Regulatory Impact Statement

Transcription

1 Regultry Impct Sttement Extending py-perid ssessments t slries nd wges f ll student ln brrwers Agency Disclsure Sttement Inlnd Revenue hs prepred this Regultry Impct Sttement. The Sttement nlyses the prblem f whether the py-perid ssessment plicy shuld be extended t the slry nd wge ernings f ll student ln brwers. Prpsed mendments in the Student Ln Scheme Bill 2010 mve certin student ln brrwers frm nnul ssessments t py-perid ssessments (with n end-êyer squreups). The prpsed mendments re designed t pply nly in cses where there re n business nd investment lsses tht culd be used t ffset slry nd wge ernings nd result in lwer student ln repyment bligtin. Hwever, the Budget 2011 nnuncement tht lsses re t be excluded frm repyment clcultins mens tht pyperid ssessments cn n\ / be extended t ll student ln brrwers wh ern slry nd wges. The min bjective is t tret ll slry nd wge ernings cnsistently in rder t simplify the student ln scheme, imprve equity nd prvide certinty. Other thn set ut in this Disclsure Sttement, n significnt gps, ssumptins, dependencies, cnstrints, cvets r uncertinties hve been identified. Extensive cnsulttin ws undertken during the develpment f the wider prpsls t trnsfrm the student ln dministrtin. This included discussin dcument, n nline frum nd submissins n the Student Ln Scheme Bill Officils cnsider tht further public cnsulttin n the extensin f the py-perid plicy t ll slry nd wge ernings is nt necessry given the wide initil cnsulttin. The recmmended plicy prpsls d nt impse dditinl cmplince csts, impir privte prperty rights, reduce mrket cmpetitin, prvide disincentives t innvte nd invest r veride fundmentl cmmn lw principles. riglthm Grup Mnger, Plicy Inlnd Revenue 26ltly 2011

2 STATUS QUO A ID PROBLEM DEF'INITION 1. The Student Ln Scheme Bill 2010 (the bill) intrduces plicy chnges tht imprve the verll integrity f the student ln scheme, reduce cmplince csts nd relieve dministrtive pressures. The Regultry Impct Sttement Trnsþrming student ln dministrtin ccmpnying tht bill prvides nlysis f thse chnges. 2. This Regultry Impct Sttement cnsiders the impct f extending ne f the plicy chnges in the bill in light f the Budget 2011 nnuncement tht lsses wuld be excluded frm repyment clcultins. Specificlly, this nlysis cnsiders the prblem f whether the py-perid ssessment plicy shuld be extended t the slry nd wge ernings f ll student ln brrwers, including thse mking ther incme (r lsses). 3. Currently, student ln cllectin is bsed n n end-f-yer squre-up where student's verll repyments re clculted by reference t their nnul incme. Prpsed mendments in the bill prvide fr mve t py-perid ssessment, where the munt erned in ny py-perid is ssessed ginst weekly, frtnightly r mnthly repyment threshld nd there is n nnul squre-up. 4. Under the mendments prpsed in the bill, brrwers wh ern slry nd wges re treted s flling int ne f three grups: Referred t s 1. Slry nd wge brrwers 2. Pre-txed incme brrwers 3. Other incme brrwers Incme erned Slry nd wges Pre-txed incmel less thn $1,500 N ther incme (including business nd rentl incme) Slry nd wges Pre-txed incme mre thn $1,500 N ther incme (including business nd rentl incme) My hve slry nd wges nd/r pre-txed incme Des hve ther incme (including business nd rentl incme) Revment blistins All bligtins met thrugh pyperid ssessments. N end-f-yer squre-up required. O All bligtins relting t slry nd wge ernings met thrugh py-perid ssessments. Seprte end-f-yer squre-up fr pre-txed incme nly. End-f-yer squre-up including ll incme erned during the yer. 5. The ther incme brrwers (ctegry 3 bve) my hve hd lsses frm investments r business ctivity tht culd be used t ffset (reduce) their slry nd wge ernings, leding t reduced student ln repyment bligtin. They were excluded frm the pyperid ssessment plicy in the bill in rder t reflect their incme fter lsses re tken int ccunt. I Pre-txed incme includes New Zelnd-bsed investment incme, csul griculturl emings, nd electin dy wrker emrngs. 2

3 6. In the 2011 Budget, it ws nnunced tht lsses frm investments r business ctivity will n lnger be included when clculting brrwer's repyment bligtin. This remves the need t distinguish between brrwers wh receive ther incme nd brrwers wh d nt. In principle, py-perid ssessments cn nw be extended t ll slry nd wge ernings. OBJECTIVES 7. The min bjective is t tret ll slry nd wge ernings cnsistently in rder t simplify the student ln scheme, imprve equity nd prvide certinty t student ln brrwers with slry nd wge ernings. REGULATORY IMPACT ANALYSIS 8. Prir t the 2011 Budget nnuncements, the end-f-yer squre-up fr ther incme student ln brrwers ws required in rder t tke int ccunt lsses tht culd reduce student ln repyment bligtins. Given tht lsses re nw nt tken int ccunt in ssessing student ln brrwer's repyment bligtins in respect f wges nd slry, there is n need t retin the distinctin between the slry nd wge ernings f brrwer wh erns ther incme nd brrwer wh des nt. 9. The preferred ptin is therefre t extend py-perid ssessments t ll slry nd wge ernings. The key fetures f this ptin fr ther incme brrwers (ctegry 3 in the tble bve) re: Feture End-f-yer squre-up Under deductins Over deductins Secndry emplyment Full time study Sttus u All incme including slry nd wge ernings is squred up. Significnt under deductins re cllected in the PAYE system. Smller munts re cllected in the end-f-ver sure-un. Significnt ver deductins re credited in the end-f-yer squreup. Smller munts re credited in the end-f-ver squre-up. Brrwers my fce higher repyment rte nd must wit fr the end-f-yer squre-up t receive ny ver deductins. Brrwers cnnt pply fr the full time study exemptin nd must wit fr the end-f-yer squre-up t receive ny ver-deductins. Preferred ntin Other incme nd pre-txed incme is squred up. Slry nd wge ernings re nt. Significnt under deductins re cllected in the PAYE system. Smller munts re isnred. Significnt ver deductins cn be refunded during the yer. Smller munts re ignred. O Bruwers cn pply fr reduced repyment rte nd hve the crrect munt deducted. Brrwers cn pply fr the exemptin nd receive immedite relief frm deductins.

4 10. Cnsequently, the effects tht the preferred ptin hs n ther incme brrwers (ctegry 3) in respect f their repyment bligtins re:. ll bligtins relting t slry nd wge ernings re met thrugh py-perid ssessments; nd there is seprte end-êyer squre-up fr pre-txed incme nd ther incme nly. 11. The prpsed chnges wuld increse student ln repyments by pprximtely $5 millin per yer frm the tx yer. 12. We hve nt identified ny ther ptins tht wuld hve the benefit f treting slry nd wge ernings cnsistently. Benefits f the preferred ptin 13. The benefrts re tht ther incme brrwers wuld: be treted cnsistently; fce the sme repyment bligtins with the sme slry nd wge ernings; receive firer tretment in cses f significnt ver deductins, secndry emplyment nd full time study; nd hve certinty fht their slry nd wge repyment bligtins were being met thrugh their deductins. Csts f the preferred ptin 14. Student ln brrwers wh ern slry r v/ges fr prt f the yer, r whse ernings re irregulr, wuld cntinue t hve the sme munt f repyment deductins withheld ech py perid. Hwever, they wuld n lnger be ble t hve their slry nd wge ernings squred up, which spreds their incme ver the whle yer nd culd lwer their repyment bligtin. In effect, these student ln brrwers wuld be frced int repying their student lns mre quickly. 15. This chnge wuld ffect pprximtely 62,000 brrwers nd fr tw thirds f the ffected brrwers the incresed bligtin wuld be less thn $100 per yer. Hwever, s lredy nted, these brrwers wuld ultimtely benefit frm the incresed bligtin s their lns wuld be repid fster. 16. N scil, envirnmentl r culturl csts were identified. CONSULTATION 17. Extensive cnsulttin ws undertken during the develpment f the wider prpsls t trnsfrm student ln dministrtin. This included discussin dcument, n nline frum nd submissins t the bill. The fllwing deprtments were cnsulted during the 2 Nt. thut ny chnge tht gives rise t n incresed repyment bligtin results in brrwer repying their ln mre quickly with the brrwer retining the benefit f ech pyment. 4

5 bill's develpment: the Ministry f Eductin, the Tresury, the Ministry f Scil Develpment (including Studylink), the Ministry f Justice, the Ministry f Cnsumer Affirs, the Cmmerce Cmmissin nd the Privcy Cmmissiner. 18. Submitters sw the mve t py-perid ssessment s psitive step fr brrwers wh hve cmpleted their study. This nd relted issues were delt with in the Regultry Impct Sttement Trnsþrming student ln dministrtin tht went with the bill. 19. Given the extensive cnsulttin nd the psitive feedbck nted bve, Officils cnsider tht the extensin f the py-perid ssessment plicy des nt require further public cnsulttin. 20. We hve undertken further cnsulttin with the Ministry f Eductin, the Tresury, nd the Ministry f Scil Develpment (including Studylink) in regrds t the extensin f the py-perid ssessment plicy. Their views hve been incrprted int the pper nd they re supprtive f the extensin f the py-perid ssessment plicy. CONCLUSION A {D RECOMMENDATION 21. As nted, the recmmended ptin is t extend the py-perid ssessment plicy t the slry nd wge ernings f ll student ln brrwers. This wuld: remve distinctin between student ln brrwers tht is nw unnecessry s result fthe Budget 201 I nnuncements; nd prvide cnsistent tretment f ll slry nd wge ernings which wuld simplify the student ln scheme, imprve equity nd prvide certinly t brrwers with slry nd wge ernings. IMPLEMENTATION 22. These chnges wuld be undertken by Inlnd Revenue s prt f the wider prject t implement the chnges under the Student Ln Scheme Bill. As these chnges simplify the student ln scheme, implementing them wuld help t relieve pressure frm Inlnd Revenue's effrts in this re. It wuld be esier t implement the preferred ptin thn t retin the sttus qu. 23. Systems re being develped t supprt the bill tht will ensure ther incme brrwer's bligtins re met. These systems will check tht crrect student ln deductins re mde frm slry nd wge ernings.

6 MONTTORING, EVALUATION AND REVIEW 24. In generl, the mnitring, evlutin nd review f these prpsls wuld tke plce under the Generic Tx Plicy Prcess (GTPP). The GTPP is multi-stge plicy prcess tht hs been used t design tx plicy in New Zelnd since The finl step in the prcess is the implementtin nd review stge, which invlves pst-implementtin review f legisltin, nd the identifrctin f remedil issues. Opprtunities fr externl cnsulttin re ls built int this stge. In prctice, this wuld men tht these prpsls wuld be reviewed t time fter the plicy hs hd sme time t wrk. Any chnges tht re needed t give the legisltin its intended effect wuld be dded t the tx plicy wrk prgrmme, nd prpsls wuld g thrugh the GTPP.