ANNEX Summary of impacts of the options (including the status quo) Option 1: Status quo Description Impacts Employees Employers/payroll intermediaries Tax system(by reference to the Society (by reference to social and software developers integrity of the tax system, impact policy programmes administered by No tax withheld at source. on Inland Revenue and revenue Inland Revenue) impact) Advantages - - - - Disadvantages Compliance costs associated with - Risk to the tax base from employee - filing returns and payment of tax on non-compliance. any ESS benefits received. Inland Revenue incurs higher If the amount of tax payable exceeds administration costs associated with $2,500, the employee faces the processing returns and any prospect of having to comply with necessary enforcement action. the provisional tax rules and Elevated tax collection risk due to accounting for tax in instalments employees being uncertain about throughout the year. their obligations under the Income Employees need to have cash Tax Act 2007. resources to meet any tax obligations. Mitigating factors Employees can sell shares to meet - - ESS benefits counted towards any any tax liabilities. obligations/entitlements for child support, student loans or Working for Families tax credits. Conclusion: Employee bears the cost of compliance and associated tax risk. Inland Revenue faces increased non-compliance risk. Option 2: Collection using the PAYE system (preferred option) Description Impacts
ANNEX Summary of impacts of the options (including the status quo) Option 1: Status quo Description Impacts No tax withheld at source. Employees Employers/payroll intermediaries and software developers Tax system(by reference to the integrity of the tax system, impact on Inland Revenue and revenue impact) Society (by reference to social policy programmes administered by Inland Revenue) Advantages - - - - Disadvantages Compliance costs associated with filing returns and payment of tax on any ESS benefits received. If the amount of tax payable exceeds $2,500, the employee faces the prospect of having to comply with the provisional tax rules and accounting for tax in instalments throughout the year. Employees need to have cash resources to meet any tax obligations. - Risk to the tax base from employee non-compliance. Inland Revenue incurs higher administration costs associated with processing returns and any necessary enforcement action. Elevated tax collection risk due to employees being uncertain about their obligations under the Income Tax Act 2007. - Mitigating factors Employees can sell shares to meet any tax liabilities. - - ESS benefits counted towards any obligations/entitlements for child support, student loans or Working for Families tax credits. Conclusion: Employee bears the cost of compliance and associated tax risk. Inland Revenue faces increased non-compliance risk. Option 2: Collection using the PAYE system (preferred option) Description Impacts
2015-ris-tfpsom-bill-1.docx