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Inland Revenue

Tax Policy

Tax in dispute

Clause 67


(5 – New Zealand Institute of Chartered Accountants, 10 – KPMG)

This submission opposes the proposed amendment. It removes an ability of a taxpayer to challenge a decision of the Commissioner that can have dire circumstances. Not being able to challenge such a decision gives the Commissioner unfettered power to enforce payment from taxpayers, whether that payment is correctly due or not. (New Zealand Institute of Chartered Accountants)

The Committee should ensure that this additional power is required and will be used as intended. (KPMG)


Section 138I of the Tax Administration Act 1994 concerns payment of tax in dispute. Before 2003 the legislation required that half the tax being disputed be paid in all cases. This requirement was repealed as the justification for requiring the payment was significantly diminished by the introduction of use-of-money interest.

When the general requirement was repealed, the Commissioner was given the ability to require that a disputant pay all of the tax in dispute if the Commissioner considers that there was a significant risk that the tax in dispute would not be paid if the disputant’s challenge was not successful (section 138I(2B)).

This discretion is exercised in exceptional circumstances only – for example, when the Commissioner considers there is a flight risk or a substantial risk of assets being alienated. The delegation for this discretion is set at a high level.

It was never the policy intention that the exceptional/rare event would itself be disputable. Full dispute rights are still available for the substantive dispute.

Officials continue to support the amendment as introduced.


That the submission be declined.