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Budget 2016 Home Page Budget Economic and Fiscal Update 2016

Treasury and Inland Revenue Tax Forecasts

In line with established practice, Inland Revenue has also prepared a set of tax forecasts, which, like the Treasury's tax forecasts, were based on the Treasury's macroeconomic forecasts. The two sets of forecasts differ from each other because of the different modelling approaches used by the two agencies and the various assumptions and judgements made by the forecasting teams in producing their forecasts.

For most tax types, the two agencies' forecasts are very close to each. However, there are three tax types that stand out:

  • the Treasury's corporate tax forecast incorporates a larger response to the business cycle than Inland Revenue's does, causing the Treasury's corporate tax forecast to be lower than Inland Revenue's in each year from 2016/17 onwards
  • the Treasury's GST forecast is higher than Inland Revenue's from 2016/17 onwards owing to the relative weights given to individual macroeconomic parameters within the respective forecasting models, and
  • the Treasury's withholding tax on resident interest (RWT) forecast grows at a faster rate than Inland Revenue's owing to different forecasting model structure, parameters and assumptions. Treasury's RWT forecast is $0.6 billion higher than Inland Revenue's by the end of the forecast period.

In total, the Treasury’s tax forecast is initially (2015/16) lower than Inland Revenue’s, but grows at a faster rate to be higher than Inland Revenue’s by the end of the forecast period (2019/20), mainly as a result of differences in the interest RWT forecasts.

The following two tables detail the respective forecasts by the Treasury and Inland Revenue for tax revenue and receipts across each of the various sources:

Table 8 Treasury and Inland Revenue forecasts of tax revenue (accrual)

Table 9 Treasury and Inland Revenue forecasts of tax receipts (cash)

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