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Redundancy Tax Changes Miss The Real Issue

New Zealand Institute of Chartered Accountants

Redundancy Tax Changes Miss The Real Issue

The Government's moves to introduce special provisions for taxation of redundancy payments does nothing to fix the more fundamental problem of New Zealand's marginal tax rate structure, according to the New Zealand Institute of Chartered Accountants.

"The tax rate payable on redundancy simply reflects the wider issues of a progressive tax system," Institute tax director Craig Macalister said.

"The so-called tax problems with redundancy payments are no different to any other lump-sum payment or when taxpayers have fluctuating income.

"People who receive lump-sum payments, like those who receive ACC lump-sum payments, will miss out, when their tax position is basically the same as workers who are made redundant.

"If marginal tax rates are set according to people's ability to pay, the source should not matter a dollar of income is a dollar of income.

"The solution is not special tax rates for redundancy; the solution is adjusting the levels at which marginal tax rates are set.

"If Government wanted to do something with fluctuating incomes in general, especially with social assistance abatement, it would be welcomed. Otherwise, adjust the marginal tax rate structure."


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