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Inland Revenue

Tax Policy

PUBLISHED 11 November 1999

Post-election briefing papers, update on forecasting and policy analysis

Preparation of the Policy Advice Division's post-election briefing to the incoming government is well under way. The briefing papers, a valuable source of information on tax policy in New Zealand, will be available on this web site once they have been released by the new Minister of Revenue. Our Forecasting and Analysis Unit is carrying out research for the project and is coming up with some interesting results. Principal Analyst Sandra Smith describes the work of the unit, and tax matters emerging from the recent Pre-Election Economic Forecasting Update in Forecasting and Analysis Update.

Forecasting and Analysis Update

This month is the turn of PAD's Forecasting and Analysis Unit to provide an update. In the absence of our Manager, Michael Dunn, I am penning this piece.

The unit provides tax forecasts for the Budget and quantitative analysis of policy issues, such as statistical data and costing of policy proposals. Research currently under way includes data for the post-election briefing. One of our projects here is to analyse from which sectors of the economy our tax is collected. This is producing some interesting results that will be made available shortly. The unit is also responsible for ensuring that any Inland Revenue comments or costing of political party proposals accord with public service guidelines of neutrality in the pre-election period.

We have just completed our contribution to the Pre-Election Economic and Forecasting Update (PREFU), released on 21 October. The Government forecasts show the tax/GDP ratio reducing from 32.3% in 1998/99 to 31.8% in 2000/01. The reduction is largely due to the Government's announced tax cuts for next year.

Tax related fiscal risks in the PREFU cover:

  • The possibility that tax cuts will not be legislated for.
  • Proposals of the Committee of Experts on Tax Compliance to tax restrictive covenants and lease inducement payments that are under consideration.
  • The previous announcement that the Government is considering law changes on superannuation funds investing into superannuation funds. Any proposals in this area would follow consultation.

The last two of these risks were also in the 1999 Budget Update.

And where is Michael Dunn? He's on leave working with a US agency advising on the establishment of a fiscal and tax system in war-torn Kosovo. This follows similar advisory assignments he has had in Kazakhstan and Kyrgyzstan. Clearly Michael enjoys the challenge of tax in exotic locations. He is due back at the end of the year.

Sandra Smith
Principal Analyst, Forecasting and Analysis Unit