Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's tax take surpassing expectations

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Jenee Tibshraeny: NZ Herald Wellington business editor on the Government's tax take surpassing expectations · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks B follow
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• 0:17
  Speaker 1: Heather duples Ce Allen.
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  Speaker 2: It's coming up eighteen pass six. As I said, we're
• 0:20
  Speaker 2: going to talk to Jeremy Hutton from Milford Asset Management
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  Speaker 2: shortly on the Gen Taylor's boost from the t y announcement.
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  Speaker 2: But first, the government's tax take has for the first
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  Speaker 2: time in a while, surpassed Treasury's expectations. Ironically, the positive
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  Speaker 2: surprise was the result of efforts to minimize the amount
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  Speaker 2: of tax that trustees pay. Genative trainee is The Herald's
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  Speaker 2: Wellington business editor he Jena Hey. Hever, this is basically
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  Speaker 2: the trust's trying to get as much money out as
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  Speaker 2: they could before the tax rate went up to thirty
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  Speaker 2: nine percent. Yeah.
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  Speaker 3: Yeah, Look, essentially, companies that are owned by trusts, they
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  Speaker 3: appear to have flushed out the excess retained earnings ahead
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  Speaker 3: of that trustee tax rate rising from thirty three to
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  Speaker 3: thirty nine percent on the first of April this year.
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  Speaker 3: So interestingly, I talked to the IID today and they
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  Speaker 3: told me that the amount of dividend payments in the
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  Speaker 3: past tax year or more than doubled to nearly fifty
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  Speaker 3: billion dollars from the previous year. So that just shows
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  Speaker 3: the extent to which the companies did flush out those
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  Speaker 3: retained earnings in advance of that trust tax rate rising.
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  Speaker 2: Is it possible though, that because so much has been
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  Speaker 2: paid out in that financial year, that when the next
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  Speaker 2: one comes around it drops off again.
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  Speaker 3: Yeah, for sure. So we saw the same sort of
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  Speaker 3: spike ahead of the government introducing that new income tax
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  Speaker 3: rate of thirty nine percent for income over one hundred
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  Speaker 3: and eighty thousand dollars. So before that came in, we
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  Speaker 3: saw the same thing happen. The value of dividend payments
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  Speaker 3: payments spiked and then it dropped back down again for
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  Speaker 3: the same reason, you know, people trying to minimize their
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  Speaker 3: tax bills. So interesting phenomena. I've got a graph here,
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  Speaker 3: have prepared a story for tomorrow, and that jump in
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  Speaker 3: twenty twenty fours is pretty significant. Now, the inland revenue,
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  Speaker 3: this is not a surprise for them, right, They kind
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  Speaker 3: of knew this this would happen, and they issued some
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  Speaker 3: advice earlier in the year that said this is totally legal.
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  Speaker 3: You know, companies can choose when they pay dividends, provided
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  Speaker 3: that payment is genuine, like, provided they're not just saying
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  Speaker 3: they're making the payment but can't actually afford to make
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  Speaker 3: the dividend payment, you know, provided it's real. So yeah,
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  Speaker 3: interesting situation.
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  Speaker 2: Other than this, how did the government's books look?
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  Speaker 3: Well, this was the interesting thing actually that because of this,
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  Speaker 3: the tax take was about one point seven percent higher
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  Speaker 3: than expected. So as soon as I saw that, I thought, wow,
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  Speaker 3: we haven't seen that in a few months at least.
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  Speaker 3: With the tax stack coming in above expectation, this contributed
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  Speaker 3: towards the government's deficit not being as deep as expected.
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  Speaker 3: So yeah. Interestingly, tax minimization trick actually resulted in the
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  Speaker 3: government temporarily receiving more text from you.
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  Speaker 1: Than to mate.
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  Speaker 2: Thank you appreciate it mate, that's your agib trainy. The
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  Speaker 2: Heralds Wellington Business Edit h editor
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