Central payment provider

Submissions

(64 – Payroll Giving Limited, 67 – New Zealand Institute of Chartered Accountants, 68A – Corporate Taxpayers Group)

The proposed payroll giving scheme should specifically provide for the option of a central payment provider. This would require a two-year “safe harbour” for donors on their annual level of donations relative to their taxable income. This proposal would be compatible with Inland Revenue systems for the exchange of taxpayer data that were implemented for KiwiSaver. (Payroll Giving Limited)

Inland Revenue could assume the responsibility for paying the donations made through payroll giving to donee organisations. If Inland Revenue were to administer the scheme, employers could make just the one payment to Inland Revenue, which could more easily distribute the payments to the relevant donee organisations within the three-month timeframe. Furthermore, it would be easier for Inland Revenue to monitor whether the charity is eligible and Inland Revenue would ensure that the money is passed onto the relevant recipient. This would deal with a significant risk of funds being misappropriated by unscrupulous employers, as there are limited checks and balances in place. Employees will have comfort that all funds have been properly passed on to the correct donee organisations. (New Zealand Institute of Chartered Accountants, Corporate Taxpayers Group)

In the event that Inland Revenue does not act as a payment intermediary and given the risks for employers in administering the scheme, Inland Revenue should select a small group of approved payment intermediaries. Inland Revenue would be able to more easily monitor the payment intermediaries, rather than the outputs of all the employers in the country. (Corporate Taxpayers Group)

Comment

Although payment intermediaries may form part of a payroll-giving scheme arrangement, they are not mandatory.

This approach provides greater flexibility and choice for employers seeking to offer payroll giving to their employees. It also takes into account the current arrangements that existing employers have in place for directing payroll donations to charitable or philanthropic causes. For example, some employers use United Way as a payment intermediary, while ANZ National Bank has set up its own charitable foundation (which itself is a donee organisation) to determine how its employees’ payroll donations are applied.

Officials see clear simplification benefits for employers and employees in using payment intermediaries. However, catering for a central payment provider is likely to involve considerable change to the design of the proposed scheme and significant cost which would defer implementation of payroll giving for at least another 12 months.

It may be that the concept of a central payment provider could be revisited after the scheme has “bedded” down.

Recommendation

That the submissions be declined.