Will Budget offer a tax surprise?

Tax experts are expecting a quiet day on Thursday, when the main focus of this year’s Budget will be on the Government’s plans for billions of dollars of extra spending on health, climate change policies, and new initiatives to support businesses.

PWC tax partner Geof Nightingale says that for that reason, it will have a finance and economics team leading its analysis of the Budget.

It will be a ‘‘very interesting’’ Budget, given it will be the first that Finance Minister Grant Robertson has delivered in a highinflation environment, but probably not from a tax perspective, Nightingale says.

But there are usually a few unexpected announcements in the Budget and it’s just possible that one or two of those this year might have something to do with tax.

Deloitte tax partner Robyn Walker says she wouldn’t be surprised if the Government changed the rules that apply to fringe benefit tax to allow employers to subsidise public transport or electric vehicles for their staff without that being deemed as a benefit that should be subject to what is effectively income tax.

‘‘I don’t think a lot of employers will do that sort of thing,’’ Walker says.

‘‘But we are at the point where employers probably want to think about how they can entice people back into the office, and if they think they can help deal with the cost that may be a ‘plus’.’’

With even any discussion from Labour of a wealth or inheritance tax some way off, bigger tax changes appear far less likely.

But one development that has saved the tax rumour mill from grinding to a halt is Robertson’s announcement earlier this month that the Treasury is not now expecting the Government to return to surplus until the year starting July 2025, a year later than previously forecast.

Bank economists believe the most likely explanation is that the Treasury will reveal in the Budget that it has downgraded its economic forecasts, perhaps leaving a decent hole in company tax revenues.

An alternative explanation is that Robertson may be about to announce even more spending than previously forecast in the Budget. But if the Government was planning some sort of surprise tax cut, that would also fit with the delayed return to surplus.

No-one is giving credence to the idea that the Government might cut income tax rates on Thursday.

The chances of the Government raising the tax thresholds at which higher rates of tax kick-in appear almost equally far-fetched, Walker agrees.

There is some speculation the Government could decide to stop taxing the inflation component of interest payments on bank accounts and term deposits.