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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 138
Therefore, the
Parliamentary contemplaon test has two steps
:
The taxpayer must show that
the use made of the specific provision is within its
intended scope
(i.e. is the use of the provision in accordance with what you would
expect?)
The taxpayer’s
use of the specific provision, viewed in the light of the arrangement
as a whole, must not have altered the incidence of income tax in a way which was
not within the contemplaon and purpose of Parliament
when it enacted the
provision (i.e. in the context of the whole arrangement, was the specific provision
used in a way contemplated by Parliament?)
Relevant factors
in determining whether Parliament had contemplated the taxpayer’s use of
the provision:
Idenfy Parliament’s purpose in enacng the provision
Analyse the
commercial reality and economic effects of the arrangement
– taking
into account the following factors:
(a)
the manner in which the arrangement is carried out
(b)
the role of all pares and their relaonship with the taxpayer
(c)
the economic and commercial effects of documents and transacons
– is it
an ordinary business pracce or is there anything uncommercial?
(d)
the duraon of the arrangement on the nature and extent of financial
consequences
(e)
the extent of arficiality or contrivance in the way the benefit was gained
from the use of the specific provisions
Raising the cost of the taxpayer’s right to use the land by millions of dollars via a promissory note is
highly likely to be arficial – it is not using the provision in a way that Parliament contemplated
There was a serious queson over whether the appellants had a true business purpose, as disnct
from a tax saving purpose, in entering into the arrangement with respect to the licence premium.
The
clarity of the tax advantages was in marked contrast to the obscurity of the prospect of any ulmate
commercial profit
o
Judgment (minority)
The general an-avoidance rule provides for an expansive purposive interpretaon – if there is tax
avoidance involved, the court ought not to interpret the rules in a way that will deliver tax benefits to
the taxpayer
o
Commentary
There has been discussion as to whether the Parliamentary contemplaon test goes beyond the
scheme and purpose of the Act and creates a new test
It may have created a new test that authorises the court to examine, in circumstances where
there is arficiality, the real economic substance of the transacon
What are the features of this form of the GAAR?
The Commissioner has a broad power of reconstrucon (counteracon) – it may adjust in a
way that it thinks appropriate and does not need to describe the factual alternave for the
adjustment
The onus is on the taxpayer to show that the Commissioner’s adjustment is wrong
and by how much
30% of reported judgments in the last decade have dealt with tax avoidance
Ulmately, you could argue the law is judge-made and not statutory
Frucor Suntory New Zealand Ltd v Commissioner of Inland Revenue
[2018] NZHC 2860
o
Facts
Deducon claimed for interest expenditure
o
Judgment
Did the taxpayer use the specific provisions within their intended scope?
The taxpayer is a company that entered into a transacon and claimed a deducon for an
interest expense – this is the way in which the specific provisions were meant to be used
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