Business heads decry three-year spread

By Brian Fallow

WELLINGTON - Employers and manufacturers' representatives are angry at Government plans to impose Inland Revenue-style penalty payments on firms which spread their final year's ACC premium over more than one year.

Manufacturers Federation chief executive Simon Carlaw called it a revenue grab. Employers Federation deputy chief executive Anne Knowles said: "By focusing on penalties, rather than making what is an obnoxious payment more simple and reasonable, they are doing the opposite."

The Accident Insurance Act enshrines the proposition - still disputed by the Employers Federation - that employers who set up in business after April 1 1980 have been paying their ACC levies in arrears, and that ACC is therefore entitled to go back to the well one last time for 12 months of premium for the period from April 1 1998 to March 31 1999.

In all, about $500 million is involved.

As they will also be paying their new insurers in advance, paying a premium for the three-month transition period to June 30, 2000 and paying for the backlog of existing claims, many businesses face a cash flow squeeze.

To relieve that pressure, the Government now proposes to allow the final year's payment be spread over three years.

But the catch is that penalty interest payments, similar to the Inland Revenue's regime for late payment of tax, apply after the first year.

A Department of Labour consultation document detailing the proposal says: "The full 12-month premium would be due and payable by June 30 2000. No penalties would apply to any amounts of 12-month premium paid to ACC before that date."

Employers and self-employed people would be able to pay after the due date "at a cost" - a penalty of 10 per cent per annum calculated on a monthly basis - so long as a third of the premium had been paid by June 30 next year.

If employers fall behind a higher non-payment penalty would kick in on the difference.

"Options for the higher non-payment penalties are either for a fixed penalties of 30 to 50 per cent, or penalties similar to those imposed by IRD (5 per cent plus 2 per cent for each month the amount remains unpaid)."

It is also proposed to have a threshold - it suggests somewhere between $50 and $1000 - below which the option of paying in instalments will not be available, to avoid the administration costs involved. Anne Knowles said that the Employers Federation continued to dispute that ACC was entitled to the payment at all.

But in the absence of a change of heart by the Government on that score, they contended that it should be able to be spread over five years, that it should be able to be paid however best suited the company's cash flow - monthly, quarterly or in lump sums - and that instead of penalties, those who paid in full within the five years should be given a discount.

"We find it somewhat concerning that having made this decision [to levy one last year's payment] employers are expected to be grateful because we have now got the ability to pay it over three years, but with a huge penalty provision if that's not paid," she said.

The Government argues that to forget about the payment would represent a cross-subsidy from pre-1980 employers to the rest.

Mr Carlaw said: "On the one hand we have the Minister for Enterprise and Commerce [Max Bradford} acknowledging that more needs to be done to grow industry. On the other hand we have the Minister for ACC [Murray McCully] proposing to charge companies penalty rates while they attempt to comply with a situation arising out of a change to Government policy."

Mr McCully could not be reached for comment but a spokeswoman said the issue was still in the consultation phase.