A recent IRD discussion document that proposed changes to employee allowances, as reported in HRM Online, has attracted the ire of business groups in New Zealand. The paper, Reviewing the tax treatment of employee allowances and other expenditure payments, proposes that communication costs should be fully taxed when they combine work and private uses.
“We suggest that employee expenditure payments to meet internet and other electronic communication costs should be taxed in full when meeting mixed work-related and private expenses and there is no separately identifiable work or private element,” the paper states.
The IRD is currently reviewing submissions on the proposal before draft legislation is introduced to parliament, the New Zealand Herald reported.
Both the Employers and Manufacturers Association (EMA) and Business New Zealand have expressed opposition to the proposals. The EMA has warned that they would be ‘unenforceable’ and would defeat the Government’s purported aim to increase workplace productivity.
“On the one hand we have Communications Minister Amy Adams recently praising the workplace flexibility we now have with such devices…and on the other we have IRD saying they need to tax these things because there’s been an increase in ‘working outside the traditional office environment’,” Kim Campbell, chief executive, said.
Campbell warned that it would be very difficult to distinguish private and work use, that the compliance cost for business would be disproportionately high, and that the revenue would be very small. “To try and find a way of taxing your personal use is completely inconsistent and frankly out of step with modern technology,” he added.
Business New Zealand was also wary of the approach. “Given the increased blurring of the lines between work and personal time, the rapid changes in technology and increased nuances between ‘use’ and ‘cost’ with bundled services, this would be a backward step,” Phil O’Reilly, chief executive, said.
Both Campbell and O’Reilly warned that such ‘blunt’ and costly changes to the taxation of employee allowances would simply mean that employers refused those perks to their staff. “Given the need for greater use of technology and innovation, this is the opposite of what should be happening,” O’Reilly added.
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