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
''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.''