A bill of over $2 million looms for the New Zealand Police if a retrospective tax is imposed on the plain-clothes officer allowance next month.
After a review the Inland Revenue Department (IRD) decided the previously tax-free clothing allowance given to over 2000 police staff who wore plain-clothes would be taxed from July 1.
Police are seeking a review of the decision, but in the meantime would foot the bill for any tax liabilities until July 30 this year.
While the tax to be paid on the allowances would vary depending on the individual, a Criminal Investigation Branch (CIB) member paid an annual allowance of $1305 and taxed at an assumed rate of 33 per cent would be stung for more than $400.
New Zealand Police Association president Greg O'Connor said the tax was an imposition.
"We believe it is unfair given all parties believed it was a tax-free allowance.
"The rest of their colleagues have their uniform provided, and the requirement for them to be in plain clothes is an imposed cost, so we believe it should be a tax-free benefit, particularly given the nature of the work of these officers."
He said normally plain-clothes officers would be in uniform, but the needs of their jobs meant it was not possible.
"A lot of it's to do with visiting addresses where they can't be identified as police officers," O'Connor said.
"The public is not always appreciative of police in uniform visiting them, particularly victims of crime."
He said the total bill could reach $2.3m dollars and it would be up to each individual detective or officer to pay.
The association was now working with the IRD to have the bill reviewed and reversed.
A senior member of the Palmerston North CIB, Ashley Gurney, said he would be facing a bill of about $4000 if forced to pay a retrospective tax on his clothing allowance.
The allowance went toward dry-cleaning bills and buying sensible clothing, Gurney said.
"No-one is shopping on Fifth Avenue. [Detectives] recognise the need for durable clothing and only have a limited budget."
An IRD spokeswoman said she was unable to comment on an individual taxpayer's situation or on a particular employer's responsibilities for the treatment of allowances due to privacy reasons.
While there had been no change in tax law, the tax position around allowances, including clothing allowances paid to employees, was complex, she said. It depended on a variety of factors, including the nature of the employment and, in this case, the nature and purpose of the clothing.
She would not confirm the rate police staff would be charged, but said the marginal tax rate was 33 per cent, although it would depend on the individual's circumstances.
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