Voucher ploy to avoid tax on the rise
A tax avoidance voucher-for- salary scheme is thought to be losing Inland Revenue and taxpayers hundreds of thousands of dollars and is most common in the charitable sector, the department said.
With the practice, employees receive vouchers - usually in the form of a debit card that can be used for groceries and other household expenses - to replace part of their wages or salaries.
The vouchers are not treated as income and PAYE is not deducted. Also, the vouchers can be used by employees to reduce their child support, student loan or KiwiSaver obligations or claim a larger Working for Families Tax Credit entitlement.
Employers can reduce their KiwiSaver contributions while avoiding paying GST on the vouchers.
The IRD said the practice may constitute tax avoidance and offending companies have been warned they could face serious penalties.