decrease the number of contractors who are and therefore reduce this fiscal benefit to the government. 3. Voluntary Met Met No impact Marginal upfront gain. withholding agreements Contractors will be able to Compliance for contractors who enter voluntarily choose to have voluntary agreements will decrease as they have withholding apply and so an easier means to pay their tax. Administration have similar treatment to costs for Inland Revenue will decrease for these employees. contractors as well. 4. Extending Met Met Met The impact of this option withholding to is difficult to measure as it labour-hire Contractors working for Will reduce compliance costs for labour-hire Contractors working relies on estimations of firms labour-hire firms will not firm contractors as they will have an easier for labour-hire the hidden economy. be able to avoid paying means to pay their tax. will not have the their fair share of tax and opportunity to A conservative estimate claim social policy Compliance will increase for labour-hire structure to avoid shows a revenue benefit benefits they are not firms. However, this is expected to be less than paying their fair of $5 million-$10 million entitled to. the decrease in compliance costs for contractors share of tax. a year. and as a result overall compliance costs are This option would make expected to decrease. Some contractors the treatment of employees may attempt to avoid and contractors more Large labour-hire firms have reported that the the rules by similar for tax purposes. compliance costs of the proposal for them would contracting with be low, while smaller firms have reported that clients directly; the compliance costs would be higher. however following consultation with Reduced administration for Inland Revenue labour-hire firms we in processing and enforcement for labour-hire consider that this firm contractors. impact will be low.
decrease the number of contractors who are and therefore reduce this fiscal benefit to the government. 3. Voluntary withholding agreements Met Contractors will be able to voluntarily choose to have withholding apply and so have similar treatment to employees. Met Compliance for contractors who enter voluntary agreements will decrease as they have an easier means to pay their tax. Administration costs for Inland Revenue will decrease for these contractors as well. No impact Marginal upfront gain. 4. Extending withholding to labour-hire firms Met Contractors working for labour-hire firms will not be able to avoid paying their fair share of tax and claim social policy benefits they are not entitled to. This option would make the treatment of employees and contractors more similar for tax purposes. Met Will reduce compliance costs for labour-hire firm contractors as they will have an easier means to pay their tax. Compliance will increase for labour-hire firms. However, this is expected to be less than the decrease in compliance costs for contractors and as a result overall compliance costs are expected to decrease. Large labour-hire firms have reported that the compliance costs of the proposal for them would be low, while smaller firms have reported that the compliance costs would be higher. Reduced administration for Inland Revenue in processing and enforcement for labour-hire firm contractors. Met Contractors working for labour-hire will not have the opportunity to structure to avoid paying their fair share of tax. Some contractors may attempt to avoid the rules by contracting with clients directly; however following consultation with labour-hire firms we consider that this impact will be low. The impact of this option is difficult to measure as it relies on estimations of the hidden economy. A conservative estimate shows a revenue benefit of $5 million-$10 million a year.
2016-ris-bteirm-bill-4.docx