Option 4: Collection using a withholding tax Not considered in depth due to concerns that Inland Revenue would not be able to implement the method. Alternative well-developed systems such as PAYE and FBT already exist. Recommended proposal: Employer election with data capture using the PAYE’s employer monthly schedule (EMS) Description Impacts Employer to choose to withhold tax Employees Employers/payroll intermediaries Tax system(by reference to the Society (by reference to social on any ESS benefits received by an and software developers integrity of the tax system, impact policy programmes administered by employee using the PAYE system on Inland Revenue and revenue Inland Revenue) impact) Employers disclose the value of any ESS benefits via the employer monthly schedule this would – apply in all cases whether the employer chose to withhold tax or not. Advantages Employees may have increased Increased employee certainty about Improved compliance. ESS benefits counted towards any certainty about the tax treatment of the tax treatment of ESS benefits obligations/entitlements for student Improved tax collection. ESS benefits including their may support the take up of such loans and Working for Families tax Reduced revenue risk. obligations. schemes and inclusion in credits. Reduced administration costs for remuneration packages. Reduced compliance costs. ESS benefits counted for child Inland Revenue from fewer Reduced impact on employers if the support purposes. individual tax returns and follow up obligation to pay tax stresses enforcement action. employers’ working capital or interferes with bargains struck between the employer and employee. Cost of compliance is shifted from the employee to the employer when the employer considers there is an overall net benefit to do so. Disadvantages Advantages described above are not May create additional compliance Advantages described are not Possibility that reconciliation errors fully captured if employers decide costs on employers. fully captured if employers decide are created due to amounts not not to withhold tax on ESS benefits not to withhold tax on ESS benefits counted for Kiwisaver and when the Need for legacy record keeping to received by employees. received by employees. employer chooses not to withhold ensure that elections are properly tax. This will require additional captured.
Option 4: Collection using a withholding tax Not considered in depth due to concerns that Inland Revenue would not be able to implement the method. Alternative well-developed systems such as PAYE and FBT already exist. Recommended proposal: Employer election with data capture using the PAYE’s employer monthly schedule (EMS) Description Impacts Employer to choose to withhold tax on any ESS benefits received by an employee using the PAYE system Employers disclose the value of any ESS benefits via the employer monthly schedule – this would apply in all cases whether the employer chose to withhold tax or not. 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 Employees may have increased certainty about the tax treatment of ESS benefits including their obligations. Reduced compliance costs. Increased employee certainty about the tax treatment of ESS benefits may support the take up of such schemes and inclusion in remuneration packages. Reduced impact on employers if the obligation to pay tax stresses employers’ working capital or interferes with bargains struck between the employer and employee. Cost of compliance is shifted from the employee to the employer when the employer considers there is an overall net benefit to do so. Improved compliance. Improved tax collection. Reduced revenue risk. Reduced administration costs for Inland Revenue from fewer individual tax returns and follow up enforcement action. ESS benefits counted towards any obligations/entitlements for student loans and Working for Families tax credits. ESS benefits counted for child support purposes. Disadvantages Advantages described above are not fully captured if employers decide not to withhold tax on ESS benefits received by employees. May create additional compliance costs on employers. Need for legacy record keeping to ensure that elections are properly captured. Advantages described are not fully captured if employers decide not to withhold tax on ESS benefits received by employees. Possibility that reconciliation errors are created due to amounts not counted for Kiwisaver and when the employer chooses not to withhold tax. This will require additional
2015-ris-tfpsom-bill-1.docx