ACC Levies Confirmed to Rise

December 5, 2008 New Zealand FinanceNew Zealand Taxation  No comments

Finance Minister Bill English stated on the 5th of December that ACC levies will rise on the 1st of April 2009.

To cover shortfall in the Accident Compensation Corporation (ACC) accounts, which according to the new Government are a product of the previous government’s manipulations. Finance Minister Bill English is said to have until Christmas to decide the exact nature and amount of the increase in ACC levies that would be imposed on workers.

The current problem arises from the “non-earners account” in the ACC system. This account is used to cover accident claims by students, children, beneficiaries and elderly. The nature of the non-earners account means that it is not covered by levies, as no levies can be imposed when there is no income for them to be imposed upon, and as such, taxes are used for the payment. It is claimed by the outgoing Minister for Accident Compensation Maryan Street that there was a growth in the number and nature of claims in the non-earners account, and also that she was not made aware of the growing discrepancy in the account. The source of contention comes from the fact that the 1$1 billion amount which is to be paid in through the non-earners account over the next three years was not previously disclosed, which would have been mandated by the he Fiscal Responsibility Act, passed in 1994. As this amount is not paid by levies, but by government funding, it is up to the new National Government to decide how it will be covered.

At the current moment the two main options in from of Bill English in regards to this issue are either raising ACC levies or funding the gap from government funds. Analysts say that a governmental funding would require further borrowing.

The other option is the raising of levies. An official recommendation laid forward by the Labour Department o Bill English has proposed a raise in levies to 2 cents per dollar earned next year, and rising to a level of 2.2 cents, while the current rate is 1.4 cents. Many critics are already coming forward, mostly using the fact that these raises will make a significant impact on the National tax cuts as justification.