Tax expenditure statement

2017 Tax Expenditure Statement

Formats and related files

The purpose of this statement is to provide additional transparency around policy motivated 'expenditures' made through the tax system. Tax expenditures take the form of an exemption, allowance, preferential tax rate, deferral or offset that reduce a tax obligation to achieve a specific policy objective.

Introduction#

The purpose of this statement is to provide additional transparency around policy-motivated ‘expenditures' made through the tax system. Tax expenditures take the form of an exemption, allowance, preferential tax rate, deferral or offset that reduce a tax obligation to achieve a specific policy objective.

This voluntary disclosure improves our transparency arrangements by bringing New Zealand's financial reporting closer to OECD best practice standards. This statement is not intended to be a statement of policy effectiveness or desirability.

Changes from Previous Statements#

The 2017 Tax Expenditure Statement is very similar to last year's statement. As detailed in Table 5, one tax expenditure has been removed from this year's statement and two have been added. For greater transparency, an extra column has been added to Table 3, describing the policy rationale for each expenditure included in the Income Tax Act 2007. The classification of expenditures in Table 3 has also been added below each section reference.

There is no change to the reporting of quantified changes in Table 2. A brief explanation of how they are calculated is provided in the Quantification Methods section on page 16.

What is a Tax Expenditure?#

Governments can spend in a variety of direct and indirect ways. International public sector accounting standards (IPSAS 23) divide spending into three different categories: direct spending; spending through the tax system; and tax expenditures.

Table 1: Classification of Crown spending under public sector accounting standards
  Definition Reporting
Direct spending Traditional spending made as a direct transfer between the Crown and different entities or individuals. Disclosed in the Crown Financial Statements and annual Budget.
Spending through the tax system Hybrid transfers that can be taken as a cash payment or via a reduction in tax. A predictable cash value allows these transfers to be formally appropriated and disclosed in the Crown Financial Statements and annual Budget.
Tax expenditures Individual features of the tax system that reduce an entity's tax obligation in a way that is designed to give effect to policy other than to raise revenue in the most efficient and economically neutral way.

Tax expenditures are defined in tax legislation, but have not previously been disclosed.

The 2010 statement was the first disclosure since 1984.

Tax systems differ from country to country. Thus, there is no current international consensus as to how tax expenditures should be categorised. Treasury released a discussion of how tax expenditure reporting could be categorised to meet New Zealand's objectives in Treasury Policy Perspectives Paper 09/01.

Some countries define tax expenditures indirectly relative to a normative benchmark. This approach allows countries to report a wider set of structural tax expenditures that are generally applicable[1]. This document has focused, in the first instance, on a narrow subset of tax expenditures that bear a distinct fiscal cost and represent a clear policy-motivated exemption[2] to current tax practice. A summary of the guiding criteria is included in Figure 1.

No attempt has been made to identify a normative tax benchmark or to comprehensively analyse tax legislation.

Figure 1: Guiding criteria for inclusion in this disclosure document
Figure 1: Guiding criteria for inclusion in this disclosure document.

Notes

  • [1]For example, Portfolio Investment Entities (PIEs) offer all tax payers the option of relatively 'concessional' tax treatment as a mechanism to encourage portfolio investment. While a non-revenue policy objective suggests that PIEs could be categorised as a tax expenditure, PIEs are excluded from the tax expenditure definition used in this document as PIEs are available to all taxpayers. A benchmark tax system would allow the Treasury to categorise structural features of the tax system such as PIEs, trusts, or progressive personal tax rates. A benchmark tax structure is useful where no clear exemption exists as it would define what constitutes the 'standard' tax treatment. For instance, is the 'standard rate' the company rate, PIE rate, trust rate, or one of the personal tax rates?
  • [2]The stated purpose of the Income Tax Act 2007 is to "define, and impose tax on, net income". Tax expenditures are not motivated by a desire to raise revenue in the most efficient manner possible, but instead are significantly motivated by non-revenue policy objectives.

Current Tax Expenditures#

The following sections list tax expenditures drawn from the Income Tax Act 2007, as at 1 April 2017. Current analysis suggests that the Goods and Services Tax Act 1985 does not contain any tax expenditures. Appropriated cash payments (spending) made through the tax system, eg, Working for Families tax credits, have also been included in the final part of the list. Cash payments made through the tax system do not formally meet a tax expenditure definition, but have been included for transparency purposes.

A small sub-section of tax expenditures with readily accessible data has been quantified (refer Table 2). The government does not collect data on all tax expenditures as the compliance and administration costs of collecting additional data exceed the value that data might provide.

A new column has been added to Table 3, describing the policy rationale for individual expenditures. Further, the classification of each expenditure in Table 3 has been added below the section reference. These have been added to provide greater transparency, as recommended by the Open Budget Initiative and Transparency International[3].

Table 2: Quantified Tax Expenditures and Spending through the Tax System
Quantified tax expenditures Value of expenditure 2011/12 (actual) Value of expenditure 2012/13 (actual) Value of expenditure 2013/14 Value of expenditure 2014/15 Value of expenditure
2015/16
Value of expenditure
2016/17 (forecast)
      As at April 2017 Estimated Actual As at April 2017 Estimated Actual As at April 2017 Estimated Actual
Charitable or other public benefit gifts by a company: deduction 22 20 17 17 31 31 18 21 21
Charitable or other public benefits: tax credit 235 225 234 234 241 244 235 247 247
Independent earner tax credit 223 223 221 223 219 223 208 223 223
Māori Authorities: donations 0.5 0.7 0.9 0.9 2.5 2.5 3.7 3.7 3.7

Note: measured in $000,000s over March tax years. Italicised values may be incomplete. See the appendix for further information on quantification methods.

Appropriated spending through the tax system Value of expenditure
2011/12 (actual)
Value of expenditure
2012/13 (actual)
Value of expenditure
2013/14 (actual)
Value of expenditure
2014/15 (actual)
Value of expenditure
2015/16 (actual)
Value of expenditure
2016/17 (forecast)
Child tax credit 2.0 1.7 1.8 1.3 1.1 0.9
Family tax credit 2109 2060 2015 2006 1793 1763
In-work tax credit 567 545 533 511 513 566
KiwiSaver tax credit 689 723 804 855 698 781
Parental tax credit 18 17 18 21 31 30
Minimum Family tax credit 11 12 14 16 14 13

Note: These credits are appropriated and are measured in $000,000s over financial years.

Notes

  • [3] http://www.internationalbudget.org/budget-work-by-country/findgroup/group-data/?country=nz; http://www.transparency.org.nz/2013/http:/transparency/2013/Integrity-Plus-2013-New-Zealand-National-Integrity-System-Assessment

Tax Expenditures Categorisation#

In the tables that follow, tax expenditures and appropriated spending are categorised by Type and Impact.

Notes on Categorisation

In this statement there are three types of tax expenditures:

  1. Social: Tax expenditures that are introduced with the purpose of achieving certain social policy objectives. These can be either appropriated spending - such as the Working for Families tax credits - or income exemptions or deductions such as the Charities tax credit or the deduction for Māori Authority donations.
  2. Business: Tax expenditures that are aimed at incentivising certain types of business or commercial activities in order to meet explicit or implicit economic policy objectives. Some examples include: income exemption for bodies promoting scientific or industrial research, or the deduction for petroleum mining expenditure.
  3. Other: Tax expenditures that are not expressly introduced to achieve social or business economic policy objectives. An example is the tax exemption for the allowances of the Governor General.

Tax expenditures are also categorised by their impact. That is, whether their effect on the current tax base results from historic policy settings, and/or whether they are permanent, that is subject to no future reversal, or that they facilitate timing changes which reverse in the future. Detailed definitions of these impact categories are as follows:

  1. Historic: Tax expenditures that are no longer available for new claims, but qualifying activity from the past can still affect tax revenues. Some examples include: accelerated depreciation and home ownership savings.
  2. Permanent: Tax expenditures that reduce the overall amount of tax payable or increase entitlement to Crown expenditure. Some examples include: income exemption for Community Trusts and the Charitable or other public benefit tax credit.
  3. Timing: Tax expenditures that achieve a tax deferral through allowing later recognition of income or earlier deductions that reverse over following years. An example is the film industry expenditure deduction.

Table 3: Tax Expenditures Included in the Income Tax Act 2007

Tax Expenditure Sections/ Classification Comment Policy Rationale Type Impact
        Social Business Other Historic Timing Permanent
Accelerated depreciation Sections DO 4-5, 12, DP 3, DZ 17-18, EE 31 -Accelerated write-off The ability to depreciate capital items faster than their economic life reduces income by a greater amount in earlier years (deferring tax payments). This covers both primary sector amortisation and fixed asset depreciation. To encourage investment in depreciable assets.      
Accommodation allowances -Exemption Exemption for accommodation allowances for these three groups. Employer provided accommodation and accommodation payments provide private benefit to the employee and should be taxed. In these three instances, there is little benefit to the employee, because the accommodation or payments arise from the requirements of the employer or the job.        
Defence Force Section CE 1D -Exemption Exemption for accommodation provided to a member of the Defence Force. NZDF staff are required to accept postings anywhere in the country. Housing is on base and under certain restrictions.        
Ministers of religion Section CE 1E -Exemption Exemption for both owned and rental accommodation supplied by religious bodies to their ministers (capped at a reasonable amount). Subsidised accommodation enables and encourages ministers, who are generally low wage earners, to better perform their religious duties and provide a service to their communities (often the expectation parishioners can visit their home).        
Canterbury rebuild Section CZ 29 -Exemption Transitional rule for employer-provided or paid accommodation for employees working on Canterbury earthquake reconstruction projects from 4 Sep 2010 to 31 March 2019.          
Allowances of the Governor-General Section CW 16 -Exemption Allowances and benefits received by the Governor-General and former Governor-Generals under the Governor-General Act 2010 are exempt from tax. Administrative convenience, as the Governor-General's allowance covers both personal and office expenses.        
Bloodstock: accelerated deductions Sections EC 38-48 -Accelerated write-off Both the timing and rate of write downs are accelerated when compared with an economic approach. To encourage the ownership and breeding of stallions and broodmares.        
Bodies promoting amateur games and sports: exempt income Section CW 46 -Exemption Income derived by a club, society or association is exempt income, providing it is established to promote an amateur game or sport and no funds are used for private pecuniary profit. To encourage amateur games or sports which have the purpose of promoting physical activity across generations for the general well-being of society.        
Bodies promoting scientific or industrial research: exempt income Section CW 49 -Exemption Income derived by a society or association established mainly to promote or encourage scientific or industrial research is exempt income, providing the society or association is approved by the Royal Society of New Zealand and no funds are used for private pecuniary profit. To encourage research that is of national interest, and ensure these institutions are on a level playing field with other tax exempt organisations.        
Certain income derived by transitional residents: exempt income Sections CW 27 and HR 8 -Temporary exemption

New tax residents (both immigrants and returning New Zealanders) can gain a temporary tax exemption for up to four years on most foreign-sourced income (NZ tax on foreign-sourced income is higher than some other countries).

 

To reduce the costs to NZ businesses associated with recruiting highly skilled and mobile individuals; remove tax barriers that may inhibit international recruitment to NZ; and grow development of a competitive and innovative economy.        
Charitable or other public benefit gifts by a company: deduction Section DB 41 -Deduction A company is allowed a deduction for a charitable or other public benefit gift of cash when made to an entity described in section LD(3)(2) or listed in schedule 32 of the Income Tax Act 2007. This deduction is limited by net income. Tax incentives for charitable donation.        
Charitable or other public benefit gifts by an individual: tax credit Subpart LD -Deduction An individual who makes a charitable or other public benefit gift is, under certain conditions, allowed a refundable tax credit. This applies to cash donations only and is limited by taxable income. Tax incentives for charitable donation.        
Charities deregistration Section HR 12 -Exemption Charities that predominately provide community housing are exempt from section HR 12 (tax on deregistration of charities) in qualifying circumstances. To ensure that assets and income accumulated while an entity was exempt from income tax as a charity is destined for charitable purposes.        
Charities: exempt income Sections CW 41-43 -Exemption Business, non-business and charitable bequests are exempt income for registered charitable entities. The exemption does not apply to business income to the extent that the charity carries out its charitable purposes outside New Zealand. To subsidise spending on charitable purposes; encourages individuals to leave bequests to charities.        
Community housing Section CW 42B -Exemption Income derived by community housing entities is exempt income. To help promote home ownership for New Zealanders who would not otherwise be able to afford to buy a house. Supports community housing providers that offer pathways to home ownership to low-income households but may no longer be considered charitable entities.        
Community trusts: exempt income Section CW 52 -Exemption Income derived by the trustee of a community trust is exempt income. To assist with providing community benefits for the good of the public.        
Employee share schemes Sections DC 12-15, CE 2 -Deduction Employers who run a qualifying share scheme are entitled to a notional deduction for interest, employees of such employers are able to take any gains tax free. To increase opportunities for employee participation in share ownership.        
Farming business expenditure: accelerated deductions Sections DO 1-3, DO 10 -Deduction Certain deductions granted for improvements and enhancements to land for farming can be expensed rather than treated as capital and amortised, eg, fencing. To increase the productive capacity of existing farm and the quality of the nation's exports.      
Film industry expenditure: accelerated deductions Section DS 1-4 -Deduction Expenditure incurred acquiring film rights or film production expenditure can be expensed over a specified time frame. To encourage the development of the New Zealand screen production industry.        
Forestry encouragement grant: accelerated deductions Section DP 5 -Deduction Forestry expenditure incurred by a person who derives a forestry encouragement grant that is not grant related is immediately deductible. To encourage the planting of woodlots to ensure an adequate supply of timber for future need.      
Forestry expenditure: accelerated deductions Section DP 1 -Deduction Expenditures associated with forestry (eg, planting or tending costs) can be expensed rather than capitalised against harvest proceeds. To encourage the establishment of new forests.        
Friendly societies: exempt income Section CW 44 -Exemption Specified income derived by a friendly society is treated as exempt income. Mutuality principle that a person cannot derive income from mutual transactions as they are of a similar nature to trading with oneself.        
Fringe benefit tax: partial exclusion for charities

Section CX 25

-Exemption

Generally fringe benefits provided to employees not involved in a charities' business are exempt FBT. The cost of complying with FBT obligations would be onerous and reduce the funds available for charitable purposes.        
Funeral Trusts: exempt income Section CW 45 -Exemption Interest or a dividend derived by a trustee in a funeral trust is exempt income. To reduce compliance costs for Sickness, Accident and Death funds that would need to restructure to be recognised as friendly societies.        
Herd improvement bodies: exempt income Section CW 51 -Exemption Income derived by a herd improvement association, or society established mainly to promote an improvement in New Zealand dairy cattle, is exempt income, providing no funds are used for private pecuniary profit. Herd improvement bodies considered of national significance at the time.        
Income equalisation schemes: deduction Subpart EH -Deduction Persons working in forestry, fishing, or farming entities may reduce their taxable income in a year by depositing taxable income with Inland Revenue. The schemes allow taxable income to be transferred between years thereby smoothing taxable income. To facilitate income smoothing.        
Income for military or police service in operational area: exempt income Sections CW 23-24 -Exemption Specified income derived by members of the New Zealand Defence Force (or the police) serving in an operational area can be treated as exempt income. To increase equity and reduce the administrative burden across the New Zealand Defence Force and the Police.        
Income from conducting gaming-machine gambling: exempt income Section CW 48 -Exemption Gross gambling proceeds from gaming-machine gambling are exempt income if the person complies with the Gambling Act 2003. Note that turnover is separately taxed. To reduce compliance costs and ensure there is no bias in favour of amateur sports, which have an income tax exemption.        
Independent earner: tax credit Section LC 13 -Tax Credit Individuals whose income is between $24,000 and $44,000, and who are not receiving certain forms of income, are entitled to a tax credit of $520. This credit abates once annual income rises above $44,000. >To improve incentives to participate in the workforce.        
Interest on home vendor mortgages: tax credit Sections LZ 6-8 -Tax Credit A tax credit may be available for interest from a home vendor mortgage, providing it was approved by the Housing NZ Corporation, on or before 5 August 1982. To encourage the most efficient use of the nation's housing.      
Jurors' and witnesses' fees: exempt income Section CW 26 -Exemption Fees paid by the Crown to jurors and its witnesses, other than expert witnesses, are exempt income. To encourage public involvement in law enforcement by increasing the net payment to witnesses. Cost savings for the Department of Justice who administer the payments, which outweigh the tax foregone.        
Local and regional promotional bodies: exempt income Section CW 40 -Exemption The income derived by a charitable association or society is exempt income, if it is primarily established for beautification purposes. To encourage local and regional beautification/advertisement.        
Māori Authorities: deduction Section DV 12 -Deduction A Māori authority is allowed a deduction for a cash donation that it makes to a Māori association as defined in the Māori Community Development Act 1962. It is also allowed a deduction for charitable or other public benefit cash gifts. This deduction is limited by net income. Tax incentives for charitable donation.        
Non-profit organisations Section DV 8 -Deduction Non-profit organisations are entitled to an income tax deduction for the lesser of $1,000 and their net income. To reduce compliance costs.        
Non-resident oil rig and seismic vessel operator - tax exemption Section CW 57 -Exemption Income derived by non-resident operators of oil rigs and seismic vessels is exempt from taxation. To prevent rig operators leaving NZ before 183 days and a separate operator having to come in to finish the job.        
Payments of interest post-war credits: exempt income Section CW 5 -Exemption Interest derived by a person under section 2 of the Income Tax (Repayment of Post-War Credits) Act 1959 of the United Kingdom Parliament is exempt income. To reduce compliance costs, as interest on post-war credits was already exempt from tax in the UK.        
Payments of interest on farm mortgages: exempt income Section CW 6 -Exemption 50 percent of the interest that an individual derives from a mortgage securing a loan made by a seller of a farm is exempt income, if the Rural Banking and Finance Corporation of New Zealand approves the mortgage. To encourage young farmers.        
Petroleum mining expenditure: accelerated deduction Subpart DT, sections EJ 12-20 -Deduction Development expenditure is written off over an accelerated seven-year period. To make the NZ mining industry more competitive internationally (and similar to the rules in Australia)        
Plain clothes allowances Section CW 17CC -Exemption In very limited circumstances a plain clothes allowance paid to an employee who is also provided with a uniform can be tax exempt. To reduce compliance costs.        
Research and Development - cashing out tax losses Subpart MX -Cash-out of losses In qualifying circumstances a company that conducts research and development and incurs tax losses may cash out the tax value of the research and development part of the tax losses. This is repayable against future profits, or in certain other circumstances. To reduce bias against investment in R&D start-ups arising from the current treatment of tax losses.        
Scholarships and bursaries: exempt income Section CW 36 -Exemption Any scholarship or bursary payment for attendance at an educational institution is exempt income, except for a basic grant or an independent circumstances grant under the Education Act 1989. To assist education development.        
TAB and racing clubs: exempt income Section CW 47 -Exemption Income derived by the New Zealand Racing Board, New Zealand Thoroughbred Racing, Harness Racing New Zealand and the New Zealand Greyhound Racing Association is exempt income. Note that betting turnover is separately taxed. To reduce administrative costs owing to the small amount of receipts.        
Te Awa Tupua Section CW 40C and the Te Awa Tupoua (Whanganui River Claims Settlement) Act 2017 -Exemption Income received by Te Awa Tupua is exempt from income tax so long as it is applied for the purposes set out in the Te Awa Urewera Act 2014. Treaty of Waitangi settlement        
Te Urewera Board Section CW 40B and the Te Urewera Act 2014 -Exemption The Board's income (generally from concessions) is exempt from tax so long as it is applied for the purposes set out in the Te Urewera Act 2014. To reduce tax compliance costs connected with the two entities created by the Te Urewera-Tuhoe Bill - Te Urewera and the Te Urewera Board.        
Veterinary services bodies: exempt income Section CW 50 -Exemption Income derived by a veterinary association, club or society established mainly to promote efficient veterinary services in New Zealand is exempt income, providing no funds are used for private pecuniary profit. Originally established as the bodies were seen to be of national significance.        

Table 4: Approved Appropriated Spending Made through the Tax System

Tax Expenditure Sections Comment Type Impact
      Social Business Other Historic Timing Permanent
Child tax credit Section MZ 2 Families with a pre-existing entitlement dating from before 31 March 2006 are able to claim a tax credit for dependent children. Additional access to this tax credit is no longer available.      
Family tax credit Section MD 3 Families are entitled to an income tested tax credit or cash payment for children aged 18 years or younger.        
In-work tax credit Section MD 10 Families with children 18 years or younger that work the required number of hours per week are entitled to an income tested in-work tax credit.        
KiwiSaver tax credits Section MK 1-8 The savings of participants in the KiwiSaver scheme are entitled to a tax credit.        
Parental tax credit Section MD 12 A tax credit may, under certain conditions, be paid to families with a newborn baby for the first 56 days (eight weeks) after the baby is born.        
Minimum family tax credit Section ME 1 A tax credit may be available to ensure that the annual income (after tax) of a family with dependent children 18 or younger does not fall below $22,776.        

Table 5: Revisions to Tax Expenditures since the 2016 Tax Expenditure Statement

Tax Expenditure Sections Comments
Credits for savings in special home ownership accounts Section LZ 9 Removed by the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016
Non-profit organisations Section DV 8 Further analysis shows this deduction is a tax expenditure.
Te Awa Tupua Section CW 40C and the Te Awa Tupua (Whanganui River Claims Settlement Act 2017) Added on 20 March 2017 by the Te Awa Tupua (Whanganui River Claims Settlement) Act 2017

Quantification Methods#

This section provides further information on the methods used to obtain those expenditures listed in Table 2.

Quantified Tax Expenditures#

Charitable or other public benefit gifts by a company: deduction

This item is sourced from the Income Tax return for companies (IR4). The values returned are the amount of donations made; the tax expenditure associated with these donations are the amount of donations multiplied by the company tax rate prevailing for the tax year in which the donations are returned.

Analysis of filing patterns in the previous two years suggests that claims for donation-related deductions are generally available by April the following year, and additional claims for a deduction are not large. Consequently, data for 2015/16 uses the claims information available at the end of April 2017 with a small allowance for later claims.

The forecast for 2016/17 is, in the absence of better information, held at the same level as for 2015/16.

Charitable or other public benefits: tax credit

This item is sourced from the tax credit claim form (IR526) and from Employer Monthly Schedules for payroll giving.

Analysis of filing patterns for the IR526 return suggests that over 90 percent of claims for tax credits in the 2015/16 year will be received by April 2017. Consequently, for the estimated actual figure for 2015/16 we have assumed a small scale up on the credits received by April.

The forecast for 2016/17 is, in the absence of better information, held at the same level as the 2015/16 estimate.

The (small) payroll giving component of the donations reported in this expenditure are available within 20 days of the end of the month in which the donation was made, and actual data is used for both the 2015/16 and 2016/17 years.

Independent earner tax credit

The Independent Earner Tax Credit (IETC) can be claimed at year end, or during the year through the PAYE system. For the year-end claims, the amount is compiled directly from IR3 tax returns or personal tax summaries. For the PAYE claims of people who do not square up at year end, the amount of IETC claimed is imputed monthly from the PAYE earnings of people who have selected ‘ME' tax codes for their PAYE. This monthly imputation annualises the earnings of that particular month, and imputes entitlement on the basis of these monthly earnings, not on the basis of the annual earnings.

The final step in quantification of IETC for any given return period is an estimate for late claims. Not all claims are made within a year of their entitlement, and back periods can continue to grow as late claims are made through the square-up process. From past experience, up to $20 million of additional claims can be made in second and subsequent years.

Because of the ongoing potential for back-year claims, the estimate for any year is set at the largest of the preceding “complete” years.

Māori Authorities: donations

This item is sourced from the Income Tax return for Māori authorities (IR8). The values returned are the amount of donations made; the tax expenditure associated with these donations is the amount of donations multiplied by the Māori authority tax rate for the tax year in which the donations are returned.

Analysis of filing patterns in the previous two years suggests that claims for donation-related deductions are generally available by April the following year, and additional claims for a deduction are not large. Consequently, data for 2015/16 uses the claims information available at April 2017.

The 2016/17 year is estimated to be similar to 2015/16.

Appropriated spending through the tax system#

Child tax credit, Family tax credit, In-work tax credit, Parental tax credit, and Minimum Family tax credit

Historical values for these Working for Families tax credits are provided by Inland Revenue's Crown Accounting team, based on actual expenditure on these credits. These items are also formally forecast as part of the preparation of the Government's Budget process, and the values reported in the Tax Expenditure statement are taken from these forecasts.

KiwiSaver tax credit

The KiwiSaver tax credit reflects the combined expenditure on (historically) Kickstart, Member Tax Credit and interest payments made by Inland Revenue relating to the period when contributions to members' scheme providers are held by Inland Revenue.

Historical values for these tax credits are provided by Inland Revenue's Crown Accounting team, based on actual expenditure on these credits. This item is also formally forecast as part of the preparation of the Government's Budget process, and the values reported in the Tax Expenditure statement are taken from these forecasts.