Redundancy tax – marginal tax rate the problem

Redundancy tax – marginal tax rate the problem

The Government is considering cutting the tax on redundancy packages. Under the current rule, workers are taxed at the marginal personal tax rate. The EPMU has been lobbying the Government on the issue has called for the rules to change.

The Institute of Chartered Accountants says the tax rate on redundancy payments is a red herring. The Institute says the marginal tax rate structure is the real issue.

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

"Basically, redundancy payments are no different to paying-out unused holiday leave entitlements if someone changes jobs, tax on bonuses, or any other lump sum payment. Self-employed people can also get hit when they earn more than they expected.

"Creating special rules for one set of circumstances would just further open the tax system to opportunities for abuse.

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

ENDS

A profile of the Institute and copies of media releases and submissions are available at www.nzica.com/media

© Scoop Media