Tax Avoidance: Causes and Solutions - Scholarly Commons Home

Income Tax was introduced into New Zealand in 1891, the Land and Income Tax
Assessment Act 1891 was first statute dealing with income tax. Section 40 of the Land and
Income Tax Assessment Act 1891 was the first general anti-avoidance provision combining
land and income tax. It stated that any covenant or agreement that alter or attempt to alter
the nature of the estate or interest in any land or mortgage for the purpose of defeating or
evading the payment of tax, or which was contrary to the true intent of the legislation, had
no effect as between the parties thereto.
Section 82 of the Land and Income Tax Assessment Act 1900 was the succeeding sections
to replace s 40. It held that contract, agreement, or arrangement made or entered into should
be absolutely void in so far as, it had the purpose or effect of way altering the incidence of
any tax, or relieving any person from liability to pay any tax or make any return, or
defeating, evading, or avoiding income tax.
The succeeding provisions for s 82 were s 103 of the Land and Income Tax Assessment Act
1908 and s 162 of the Land and Income Tax Act 1916 except the reference to “avoiding”
tax was omitted. Section 170 of the Land and Income Tax Act 1923 replicated s 162.
Section 108 of the Land and Income Tax Act 1954 in the same form as in s 170 except
omitted the reference to “land tax”. Then, s 16 of the Land and Income Tax Amendment Act
1968 added that any arrangement was void “as against the Commissioner for income tax
purposes” to s 108 after the word “void”.
When the 1954 Act was replaced by the Income Tax Act 1976 the anti-avoidance provisions
were located at s 99, which was enacted by s 8 of the Land and Income Tax Amendment
Act (No 2) 1968 as s 108 of the Land and Income Tax Act 1954.
At the time Income Tax Act 1994 was introduced s BB 9 was the general anti-avoidance
regime in the legislation, which became with effect from the income year commencing 1
April 1997. Upon commencement of Income Tax Act 2004, the general anti-avoidance
provisions still was located in s BG1. Since s 99, there are not significant changes took
place for the general anti-avoidance provisions.
7.1.2 Overview of section BG1
Section BG1 provides:
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