Some submitters have previously suggested that if a deferral scheme is adopted, then employers should have the obligation to report to Inland Revenue in relation to the scheme. This is because employers are better placed to design the scheme terms and conditions to ensure they can control when the deferred taxing point occurs and that they have the necessary information to fulfil reporting obligations. Employers are also likely to have greater resources at their disposal to manage the collection of the relevant information. Further, it would be more efficient to impose compliance cost on one employer who can provide employee share scheme information for a number of employees, than to impose those compliance costs on each individual employee. As employers will already have to report some employee share scheme information as part of the EMS under the new rules on the collection of tax on ESS, it would make sense for employers to have all of the reporting obligations. Requiring employees to report Employees themselves could personally be responsible for reporting certain ESS information to Inland Revenue, and be required to notify Inland Revenue when certain events have occurred (for example, when they have elected to defer, or when they have sold or transferred their shares). However, as noted above, generally employers are more able to efficiently bear compliance costs than employees. Filing returns and paying tax directly to Inland Revenue imposes compliance costs on employees, more so if they are unused to the process. These compliance costs could affect voluntary compliance and perceptions about the integrity of the tax system. From Inland Revenue’s perspective, if an individual employee does not return the income from an ESS, the Commissioner has to expend resources to collect a potentially small amount of tax from that individual. Submission point We are interested to hear from readers: What kind of reporting and record keeping requirements be necessary and appropriate to ensure that income and deductions from tax deferred share schemes is appropriately returned, and tax is paid? CHAPTER 9
Some submitters have previously suggested that if a deferral scheme is adopted, then employers should have the obligation to report to Inland Revenue in relation to the scheme. This is because employers are better placed to design the scheme terms and conditions to ensure they can control when the deferred taxing point occurs and that they have the necessary information to fulfil reporting obligations. Employers are also likely to have greater resources at their disposal to manage the collection of the relevant information. Further, it would be more efficient to impose compliance cost on one employer who can provide employee share scheme information for a number of employees, than to impose those compliance costs on each individual employee. As employers will already have to report some employee share scheme information as part of the EMS under the new rules on the collection of tax on ESS, it would make sense for employers to have all of the reporting obligations. Requiring employees to report Employees themselves could personally be responsible for reporting certain ESS information to Inland Revenue, and be required to notify Inland Revenue when certain events have occurred (for example, when they have elected to defer, or when they have sold or transferred their shares). However, as noted above, generally employers are more able to efficiently bear compliance costs than employees. Filing returns and paying tax directly to Inland Revenue imposes compliance costs on employees, more so if they are unused to the process. These compliance costs could affect voluntary compliance and perceptions about the integrity of the tax system. From Inland Revenue’s perspective, if an individual employee does not return the income from an ESS, the Commissioner has to expend resources to collect a potentially small amount of tax from that individual. Submission point We are interested to hear from readers: What kind of reporting and record keeping requirements be necessary and appropriate to ensure that income and deductions from tax deferred share schemes is appropriately returned, and tax is paid? CHAPTER 9
2017-ip-ess-start-up.docx