MPs expense allowances
The next item to look at is MPs expense allowances. Every MP gets an expense allowance of $14,800. Only the Speaker at $18,400 and the PM at $19,700 get a higher allowance.
A mistake the media often make is thinking this is an expense claim limit, and that somewhere there is a record of each MPs expenses in relation to this allowance. There is not, so demanding MPs reveal what they spend it on is rather silly.
The expense allowance also came about in 2003, and replaces the old daily allowance and former expense allowance. The allowance is designed to cover out-of-pocket expenses incurred on parliamentary business. Not travel expenses, but the smaller stuff such as:
- Meals
- Luggage
- Entertainment
- Memberships
- Gifts etc
The IRD has approved the allowance as reflecting the genuine expenses of MPs, and it is not treated as remuneration – hence no tax is paid on it. If you assume a six day working week, it is around $50 a day. I understand it is paid on the same frequency as their salary.
You might ask why MPs should get their meals paid for? Well it is for the same reason that if your employer forces you to spend a couple of days away from home, they cover your meals. Their costs would be a lot less if they could eat all their meals at home, but this is not posible when you are in Wellington half the time.
Now it is not common for “employees” to be paid an expense allowance rather than merely claim work related expenses. So why are MPs treated this way?
I suspect the biggest reason is administrative convenience. Unlike most “employees” who may only travel a few weeks a year, MPs are incurring expenses every day. It would probably take scores of hours to process all the receipts, record down exactly what they were for, and pay out on them.
Some organisations operate on a similiar basis to MPs – they pay a “per diem” for average daily expenses rather than reimburse on actual expenses.
One advantage of paying an expense allowance, is you avoid what we have seen in the UK where MPs try and maximise their expenses so they can claim more money.
There are downsides to this approach. It means some MPs probably get to save a bit of money, as their actual expenses are less than their allowance. And other MPs (especially those who are harder working and do more) arguably end up out of pocket as their expenses exceeds the allowance.
Overall I think the approch taken by the Remuneration Authority (and IRD) is a sound one. They did some emperical research a few years ago as to the average expenses incurred by MPs, and have set the allowance accordingly. It can’t be rorted, and provides certainity.
Now again this expense allowance is only for incidentals. There are separate funding arrangements for travel and accomodation which I will detail.
June 23rd, 2009 at 3:27 pm
When I have been away for extended periods of time with work I have been paid a per diem out of pocket allowance of around $50 to cover all the random bits and bobs (taxis, out of hotel food, internet, increased phone bills etc). Damn site easier than collecting every little receipt and at the lower end of the scale make administrative sense. Any saving would quickly be eroded by compliance costs.
June 23rd, 2009 at 3:40 pm
I agree with GPT1. I have also worked away from home for extended periods, and depending on the location, the per diem can range from $50 (that’s at the lower end of the scale) to well over $100. And of course, the administrative simplicity does save on costs.
June 23rd, 2009 at 4:28 pm
Nice that they don’t have to pay tax. Last time I was on a per diem, it was taxed and I had to got through the hassle of claiming all the expenses back at the end of the year. One rule them, a different rule for every one else!
June 23rd, 2009 at 4:50 pm
It would be informative if you could publish a comparison table showing the salary and expenses (including travel) for other similar countries.
June 23rd, 2009 at 7:17 pm
Does it include getting lost on your way from AKL CBD on your way to Manakau airport, and ending up helping the cause in Mt Albert?
June 23rd, 2009 at 8:36 pm
If taxis come out of that allowance (I suspect they don’t) then who cares how they use it – it isn’t an incremental cost to the taxpayer.
I suggest that making it a standard allowance means that there is suddenly an incentive to manage the cost. When you just claim all your receipts, it makes no difference how much you spend so long as you keep the receipt. So overall it is probably a saving to the long suffering taxpayer doing things this way.
June 24th, 2009 at 12:05 am
DPF says that some companies pay per diems. My company used to do this, $65 a day. It was then stopped as they were advised that the IRD considered this as taxable pay, so we had to go over to collecting receipts. A plus side for a company also is that they can reclaim the GST on receipted expenses, where per diems lost this. Of course for an MP that would mean we were simply moving GST from one department of government to another.
If this is correct then why are MPs not taxed on this amount as well.
June 24th, 2009 at 5:40 pm
Workingman, its called “troughing”