Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Restrictive covenant and exit inducements taxed

Restrictive covenant and exit inducements to be taxed

The Government plans to make restrictive covenant payments and exit inducement payments taxable.

Revenue Minister Michael Cullen said today legislation was planned for October to attack what was seen as a growing problem.

"The increasing use of these payments poses a major risk to the revenue, since they are not taxed," Dr Cullen said. "Tax from personal services income represents 75 percent of total income tax.

"These payments are already commonplace in some industries, and we foresee even greater use of them to avoid the new 39 percent income tax rate.

"A restrictive covenant payment is a payment for restricting one's ability to perform services. For example, a celebrity might receive such a payment for restricting his or her advertising activities to endorsing a single product.

"An exit inducement payment is a payment made to someone to give up a certain position or activity. For example, someone might be paid to leave one firm and join another.

"There is a strong risk arising from the fact that restrictive covenant payments and exit inducement payments can easily be substituted for taxable salary and wages, thus reducing tax revenue.

"Sometimes these payments can be in the millions of dollars. It is clearly unfair that these large payments related to employment are tax-free, while salary and wages are taxed.

"The Government will be consulting on the proposal over the next few weeks, with a view to introducing legislation in October, to be effective from the date of enactment," Dr Cullen said.

An issues paper on the proposed legislation will be on the web site of the Policy Advice Division of Inland Revenue at www.taxpolicy.ird.govt.nz from 1 pm today. Submissions close on 31 July.
Contact: David Carrigan [tax policy advisor] 471-9728

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Bridges’ ‘Meth Crooks’ Leadership Failure

Back in June, Bridges publicly accepted that Housing NZ had got it wrong, and that the National government had acted upon bad advice.

Now, you’d think this admission would create a broad bi-partisan basis for compensation to those families who had been unfairly evicted, at considerable cost and emotional distress. Some people had lost their possessions in trying to meet the expense of the upheaval.

Not everyone felt so compassionate. More>>

 

Multimedia & Transcript: Acting PM's Press Conference

Winston Peters, Acting Prime Minister while Jacinda Ardern is in New York for the UN Leaders' Week, held a short press conference Monday after chairing this week's cabinet meeting. More>>

General Assembly: Ardern Rejects Trump Call For War On Drugs

New Zealand will not be signing the United States' document calling for global action on the war on drugs, Prime Minister Jacinda Ardern says. Ms Ardern is in New York for the United Nations General Assembly this week, along with about 140 other world leaders. More>>

ALSO:

Pay Equity: Cabinet Funds Deal For Oranga Tamariki Social Workers

The Minister said that an agreement in principle has been reached between Oranga Tamariki and the PSA on a settlement worth $114.6m over five years. More>>

ALSO:

Hunting v Pest Control: Tahr Control Needed To Protect Alpine Habitats

A cull of introduced Himalayan tahr browsing conservation land in Kā Tiritiri o Te Moana/ the Southern Alps is needed to protect special alpine plants and their habitats, Conservation Minister, Eugenie Sage said. More>>

ALSO:

Protest At Sea: Judge Discharges Greenpeace Activists

The judge today discharged Norman and Howell without conviction, saying the cumulative consequences of a conviction would be out of proportion to what was “low level” offending off the Wairarapa coast in April 2017. More>>

ALSO:

No Reshuffle: Meka Whaitiri Removed As A Minister

Meka Whaitiri will be removed as a Minister with immediate effect... The decision was made after receiving a report into an incident that occurred on 27 August in Gisborne, involving Meka Whaitiri and one of her staff. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels