Claim tax changes will add to rebuild costs

Tax changes relating to employer-provided accommodation are likely to result in significant tax costs for Canterbury earthquake rebuilding activity, Deloitte Dunedin tax partner Peter Truman says.

The Inland Revenue Department had ''clearly'' drawn a 12-month limit on a temporary move and also had concerns once six months were exceeded. That did not create the necessary flexibility required in dealing with real-life situations, he said yesterday.

''The rebuild will last more than 12 months and will require many workers in the construction sector to relocate temporarily to Christchurch - either during the working week or for extended periods with their families. Most are not working in Christchurch willingly.''

Overall, the cost would be borne by employers as most employees were likely to refuse to relocate if they had to pay the increased tax costs, Mr Truman said.

That would add to the cost of rebuilding construction work.

''We consider there are strong arguments for an exception to the IRD's general approach to the specific cases related to the rebuild work, which is of high significance to the whole New Zealand economy.''

Mr Truman believed it was more appropriate for the IRD to keep its historic interpretation until the reforms now being considered by the IRD policy advice unit were enacted.

Labour Party revenue spokesman David Cunliffe did not hold back in his first major tax comments since receiving the role in leader David Shearer's recent reshuffle.

''The Government's plan to tax accommodation for earthquake rebuild workers is more akin to the actions of a vulture picking over a carcass for every last morsel than it is to sensible fiscal management.''

Common sense suggested the Government should be helping and not hindering Christchurch's recovery, he said. Taxing Christchurch rebuild workers for their temporary accommodation was a step too far.

IRD group tax counsel Graham Tubb said the IRD was continuing to work with the tax community to clarify how those rules might apply to different situations as they would vary from case to case.

''Clearly, overnight hotel accommodation will not be taxable. Inland Revenue is generally satisfied that when an employee in the course of their job shifts to a new location for less than six months, this is likely to be temporary in nature. Therefore the payments or the value of the accommodation provided will not be taxable.''