One of the many defence policy offerings from the NZ First party at the 2017 election was about improvements to pay and conditions of service. I’ve written an earlier article about how few of these policy offerings have actually been followed up on (based on official information requests). What I did receive however, was a good description of current pay and conditions. The previous Chief of Defence Force and his team did a great job of bench-marking service pay through the State Services Commission (for the most senior officers) and market data for the rest – without any political intervention at all. The new package, which was advised to the Minister and announced in June, cost $22.2 million from within existing NZDF funding.
There is, however, one area of remuneration where politicians should be focussing and that is payment of income tax by personnel while deployed on operations overseas. This affects not just members of the army, navy and air force but also intelligence agencies, police, corrections officers and many others who are deployed into unsafe areas in furtherance of NZ Government objectives. The information I quote from relates to NZDF personnel only.
Remuneration on operations comes in three forms:
- Salary and non-operational allowances (i.e. what would have been paid if the individual was still in NZ)
- Operational threat level
- Health threat level
A fourth type – the Respite Allowance is paid where the person has had insufficient time back in NZ before redeploying (Currently $10 per day tax free).
The operational allowances, comprising operational and health threat, are based on how dangerous and unhealthy the environment is deemed – ranging from Low to Very High. Iraq, for example, is rated High on both scales. The rates, gained under the OIA, are as follows:
This payment has not always been so, even though a Ministerial Committee had the power to declare an area operational, and therefore tax free as described here:
It should be cause for political embarrassment that Cabinet did not use the power it had to exempt tax during the deployment to East Timor. It was left for the Social Welfare Minister to gazette operational allowances as a welfare benefit!
Hon Peter Dunne was the Revenue Minister in 2005 and took a paper to Cabinet’s External Relations and Defence Committee. This brought allowances under the Income Tax Act but recommended continuing to tax base salary. Dunne’s recommendations and CDF commentary are as follows:
After reading this and other material, I’m left feeling that Cabinet didn’t even consider the matter. If they did and still elected to tax service personnel who are in war-like theatres at the government’s pleasure – them shame on them. Not only are they facing danger at someone else’s direction but they are not consuming resources in NZ. Another compelling reason is equity. Australians are not taxed on operations. This has created a rich recruiting lure for them to poach Kiwi service personnel – especially during the East Timor operation. CDF’s commentary follows:
I conducted two unscientific polls on Facebook and Twitter to see what others thought. The result was 10 to 1 in favour of totally tax-free operational service.
So now is the time for politicians to weigh in on this. Be brave. Make a difference.
For those that are interested, here’s the full document I’ve been quoting from: Ron Mark Response to OIA Request July 2018 re Defence Election Policies