This series has been compiled from monthly tax receipts that have been aggregated by calendar quarters so that data spanning several years can be viewed easily, while retaining some information on the variation of tax flows over the year. The focus is on taxes collected by Inland Revenue (IRD), although for completeness of understanding, some mention is included of non-IRD taxes. Inland Revenue collects approximately 75% of total taxes, which represents 90% of total government revenue.
Tax receipts reported on a net basis
Tax receipts are the measure of cash payments received by the government, less cash refunds paid out in the same period. Refunds are significant for income tax, where they are made both to individuals and to companies. In the accompanying table (PDF 8KB)and graphs (PDF 51KB), only the figures net of these refunds are shown, under the headings "Other Persons (Net)" and "Company Tax". Refunds are also substantial for GST, owing to fluctuations in business turnover, changing stock levels, and the impact of the acquisition of capital goods. Both exporters and importers tend to qualify for large refunds from IRD at certain times of the year. Refunds of GST by IRD and GST receipts by Customs are both affected by the NZ dollar exchange rate. The IRD GST figure is reported net of any cash refunds.
Trends in tax receipts
Total tax receipts (PDF 28KB) and total IRD taxes (PDF 27KB)have been trending upwards over the past three years, with the rate of growth influenced by tax policy changes, including both cuts to and increases in personal tax rates (PDF 26KB), and recent changes in fringe benefit tax, as well as by fluctuations in the rate of growth of the domestic economy.
Various cyclical factors, including climatic changes, international trade, local business conditions, and the electoral cycle have affected tax receipts over this period. The impact has been most notable for corporate taxes (PDF 27KB) (comprising company income tax, non-residents' withholding tax, foreign dividend withholding payments and residents' dividend withholding tax) and for "Other Persons" net receipts (PDF 26KB).
Examples of cyclical events that have affected tax receipts in the period include the 1997/98 drought and subsequent benign weather, affecting agricultural production and farming incomes; the Asian financial crisis and partial recovery, affecting many commodity exporters and service industries; and the New Zealand electoral cycle, influencing business and consumer confidence, and thereby affecting investment, consumer spending and business profits.
The significant variations in the value of the NZ dollar during this period led initially to a squeeze on export returns and volumes, followed by an enhancement in returns to exporters, translated into increasing incomes and taxes from producers. More constant supportive factors include the extended period of strong economic growth in the US, the relative strength (until very recently) of the Australian economy, and continuing growth in the UK, European and Middle East trading partner economies.
Quarterly variations in tax receipts
Systematic variations from quarter to quarter are evident in nearly all of the separate and aggregated taxes, with the possible exception of "Source Deductions" (PDF 26KB). "Other Persons (Net)" shows a reducing tendency to peak in the March quarter, as taxpayers spread their provisional tax payments more evenly over the due dates (7 July, November and March for standard balance date taxpayers). The shift of the terminal tax due date from 7 February to 7 April for taxpayers with agents has clearly shifted some receipts from the March to the June quarter in 2000.
The quarterly pattern of company income tax receipts (PDF 27KB) is influenced by the same factors, especially in respect of the smaller, March balance date companies. The inclusion of larger companies with a spread of March, June, September and December balance dates does alter the pattern, and reduces the overall significance of terminal tax (though not of refunds). Changes of balance dates by larger companies can also influence the quarterly pattern of tax receipts. The international tax rules have a significant impact on company tax, with non-resident withholding tax (NRWT) and foreign dividend withholding payments (FDWP) effectively substitutable for income tax. Summing these on a quarterly basis gives a pattern similar to that of income tax alone, though it must be remembered that NRWT is often paid in the quarter subsequent to the alternative income tax payment. With few exceptions, there has been growth in the aggregated measure of corporate tax receipts from any one quarter to the corresponding quarter in the subsequent year.
Goods and Services Tax
IRD GST net receipts (PDF 25KB) follow a clear but different quarterly pattern, while Customs GST receipts are more uniform across quarters, showing significant growth only in the most recent year. The latter is predominantly an exchange rate effect, with the value of imports having risen as the value of the NZ dollar has fallen. Annualised growth in IRD GST net receipts has slowed and reversed as a consequence. The quarterly pattern for IRD GST net receipts is an artefact of the system, driven by multiple filing frequencies and the deferral of the payment date for November period GST liabilities into mid-January. The latter factor reduces December quarter receipts and boosts those for the March quarter. The net IRD GST receipts in December are usually negative, as refunds are paid but little GST is received. The influence of the two-monthly and six-monthly filers, most of whom align payments with their March balance month, enhances receipts in the June and December quarters, relative to the other two quarters, but this effect is weaker than the other. One consequence of these systematic variations is that raw GST receipts data are not easy to use as an economic indicator.
Statistics New Zealand has recently developed an experimental Business Activity Indicator based upon GST receipts data. A description of this indicator may be found on the Statistics NZ website at http://www.stats.govt.nz. The series includes monthly data (by industry sector) but is released quarterly, with the figures to September 2000 having been released on 16 February, 2001. Details may be found at http://www.stats.govt.nz.
Tax receipts and tax revenue
Tax receipts are but one measure of taxation, representing the net cash flow to the government from taxation over a period. Thus tax receipts represent cash flows into the Crown's bank account, as money that the government can subsequently spend. Tax revenue is the measure of income used in computing the government's fiscal balance. Tax revenue represents income earned by the government from taxation, rather than cash received. It measures the changing tax liabilities of taxpayers, adjusted on a daily basis, regardless of whether payments have been received. These two measures will usually be different over any short period, although in the long run they should converge, as payments should equal liabilities, unless taxpayer credit less taxpayer debt shrinks or expands indefinitely.
Monthly and quarterly data releases
Tax revenue and tax receipts figures are released monthly by the Treasury, and published on its website through a page at http://www.treasury.govt.nz. That page is updated towards the end of each month. Our information will be updated quarterly, usually towards the end of the month following each quarter's end. Our objective is to provide a longer term perspective on tax collections, rather than focus on the most recent month's outturn.
An invitation to comment
This commentary and the accompanying table and graphs have been developed by the Forecasting and Analysis Unit of the Policy Advice Division. If you have any comments, suggestions for additions or enhancements, please address them to Michael Dunn, Manager, Forecasting & Analysis, either by email to [email protected] or by phoning him at (04) 474 7195. If you have any difficulties with accessing parts of this website, please email Webmaster.