TalkTax

Yesterday Peter Dunne issued a press statement calling on the citizenry to call up their power companies and insist that they be billed for their September power consumption at the old 12.5% GST rate.  Mr Dunne feels that these companies should have made more of an effort to utilise the transitional rules in the GST act that permit invoices dated before 30 September to be issued (after that date) at the 12.5% rate.

Oh the irony of having a Minister of Inland Revenue issue a press release expressing his disappointment at those taxpayers who are not make enough of an effort to avoid paying taxes.

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Some of you are going to think I am a Krukziener fan.  Actually, I have never met the guy, but I can’t help but feel a little sorry for him, and those like him, who find themselves on the losing side of a tax case. 

The current bankruptcy proceedings being brought against Krukziener by the Inland Revenue (see http://www.stuff.co.nz/business/personal-finance/4223918/IRD-gets-Krukziener-hearing-date) are the most recent (but by no means only) illustration of the Inland Revenue’s  typically bare-fisted approach to litigating tax cases.

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The old moniker used to be that the taxpayer is under no obligation to arrange his affairs “as to enable the Inland Revenue to put the largest possible shovel into his stores.” (Ayrshire Pullman Motor Services v. Inland Revenue Commissioners (1929) 14 T.C. 754)   Those of us who practice in this area did not take this to mean that any arrangement designed to avoid paying tax was OK, simply that a taxpayer wasn’t under a positive obligation to expose his business affairs to taxation.  In legislative terms; we understood there was no “tax advantage” to an arrangement simply because the taxpayer could have (with some effort) arranged his affairs so as to pay more tax.   This seemed to us an application of clear law and common sense.  This High Court decision calls even that principle into question.

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Tax headlines recently have reflected lengthy tax disputes, many which have been lost by the taxpayer. Inland Revenue has increased its focus on tax audits and this can leave many companies feeling nervous about their practices. Are you next? Read more

The much heralded new associated person rules were introduced for land transactions from 6 October 2009.  There has been a plethora of commentary and articles on the new rules and it is not the intention of this article to add further to that body of work.  Needless to say however it is generally well accepted that the new rules are extremely wide, and difficult to break as far as establishing non-tainted entities for land developers, land dealers and builders (although not impossible in some circumstances, in the author’s opinion).  The purpose of this article is to instead explore the parameters of the exemptions available to land developers, dealers and builders.  In view of the fact that many clients who are in business as land developers, dealers or builders will be “tainted” under the new rules, perhaps now is the time to focus on other ways under the Act to avoid taxation on non-business land.

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In May 2010 the Taxation (Budget Measures) Act 2010 did away with tax deductions for depreciation on buildings with an expected life of 50 years or more. That in itself had many taxpayers and their advisors shaking their heads in dismay. However, imagine the impact it has on companies with large property portfolios. This latest amendment to the tax law has resulted in many companies having a deferred tax liability.

The effect of these deferred tax liabilities is that companies’ accounts may not reflect a “true and fair view” and may be misleading for investors because even though it affects the net profit, it does not have any relevance to the performance of the company per se.

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I recently received an invoice from the Wellington City Council for the first quarterly rates instalment for the 2010/2011 year. Enclosed with the invoice was a slip advising of the upcoming increase in GST rate and suggesting that ratepayers could save themselves some money by paying the remaining three rates instalments before 1 October if they can afford to do so. We thought it would be interesting to put this to the test with some back-of-the-envelope calculations. Read more

…and so the battle continues between a tax “genius” and the IRD. Since the 1980s, Mr J G Russell (Mr Russell) has been involved in legal disputes with the IRD over various schemes designed to reduce liability for income tax on companies he consulted to. The IRD claims that he owes millions of dollars in back taxes, which has since grown, with penalties and interest, to a whopping $138m. Read more

Submissions on the Governments proposals for the taxation of QCs and LAQCs closed at the beginning of this week.   We can see no justification for repealing the qualifying company (QC) regime.  The proposed reforms should be confined to loss-attributing qualifying companies (LAQCs).

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New Zealand’s company tax rate will be lower than Australia’s, after new Australian Prime Minister Julia Gillard today announced that the Australian corporate tax rate would not be cut below 29 percent.

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