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taxation of petroleum, mining and forestry. Such tax incentives provide the taxpayer opportunities to take advantage of. Limit the using of tax incentives will minimize the possibility that taxpayers can find loopholes 8.2 Administrative rules An effective disclosure and advanced rulings across the entire spectrum of income tax legislation are required in the current tax system. The disclosure regimes, such as pretransaction ruling system, will alert the tax department to certain types of tax planning strategies at a very early stage. A properly developed system of advanced rulings would assist the operation of avoidance provisions in practice. Such rulings should not overtake the role of the legislation and the Courts and so in that respect, they should only be binding on the Commissioner with respect to named parties. 231 8.3 Legislative rules 8.3.1 Specific anti-avoidance provision The specific anti-avoidance provisions are numerous within the Income Tax Law 2004. The modern trend of this type of provision is increasing hugely in number, particularly as new measures and codes are legislated. The specific anti-avoidance provisions originate from varying times, and apply to varying subject matters so the format of the various provisions are different in variety and inconsistency. The SAAPs are within all regimes without a thoroughgoing enquiry as to their need. Those concerns are expressed in the Valabh Committee report 232 . The Valabh Committee 233 made the following recommendations in related to above concerns: within the definitional component, there should also be a two-stage analysis examining the requisite degree of tax-influence complemented by the application of a scheme and purpose saving. And similar definitional tests apply to all the SAAPs. Moreover, various SAAPs within the Act should be revised along the above lines. 231 Valabh Committee, Final Report of the Consultative Committee on the Taxation of Income from Capital, 1992. 232 Ibid. 233 Ibid. 78
8.3.2 Generally anti-avoidance rule In recent Peterson 234 case, five judges split into 3 to 2 and in favour of both the CIR and taxpayer. The split in the court illustrates the uncertainty created by current section BG1. Such uncertainty placed the NZ judiciary in the difficult situation of having to develop interpretative techniques to make section BG1 work. The Valabh Committee in their report 235 recognized the uncertainty and suggested some amendments in relation to the GAAP to improve uncertainty. The following recommendations are discussed in the Valabh Committee report. Tax liability The term liability is defined in section OB 1, the current definition is only an input to the definition of tax avoidance. The concept of tax liability should extend to all taxes levied under the Act, which represents an extension to the scope of the section but should restrain the proliferation of SAAPs in particular areas. 236 More statutory detail should be provided in relation to income tax objectives and income tax advantages. Such definition may be similar to the definition of “tax benefit” in Part IVA of Australian Income Tax Assessment Act 1936. External reference Section BG 1 does not contain reference to ordinary business or family dealing. The only statutory requirement is that the tax advantage must be more than an incidental purpose or effect. This creates problems with a literal interpretation which has led to the courts developing alternative tests or criteria to read down. The Newton 237 Predication test are followed in dealing with such problem, however the Newton approach no longer provides a taxpayer with an automatic defense. The Newton approach can be replaced with an alternative statutory test based on the taxpayers’ metal state. Internal reference 234 Peterson v CIR (2005) 22 NZTC 19,109, 235 Valabh Committee, Final Report of the Consultative Committee on the Taxation of Income from Capital,1992 236 Ibid 237 [1958] AC 450,465. 79
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Tax Avoidance: Causes and Solutions
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7.1.6 Reconstruction ..............
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Acknowledgements I would like to ta
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1.0 Introduction The purpose of thi
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elates to the indirect consumption
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Direct Income tax was first imposed
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2.0 Defining tax avoidance The defi
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Net income is defined in s BC 4, fo
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Net income - net losses = taxable i
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In the case W33 37 , a dentist term
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2.3.2 Case law Newton 44 is a typic
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elated to all of the six software p
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This approach was subsequently conf
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effect of fraudulently preferring.
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Review of these rules is undertaken
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Page 49 and 50: Steps 1 to 3 are the three elements
Page 51 and 52: contracts and agreements so as to e
Page 53 and 54: As Baragwanath J noted: “It is to
Page 55 and 56: Therefore, as suggested by Trebilco
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Page 65 and 66: 7.1.7.1 Peterson v CIR The factual
Page 67 and 68: against profits the capital costs o
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Page 75 and 76: change his mind. There are, perhaps
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Page 79 and 80: Under section 245 (4), section 245(
Page 81: system include: a broader and speci
Page 85 and 86: impermissible tax avoidance are var
Page 87: Robert W. Maas ed., Tolley’s Anti
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