Tax Avoidance: Causes and Solutions - Scholarly Commons Home

deliberate purpose of obtaining a relief from the natural burden of taxation denied generally
to the same class of taxpayer”.
In Elmiger 70 case, Woodhouse J also recognised the conflict between arrangements
potentially subject to section 108 and the Duke of Westminster principle. He was suggesting
that the Duke of Westminster does not override the general anti-avoidance provision(s) of
the Income Tax Act. Baragwanath J in Miller 71 also suggested “Section 99 is not to be
construed according to the Duke of Westminster’s case or Rowlatt J’s dictum [that there is
no equity to tax].”
4.0 Options for prevention of tax avoidance
The harms caused by impermissible tax avoidance are varied and pervasive. The effects
include short-term revenue loss, growing disrespect for the tax system and the law,
increasingly complex tax legislation, the uneconomic allocation of resources, an unfair
shifting of the tax burden, and a weakening of the ability of Parliament and National
Treasury to set and implement economic policy. 72 So the tax avoidance needs to be
prevented or at least be kept it within limits. The way used to prevent tax avoidance can be
judicial and legislative.
The judicial or administrative rules are developed by the courts or by the policymakers to
prevent the tax avoidance. And the legislative rules are framed by the government to
preventing the possible problem. These legislative rules can also be divided into two
categories: specific anti-avoidance provisions and the general anti-avoidance provision.
Specific anti-avoidance provisions are directed to particular defined situations, whereas the
general anti-avoidance provision has raised a general anti-avoidance yardstick by which the
line between legitimate tax planning and improper tax avoidance is to be drawn. 73
4.1 Judicial/administrative rule
In most countries, the interpretation of tax law falls first into the executive branch, which
will apply law and interpretation to individual cases through individual rules and decisions.
69
[1966] NZLR 683, 694.
70
Ibid.
71
Miller v CIR [1997] 18 NZTC 13,001 (HC) at p 13,032.
72
Review of Business Taxation, A Tax System Redesigned, Canberra, 1999 at s. 6.2(c).
73
CIR v BNZ Investments Limited (2001) 20 NZTC 17,103, per Richardson P.
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