Bill English's touchstone phrase for the 2012 Budget is "investing in our future". This aligns with National's objective of securing a surplus by 2014/2015 and being accepted as a careful economic steward in these challenging and volatile times.
With limited room to manoeuvre, another Budget theme is "reprioritisation" with many sectors getting a mix of both cuts and funding increases. The beneficiaries are health, education and welfare - perhaps to maintain some defence against what may, at least in some quarters, be the growing backlash against 'austerity' budgets.
From a tax perspective, there are no headline rate changes and Government's initiatives are clearly revenue positive; in contrast to the 'broadly fiscally neutral' tax package of two years ago. Increased revenue also comes from clearing the decks of historical tax credit regimes, continuing the campaign of closing "tax loopholes" and funding Inland Revenue into an even greater level of investigation and audit activity.
Looking to the future, the Treasury forecasts predict a surplus growing to $4.4 billion by 2016/17 and the Budget Speech hints that this may provide flexibility to perhaps be more generous in future Budgets - closer to the next election.
Our tax team has analysed the implications of the proposed reforms. Click here to read their commentary.
Feel free to call any member of our tax team if you would like to discuss any element of the Budget and its implications.
Partner, Department Leader – Tax