No changes but net will catch more
The Government does not appear to have slipped any tax rises into this year’s Budget.
But its tax take is nevertheless expected to rise substantially over the next few years as inflation-fuelled wage rises result in more people paying higher rates of tax and as higher prices boost GST receipts.
Speculation that there might be some new tax breaks in the Budget – such as an exemption from Fringe Benefit Tax for public transport subsidies paid for by employers – came to nought.
Inland Revenue’s total tax take is expected to rise from just over $104 billion in the year to June to more than $138b in the year to June 2026.
That would see the tax take creep up from 28.6% of GDP to 29.8% of GDP by the end of that forecast period.
Deloitte tax partner Robyn Walker said the Government’s latest accounts appeared to reveal the first estimate of how much extra tax the Government was expecting as a result of its decision last year to limit the right of landlords to deduct interest costs from their rental income.
The change is expected to result in just under $1.8b of tax being paid in total during the five years ending in June 2026, rising from $80m in the first year to $650m annually by the end of that period.
Revenue Minister David Parker had previously forecast it would bring in about $1b over its first four years. The Government is also expecting its first inflow of levies from its proposed Income Insurance Scheme with its levies on workers and employers bringing in $1.1b in the year to June 2025.
It is forecast to jump to $4.7b the following year when the scheme is expected to be in full swing.
The Government had previously estimated the annual cost of the scheme at about $3.5b.
The social insurance scheme would pay workers who lost their jobs due to lay-offs or health conditions 80% of their pay for six months, on top of a minimum four-week period paid for by employers.
That cost would be funded by a 2.77% pay levy, split between workers and employers.
The levies from the scheme are not counted within the Treasury’s estimate of the tax take.