unquantified)

The Government is considering extending the type of Mixed Ownership Model that currently applies to Air New Zealand, Genesis Energy, Meridian Energy, Mighty River Power and Solid Energy, and further reducing the Crown's shareholding in Air New Zealand. The final amount and timing of any cash proceeds, the flow-on effects to future dividend streams and any implementation costs are uncertain.

Revenue - Apportionment Rules for High-Value Assets (New, Unquantified)

A government discussion document will be released on the apportionment rules applying to tax deductions for high-value assets that are also partly used for private purposes. Any changes to those rules could have a positive impact on tax revenue.

Revenue - Potential Tax Policy Changes (Unchanged, Unquantified) 

The tax policy work programme announced by the Government includes a number of items that are under consideration, including:

• the tax treatment of profit distribution plans
• the tax treatment of charitable giving
• the imputation system
• the tax treatment of employee benefits
• amortisation of capital raising costs
• the international tax review
• the GST treatment of cross-border business activities, and
• the tax treatment of hybrid instruments.

Measures on the work programme are expected to be revenue neutral or positive in aggregate; however, individual initiatives could be revenue negative in themselves.

Revenue - Salary Sacrifice (New, Unquantified) 

The Government is reviewing the tax treatment of employee benefits paid in lieu of salary. Any changes are expected to result in an increase in tax revenues.

Revenue - Income-Sharing Tax Credits (Changed, Quantified)

The Government has introduced legislation to establish an income-sharing tax credit. If passed as introduced, the legislation will allow couples with children under the age of 18 to pool their earnings for income tax purposes if they meet certain criteria. If implemented, the changes will reduce tax revenues by $500 million per annum once the scheme is fully operational. The Finance and Expenditure Committee has recommended the significant fiscal cost of the package be addressed before the Bill proceeds.

Risk to Third-Party Revenue (Unchanged, Unquantified)

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 reduce the level of an activity or temporarily subsidise that activity.