Govt backdown on redundancy payments tax?

Press, 22 July 1988, Page 4

Govt backdown on redundancy payments tax?

By

BRENDON BURNS,

political reporter A formula to allow redundancy payments to escape Government plans to impose fringe benefits tax is expected to be announced in Parliament next week. The controversial Taxation Reform (No. 4) Bill which includes the proposal to tax redundancy payments, was reported back to the House yesterday. Mr Jim Sutton, chairman of the Finance and Expenditure Select Com-

mittee which considered the bill, said it was intended to allow genuine redundancy payments to avoid the tax. Mr Sutton (Lab., Waitaki) later said officials were still working on the formula but the committee believed a workable solution would be found. The Government had proposed in the bill to apply a 24 per cent fringe benefits tax on all redundancy payments. It did this because it said people were abusing the

tax-free payout,’ and disguising superannuation and other pay settlements as redundancy. Employers and unions protested that this would cause a wave of redundancies before the legislation took effect. The bill required the employers to pay the fringe benefit tax. Mr Sutton said the formula, still being worked on by officials, took as its base the description of redundancy used in the Labour Relations Act A list of exemptions

to the fringe benefit tax, as found in Australian legislation, would be applied. Meticulous work was still required to ensure non-redundancy payments were The Minister of Revenue, Mr de Cleene, had expressed disbelief that any successful formula could be found. “It is the Government’s view and my view that no satisfactory distinction can' be made without opening up the avoidance provisions,”

he had told “The Press” (July 14). Mr Sutton said he could understand Mr de Cleene’s incredulity but said the Minister had not attended the select committee. The change to the fringe benefits tax provision of the bill would be introduced in Parliament next week, he said. Another change in the bill, as reported back yesterday, was that the Government had abandoned its attempts to impose a new tax re-

gime on petroleum exploration and mining. Mr Sutton said the Government was prepared to take only “firstclass” legislation through Parliament, and so the clauses on mining and exploration were being removed. A bill to introduce a new tax regime in this field would be introduced in Parliament at an early stage, he said. Yesterday’s return to the House of the Taxation Reform (No. 4) Bill confirmed changes to

the provisional tax structure, indicated last week by Mr de Cleene. Proposals to charge underpayments of provisional tax at interest rates of up to 18 per cent have been abandoned. The majority of provisional taxpayers — those earning $lOO,OOO a year or less — will be able to pay last year’s tax bill, plus 10 per cent. The Opposition spokesman on revenue, Mr Doug Kidd (Marlborough), said yesterday

that the Government had been routed on its tax bill. “The whole thing has been a political shambles, driven by a need for revenue.” Some 62 pages of amendments to the bill proved this, he said. Mr Kidd said the attempt to exclude redundancy payments from fringe benefit tax was very necessary, as without this people were to be charged an entry fee to unemployment. Editorial, page 8