Marginal rates the issue, not redundancy tax

Marginal rates the issue, not redundancy tax

The Government's moves to introduce special provisions for taxation of redundancy payments reflect the problems 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. Many self-employed and seasonal workers also get hit when they earn more than expected.

"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."

ENDS

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