Tax Revenues to Drop After Quake
March 3, 2011 New Zealand Taxation
More than a week after the Christchurch earthquake, estimates are beginning to trickle in regarding the financial impact that the disaster will have on New Zealand as a whole. Initial forecasts indicate that the government will be at a loss of at least NZD 5 billion in 2011 alone, with extra expenditures across the country.
According to New Zealand Treasury forecasts, the direct costs with rebuilding the city of Christchurch will be as high as NZD 20 billion, in 2011 alone. After initial Earthquake Commission and insurance payments are made, the government is still expected to payout an extra NZD 5 billion. The Treasury has noted that the cost estimates are still not finalized, and could be revised upwards depending on more comprehensive damage estimates.
The Treasury estimates that under current tax system the government can expect to see a NZD 5 billion loss in revenues over the next four years. The forecast is based on a NZD 15 billion contraction in New Zealand’s economy. The loss figure could increase further, as Prime Minister John Key has stated that the government is considering cutting operating costs student loans and reducing liability for Working for Families payments for high-income earners, in order to compensate for the reduced revenues.
The ACC has also released its initial estimates for the full cost of claims stemming from the quake. With the currently known projections for injuries, the ACC expects to pay out approximately NZD 370 million in 2011. The costs of rehabilitation and income compensation are expected to stretch “decades into the future”.
Photo by tkw954