Visitors drive up tax revenue

Wednesday August 22, 2018 Written by Published in Economy

The government has collected $22 million more tax than predicted for the 2017/18 financial year.

 

Five million of that was from increased value added tax (VAT) revenue, which has been attributed to increased visitor numbers to the Cook Islands.

Income generated from tax contributed to about 77 per cent of the government’s total revenue in the 2017/18 financial year, which ended in June.

Total tax revenue for the period was $140.6 million, or $22.2 million above the budget estimate of $118.4m.

The recently released quarterly financial report for the 2017/18 year also shows the government’s total revenue increasing to $182.6m – around $28.1m above the budget estimate of $154.5m.

In the 2016/17 financial year, the revenue collected from tax totalled $125.4m, which is about $15.2m less than the tax earnings in 2017/18.

Total revenue for 2016/17 was $171.5m, about $11.1m lower than the 2017/18 financial year.

Tax revenue is the major contributor to government’s total income and in the 2017/18 financial year it was boosted by the tax amnesty programme implemented during that year, as well increased VAT revenue.

VAT revenue collected for the period was about $4.8m above the budget estimate of $58.7m. The increase is attributed to an increase in economic activities resulting from increased visitor numbers.

The increase in visitor numbers also contributed to an increase in departure tax collection of $10.6m, about $0.5m above budget estimate.

The income tax revenue collected for the period was about $5.6m above budget estimate of $23m. The quarterly report said this was attributed mainly to the additional income tax recovered under the tax amnesty.

“The variance was also likely to have been impacted by the budgetary reduction in the 2017/18 forecasted income tax, due to legislation changes to reduce tax brackets from 27.5 per cent to 27 per cent and 17.5 per cent to 17 per cent,” the report added.

“However, these changes only came into force on January 1, 2018, and the full financial impact on income tax collected will be seen in the 2018/19 year rather than in 2017/18.”

Company tax was the third major contributor to total revenue from tax, with the government hauling in about $8.9mm above the budget estimate of $12.9m.

“The variance can be attributed to the additional company tax recovered under the tax amnesty,” said the report.

“It is also likely the decreased forecasting of company tax for the 2017/18 year also impacted on the scale of the variance in light of the additional company tax collected under the tax amnesty. Additional company tax would have also come from additional profits made by the business community due to increased tourist numbers.”

Revenue from the collection of import levies was about $14.2m, which is $0.6m above the estimate.

While not accounted for in the 2017/18 budget, withholding tax collected about $1.8m from interest earned on bank deposits.

Meanwhile, the core-sector funding dispersed through the Cook Islands government for key sectors such as education, health and tourism, as well as targeting the strengthening of public financial management and institutions, resulted in revenue of about $7.7m.

Revenue from trading managed $7.7m, which was $1.5m above the budget estimate.

Other Crown revenue, which accounts for income from fisheries, various fees and dividends, was about $4.4m above the estimate of $22.2m.

“This was primarily due to higher than expected receipts from Fisheries US Treaties ($3.69m), followed by gain on foreign exchange ($1.25m) and higher interest earned on term deposits ($0.62m),” the report said.

Offsetting these was a lower than estimated collection of fishing licence fees (about $2.9m) as a result of fewer than expected licences being issued, the report added.

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