Tax intake $2.7 billion above forecast as pressure builds on Government to give inflation relief

Treasury documents show tax intake for the nine months to March was $2.7 billion above forecast as pressure mounts on the Government to give inflation relief. 

Tax revenue was $2.7 billion above forecast at $78.6 billion, Treasury's update on Thursday showed, due to better-than-expected corporate profits and a strong job market. 

It comes as the Government faces increasing pressure to provide tax relief in the upcoming Budget, with the latest Newshub-Reid Research poll showing nearly 70 percent of Kiwis want tax cuts.

Official data released on Wednesday showed wages have increased 3 percent year-on-year but it's not keeping up with the rising cost of living. Annual inflation was up 6.9 percent, Stats NZ announced earlier this month. 

But despite Finance Minister Grant Robertson giving himself $6 billion in new spending for the upcoming Budget, the majority will be spent on the Government's health system restructure and climate change initiatives. 

"It is always about getting the balance right, and on this side of the House we believe that part of getting the balance right is investing in public services and supporting those on low and middle incomes," Robertson said in Parliament on Wednesday. 

"What is not getting the balance right is giving tax cuts to people who earn more than $180,000 so they'll be thousands of dollars better off while someone on the minimum wage is about two bucks better off. That isn't fair. That isn't a good use of resources."

Robertson was referring to the National Party's proposed tax cuts: scrap the 39 percent top tax bracket, and lift the other brackets by just over 11.5 percent to match the 11.5 percent increase in the cost of living over the last four years. 

For example, the 10.5 percent tax rate would be applied to each dollar earned up to $15,600, instead of $14,000. Those earning $55,000 would save about $800 a year if National's tax changes were applied but someone earning $45,000 would only get about $112. 

If National leader Christopher Luxon became Prime Minister, earning $471,049, he would save about $18,500 in income tax, thanks to his proposed tax bracket changes and removing the top tax bracket Labour introduced. 

But that doesn't appear to have put voters off. In the latest Newshub-Reid Research poll, National jumped a whopping 9.2 points to reach 40.5 percent while Labour dropped 6.1 points, down to 38.2 percent. 

Finance Minister Grant Robertson and Prime Minister Jacinda Ardern.
Finance Minister Grant Robertson and Prime Minister Jacinda Ardern. Photo credit: Getty Images

"Kiwis are working harder just to stand still, paying more taxes while trying to keep up with rapidly rising prices, ever-higher borrowing costs and no prospect of relief," National's finance spokesperson Nicola Willis said. 

"The Finance Minister has reneged responsibility for addressing these challenges, with no plan except to spend more and tax Kiwis more to pay for it."

Robertson was at pains earlier this week to reassure New Zealanders he is a good economic manager. He's given himself new fiscal rules and a new debt ceiling of 30 percent of GDP. 

"As we move to a new normal post the peak of COVID, it is the right time to resume a set of fiscal rules to carefully manage costs while planning for the future."

The Government's cash splashing is under the microscope, with the Auditor-General writing to Treasury Secretary Caralee McLiesh this week to express concern about the accountability of COVID-19 spending, now at $74 billion. 

"Parliament and the public should be better able to understand the services delivered and the outcomes achieved with public money," the Auditor-General wrote

The fund spent around $20 billion on the wage subsidy scheme during lockdowns, but questions have been raised about the appropriateness of $26.6 million for cameras on fishing boats and $515 million on school lunches, for example - policies with tenuous links to COVID-19. 

"While New Zealanders are having to cut their budgets left, right and centre, Labour has taken an extra $2138 in tax from the average New Zealander which is being blown on whatever project they can find," said ACT leader David Seymour. 

Prime Minister Jacinda Ardern, speaking in Parliament on Wednesday, said there was no silver bullet to helping Kiwis with rising inflation, but she highlighted efforts her Government has made to ease the financial burden

"There are ways that we can make a difference: reducing the cost of fuel, increasing support for those on low incomes with the family tax credit increase, the winter energy payment - all of these things make a difference."

Newshub's latest poll found more than three-quarters of the country don't think the Government has done enough to manage the cost of living.