Between the lines: Taxing times in bill debate

By BRIAN FALLOW

There are plenty of reasons for business unease over the Employment Relations Bill.

Tax is not one of them ... at least not yet.

One problem which the authors of the bill seek to remedy involves the position of "bogus contractors." People who, in reality, are employees but who are deprived of the rights and protections of an employee by a piece of paper that describes them as independent contractors.

The question is whether the bill, as drafted in addressing that problem, does unintended collateral damage to people who are genuinely and contentedly independent contractors.

That is an issue the select committee is wrestling with and the language of the bill may be tightened.

But if it is not rewritten, will anyone's tax position be different on August 1, when the bill is due to become law?

No, is the consistent answer of Inland Revenue, Revenue Minister Michael Cullen, leading tax professionals and, by implication, the Law Society.

The society points to the undesirable confusion that is likely if the definitions of employee for tax purposes and for employment law purposes diverge.

And if there is no problem on August 1, what about the following August or the year after?

Is there not a risk that as the courts refine and interpret the new definition of employee under the Employment Relations legislation, the IRD will adjust `the tests it uses for the boundary between employee and independent contractor?"

Maybe. Who knows what answer the courts will give to questions which have yet to be put to them, interpreting a bill which is still in a fluid state. And who knows what difference, if any, that would make to the IRD?

In the end, Parliament is responsible for the tax laws.

If the Government decides it is necessary or desirable to alter the tax position of people who are now independent contractors for tax purposes - and it is not clear why it would want to take the heat which that would involve - it would have to go through the generic tax policy process.

That provides for at least two rounds of public submissions.

In the meantime, such a change is not on the agenda. The Government has not yet received any advice from the IRD on how much of a problem it would be to have two definitions of employee, and the pros and cons of doing anything about it.