Tax cuts on horizon after $55m surplus

Wednesday October 09, 2019 Written by Published in Economy
Deputy Prime Minister Mark Brown. 19100830 Deputy Prime Minister Mark Brown. 19100830

Finance minister promises income tax review – but also answers call for spending on health, education and infrastructure.


Government has clocked a record $55 million surplus, which it says are thanks to soaring tax revenues.

Now, Finance Minister Mark Brown has promised an income tax review – with a view to tax cuts.

There were business sector calls to reduce or rebate taxes after news three months ago of a windfall from government’s overdue tax amnesty – but there are also new calls to invest the money in public services.

Yesterday, the Ministry of Finance and Economic Management published the final quarterly financial report for the 2018/19 year.

It shows the government’s net operating surplus was $55.65m – which is $36.58m higher than the Budget estimates for the year.

Finance Minister Mark Brown said additional tax revenue and government under-spending on public sector salaries had combined to leave $55m in the government account.

The surplus would allow government to look more closely into infrastructure like sealed runways in the outer islands, in the hopes of lowering flight costs as well. Government also wanted to look at upgrading the ports

Brown said they hoped to invest in education and, in particular, to do more work in the health sector and to boost the number of flying doctors who are able to service the outer islands.

Te Kainga Community Mental Health Service director Mereana Taikoko said some of the government’s surplus should go to mental health.

At present, some mentally ill people are kept in prison, some in maximum security, because there are no secure health facilities.

“Mental health is one area where there is no money for support,” Taikoko said.

She had reached out to the Ministry of Health for funding to keep their mental health awareness programmes going, but was told they didn’t have any money to give – and that she should contact the World Health Organisation instead.

Iaveta Short, owner of the Moana Sands resorts, agreed on the need to address mental health needs, and he commended calls from the community to fix the problem.

As an accommodation owner, Short said government needed to protect, enhance and develop the tourism industry – being the country’s biggest earner, it needed to be looked after.

“Infrastructure and agriculture needs to match the tourism increase, so its common sense for government to get involved because of the industry’s returns,” said Short.

Small things could be done like invest in police numbers to improve tourists’ safety and security, said Short.


·      Government’s operating expenditure was reduced by nearly $5m, because of unfilled vacancies and savings on land and rental payments.

·      Only $36m was spent of the $47m that government budgeted for capital expenditure on projects and purchases. Most of government’s capital expenditure went into road works, and towards funding Te Mato Vai water pipeline project, which should be completed by the end of this year.

·      “The higher than expected income tax revenue is attributed to more people being employed and more people paying tax and a modest increase for company tax,” Mark Brown said. “Companies were doing very well.”

·      There was also an additional $8.86m of unexpected revenue from selling fishing licences, due to an end-of-the-year rush to purchase bilateral purse seine days when large numbers of skipjack tuna arrived in Cooks waters before Christmas. Seven more long line vessels purchased licences than had been expected.

·      Government also received a  $2.37m dividend from Bluesky Cook Islands, in which it owns a share.

·      In case of an economic collapse, the government also retains a cash reserve of $100m with $64m allocated for emergencies, loan repayment or natural disasters.

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