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Inland Revenue

Tax Policy

"Voluntary" nature of the scheme

Clause 236

Issue: Participation in payroll giving should be voluntary for employers


(35 – PricewaterhouseCoopers, 37 – Inter-Church Working Party on Taxation, 46 – Employers and Manufacturers Association (Northern), 68A – Corporate Taxpayers Group)

The bill should clearly provide that payroll giving is voluntary for employers and employees.


Proposed section LD 4 provides that tax credits for payroll donations are available to a person who is an employee whose employer files their employer monthly schedule electronically[1] and who chooses to make a payroll donation in a pay-period. This section suggests that if an employee chooses to make a payroll donation, his or her employer is obliged to offer payroll giving. This outcome was not intended.

Participation in payroll giving is intended to be voluntary for both employers and employees. To correct this matter, officials recommend that proposed section LD 4 be amended to make it clear that the scheme is also voluntary for employers.


That the submission be accepted.

Issue: Employers would be morally obliged to offer payroll giving to their employees


(68A – Corporate Taxpayers Group)

The scheme might not necessarily be voluntary for employers in practice. Should an employee express a desire to participate in payroll giving, employers could feel morally obliged to offer the scheme to their employees even though the scheme is intended to be voluntary for employers. If the employer chooses not to offer payroll giving, they could be seen as socially irresponsible and could portray their organisation in an unfavourable light.


Officials acknowledge the point made in this submission. Even so, payroll giving is all about establishing genuine partnerships between the parties concerned. The voluntary nature of the scheme should enable employers to weigh up the potential compliance costs of offering payroll giving to their employees against the benefits in the context of corporate social responsibility and the possibility of aligning their business objectives with the work of certain community organisations. It is also noted that the scheme will operate in addition to the current end-of-year tax credit claim system. Therefore, employees who do not or are not able to give through payroll giving could still claim tax relief on their donations through the end-of-year process.


That the submission be noted.


1 An employer monthly schedule provides pay-period information on employee salaries and wages, PAYE deductions and other social policy-related deductions.