Chartered Accountants Australia and New Zealand (CA ANZ) has launched a consultation with its members on the New Zealand government’s proposed income insurance scheme.
CA ANZ New Zealand country head Peter Vial, FCA said the profession is examining the “once-in-a-generation” proposal and whether the scheme would operate in harmony with New Zealand’s existing employment, welfare and taxation frameworks.
“New Zealand has over 25,000 chartered accountants embedded in every level of business, from sole public practitioners to CFOs, so we’re expecting a wide variety of viewpoints that contribute to the conversation and the policy development process,” Vial said. “Income insurance would be a significant policy and system change for New Zealand’s labour market and wider economy.”
CA ANZ said it is looking at the scheme from a public good perspective, focusing on fairness, efficiency and sustainability.
“I suspect that, while many people will support income insurance in principle, they will be concerned with making sure we cut our cloth to fit our purse,” Vial said. “If we do introduce a scheme, it needs to be as fair, efficient, and economically viable. We need to look carefully at how an income insurance scheme would work within our existing employment, tax and welfare frameworks, and chartered accountants have valuable insights to offer.”
Some of the key considerations CA ANZ said it is looking at include:
- Is the scheme too generous and can we afford it as it is proposed? e.g., should entitlements and levies be reduced?
- Is the timeframe for the proposed introduction (2023) too tight? In fact, is now the right time to introduce such a radically new and expensive initiative?
- Will all the costs fall on employers, with employees expecting employers to cover their levies through increased wages and salaries? Or is there a risk of wage and salary suppression?
- Will the costs of administering and complying with the scheme be proportionate to its benefits?
- How will any unintended consequences and unexpected behavioural changes be managed? e.g., how will the risks of gaming the scheme be mitigated?
- How will the scheme impact existing redundancy practices?
- Should employees be able to opt out in certain circumstances? e.g., by taking out private income insurance
- Should employers be able to set up their own insurance schemes?
- Will the cost to employees of compulsory income insurance drive down KiwiSaver enrolment or contributions?
- How will the scheme intersect effectively and fairly with the welfare system?
- Should employee levies be tax deductible?
- What is international best practice and what can we learn from overseas models, being mindful that New Zealand’s welfare and tax systems are different from those in other countries?
“We need to consider not only the financial implications, but also the behavioural ones,” Vial said. What ongoing effects would the scheme have on the relationship between employers and employees? CA ANZ is a global organisation, so as well as consulting with New Zealand members, we are looking at similar schemes in countries where our international members reside, particularly Australia and the United Kingdom.”