IRD error unacceptable, but uncertainty remains

The discovery of a serious error made by Inland Revenue in January’s Crown Accounts will not alter the government’s commitment to responsible fiscal management in a time of considerable economic uncertainty, Finance Minister Michael Cullen said today.

Inland Revenue has announced that Crown Accounts released earlier this month incorrectly reported a headline operating deficit. An error meant that January tax revenue was under-reported by approximately $600 million.

“Inland Revenue’s error was serious and unacceptable,” Dr Cullen said. “The news of a tax shortfall in January was a surprise to the government, but also caused unnecessary confusion in the business community.

“While it appears the error was a human one, Inland Revenue and the Treasury are investigating the cause of this mistake and will report back to Revenue Minister Peter Dunne and myself.

“Despite the upward revision in the Crown Accounts, today’s announcement means very little for the government’s overall focus on responsible economic management. These are uncertain times for the New Zealand economy, and households are feeling the impact of a global rise in food and energy costs at a time when interest rates remain high.

“Many farmers are coping with drought while exporters will take no comfort from the news out of the United States this week which has led to further weakening of the US Dollar. New Zealand cannot expect to be immune from a global economic slowdown. But New Zealanders can expect the Labour-led government to take our challenges seriously.

“The decisions we are making around May’s Budget will focus on responsible fiscal management and steps to take our economy forward towards even greater prosperity. Our eight years of prudent fiscal policy means we can weather the current economic situation with greater ease than would have otherwise been the case.

“This will not be a government, for example, that will have to cut the rate of New Zealand Superannuation in a time of uncertainty, as Bill English did on 1 April 1999.”

More information:

Treasury financial statements for the month ending January 2008: www.treasury.govt.nz/government/financialstatements/monthend  
Joint media statement by the Treasury and Inland Revenue Department (IRD): www.treasury.govt.nz/publications/media-speeches/media/18mar08a/  
Media statement by Dr Peter Bushnell, Deputy Secretary to the Treasury: www.treasury.govt.nz/publications/media-speeches/media/18mar08/