Fringe Benefit Tax (FBT) is a tax that everyone loves to grumble about.... and why not? It has unintuitive rules, some unfair outcomes, complicated formulas, high compliance costs, and widespread perceptions that no one is paying it.
Inland Revenue has now completed and released a Regulatory Stewardship Review (the Review) of FBT and the conclusion is that while FBT serves a useful and important purpose in supporting the Pay As You Earn (PAYE) regime, it’s not necessarily functioning as optimally as it could be.
The Review does not seek to provide specific answers to policy issues related to FBT, instead, it considers the health of the FBT system “to ensure it is functioning as intended and, if not, to identify and prioritise significant issues.” As part of the process of undertaking the Review, Inland Revenue spoke to a range of internal and external stakeholders (including Deloitte), to get views on the operation of the FBT regime.
The Review notes that there was a high level of agreement between Inland Revenue and external participants about FBT’s areas of strength and weakness across all areas of the stewardship review. However, the report does note that there are constraints on the ability to review the effectiveness of FBT due to a lack of data being collected by Inland Revenue.
In considering the health of the FBT system IRD has approached the review with three questions: