$380M tax shortfall estimate challenged

Press, 8 March 1984, Page 8

$380M tax shortfall estimate challenged

PA Wellington The Inland Revenue deputy commissioner’s estimate of a $3BO million shortfall in this year’s income tax take was contested by the Associate Minister of Finance, Mr Falloon, yesterday. The statement by Mr Tom Silcock, in a radio interview, was not based on accurate analysis, Mr Falloon said. Mr Falloon said Mr Silcock was working on a provisional estimate made within the department which was not correctly based.

“This estimate only contained facts pertaining to the Inland Revenue collec-

tions up to the January period of the year projected forward, and it does not reflect the likely position,” Mr Falloon said. Mr Silcock did not have the final March 7 provisional and terminal tax payments which were still being counted. “Nor, obviously, did he have the March 20 P.A.Y.E. payments," said Mr Falloon. Mr Silcock was attending a conference in Nelson yesterday and was reluctant to comment to a reporter on what he had said on radio. However, he did say he did not have up-to-date figures on what the year’s tax-take might be.

Mr Falloon also revealed

that the Budget deficit, forecast in the Budget to be $3.2 billion, could be as low as $2.7 billion. “The latest estimate I have from the Treasury is that the Budget deficit will be in the range of $2700 million to $3lOO million, with the Treasury’s estimate that it could be on the lower side of the range," he said.

Mr Falloon said he must emphasise that the March period, “because of the very lumpy nature of income tax and spending patterns,” could change that estimate. Income-tax payments estimated to be paid during March were about $2300 million.

Spending was also running below the Budget estimates, because of the dramatic decline in the rate of inflation.

“Spending on such items as oil exploration, capital participation, and general administration are all expected to be below the Budget estimates, but the final figures will not be available to the Government for several weeks,” he said.

The convener of Labour’s economic committee, Mr Peter Neilson, said Mr Silcock’s comment suggested that the state of public finances could be worse than expected. The effect would be to

create even more uncertainty in financial markets, he said.

“When the deficit could vary between $2.7 billion and $3.5 billion the Government’s financing needs could be out by $BOO million,” Mr Neilson said. “The effect on interest rates could be massive.” The chairman of the Combined State Unions, Mr Ron Burgess, said yesterday that any shortfall could not be explained away by reference to lower than expected income levels. “The flow in the estimates ibv f

a\ was obvious as soon as the Budget was presented,” he said. “We drew attention to it. We predicted this type of shortfall without having any access to the Government’s sophisticated taxestimating techniques. “With recent concerns about Government finances, it seems incredible to me that the Government could have ignored a warning of under-collection of income tax of hundreds of millions of dollars. This is simply the latest incident which proves that the unions have been right all along in their analysis of the economy and in the advice that they have given to the Government during negotiations in the last few years,” Mr Burgess said.